Thinking strategically by Philippe Barbe 28 Oct 2020

Seeking my feedback, a CEO stated the strategy for his very large corporation as: “We will continue to nurture our cash generating businesses and invest in adjacent spaces.”

I responded honestly (and hopefully generously) that every successful company nurtures its cash generating businesses and invests in adjacent spaces…Business 101!

Pushed a little further, the CEO spelled out his plans to increase revenue by x% the next year which I pointed out were tactical steps toward a financial objective, not strategy.

With the exchange going nowhere, to bring constructive ideas to the table and bring to light some possibilities, I shared several ideas on how to build a real, tangible strategy, and suggested number alternatives.

A strategy lesson:

A strategy is an overarching goal, with no indication on how to reach it BUT it is not a vague aspiration… it must be possible to determine if the goal has been achieved or not. Tactics are the steps proposed to reach the goal.

One of the best lessons I learned about strategy came from a friend in the military where they clearly distinguish strategy and tactics.

My friend and I were discussing complex Navy programs that span more than 50 years for aircraft carriers.

(Fifty years!?!? In 1970, Leonid Brezhnev led the Soviet Union, oil was cheap, economies everywhere in the developed world were booming, computers barely existed and the internet was to be invented. What a difference 50 years makes!)

My friend’s reply to my question “How do you think so far ahead?” was stunning: “This is very simple” followed by his statement of these elemental facts:

a) 50% of mankind lives within 80 miles of the coast, and that proportion increases and

b) wars are fought where people are, because that’s is where the combatants are.

Ergo, coastal areas are going to be more and more important.

From that starting point he went on to explain how one needs to imagine how one is going to fight in coastal areas.

You could bring soldiers and weapons in by air, but a tank is really hard to fly, because it is… heavy. You could go overland but access may be politically and militarily complicated. Or you could go by sea which presents its own challenges, but boats can carry a lot of people and equipment.

If by sea is the best option, then you have to imagine how you want to fight from the sea. In order to support a landing operation, you will need air support, which means air bases not too far away. Then get a moving airfield!

My friend’s answer gives a remarkable technique to elaborate a strategy that I have used with success multiple times.

1. Start with the relevant facts that pose the problem.

a) 50% of mankind lives within 80 miles in the coast with that proportion increasing

b) war happens where people are

c) access by land may not be viable

d) boats can carry lots of soldiers and equipment

2. Identify the problem: we need to fight from the sea, which dictates building a coherent set of boats and associated weapons.

3. Imagine what the solution will look like.

The first two steps to elaborate the strategy are analytical, the third one is, that solution, that future stage is imaginative and articulates a vision that leads to your strategic objective that will solve your problem. .

Examples:

Geopolitical: During the cold war, the United States had a strategic objective of limiting the spread of communism and containing the Soviet Union. The underlying vision was that of a world made of democratic countries, lead by the United States. It was the vision of a world that had never existed before. The tactics to realize that strategy covered many policies and actions, including keeping a formidable military, helping other countries economically, militarily, and so on.

Business: Consider Steve Jobs introduction of the iPhone in 2007 and Apple’s product strategy in the preceding years. While the primary fact at the time was straight forward… customers had too many devices (phone for voice calls, pager for instant messaging, music player, laptop/desktop for internet/e-mail) … the problem was more complicated to identify because it required Jobs to ask not what customers wanted, but why they had so many devices.

Where many companies saw this as a customer problem (they wanted too many things), Apple saw it correctly as a device problem as each device had its own set of buttons dedicated to the specific functionalities of the device, precluding the device to be used for other purposes.

The vision that Apple set forth was that of a single portable device that would have an interface that adapted to the different functionalities. And, they also had a market strategy given these relevant facts:

1. The cell phone was the biggest market of all the hand devices
2. Google was the biggest search engine;
3. Yahoo! had the largest e-mail customer base in US;
4. Cingular had the largest mobile phone customer base in the US.

Apple’s strategy was to sell the device as a phone, partner with these companies to acquire their customer base and thus achieve their vision of dominating the cell phone market.

If we look at Apple’s iPhone strategy and Bloomberg’s terminals, though the revenue models are different the overall product design strategies share similarities. At a high level, they acknowledge some form of market fragmentation, and build a device to address that fragmentation.

Summary:

Setting strategy may seem simple but it is often difficult to correctly identify the problem and then imagine the visioning steps.

While some folks at Apple were able to imagine what the future could look like in fairly abstract terms, the difficulty was in imagining how a sort of universal device would be used but once this was done there were enough constraints that the solution imposed itself.

Because of the challenges identifying the real problem and articulating a vision corporations often do not have much of an original strategy beyond nurturing their cash generating businesses and investing in adjacent spaces simply because they don’t have an original vision in the first place, which while not preventing them from surviving does limit their growth.

To address the difficulties of elaborating a strategy consider:

• There are techniques, people and resources to gather information and collect the relevant facts. (The CEO with the bland strategy had plenty of employees to collect the facts.)

• There are techniques to identify problems, many of which are taught in business schools. But the skill of conceptualizing problems is much harder to teach. Imaginative employees permeate companies but are often dedicated to other tasks while strategy remains the prerogative of the C-suite.

• There is no recipe for imagining a future. Imagination cannot be taught, at best, it can be developed. With the exception of creative founders remaining at the helm (ala Steve Jobs), the C-suite in most companies is seldom selected on their “creativity”.