The success secret you can’t see, smell or taste
I was once involved in a turnaround situation that required quick action. I looked at the company’s major accounts (ranked by revenue) and then had the CFO do a net (not gross) profit analysis by account. It turns out that the third-largest account was unprofitable when we added in the overhead costs and had been for years. I brought this to the account manager’s attention, and he confidently responded, “Yes, but it’s a strategic account!”
If you put 100 executives in a room and ask them to define “strategy,” you’ll likely get 200 different answers. People use the term loosely. However, when you’re talking about business strategy, it’s too often used as a synonym for important, critical, large, thoughtful or expensive. It can be all of those, but they don’t define strategy.
If you define business strategy as an integrated set of actions designed to create a sustainable competitive advantage, you have a good start. However, it’s often helpful to define what strategy is not.
If you agree with this definition, “turnaround” is not a strategy. It’s the result you hope to get when you take short-term actions to stop the bleeding. If it eventually affords you a new set of actions that bring you a sustainable competitive advantage, then it’s a strategy!
M&A is not a strategy. Important? Certainly. Deserving of the CEO’s time? Yes, if you decide to use it as a tool to support your strategy. However, unless you’re a private equity firm or a conglomerate (for example, GE), acquisitions, however important, are tactical. They might provide you with a new skill set, market or channel, but in and of themselves, they’re not a strategy. Most often, by the way, acquisitions end up looking like buying growth or EBITDA or possibly assuaging egos (they also don’t often meet their objectives).
Employee engagement is not a strategy. It’s a worthwhile and profitable practice, but by itself, it doesn’t identify how you’ll successfully compete. Engaged around what?
Execution is not a strategy. I’ve heard CEOs say, “My strategy is to execute well.” Execute what? If you execute poor ideas extremely well, you’ll just fail faster.
During deliberations on pornography, U.S. Supreme Court Justice Potter Stewart once said: “I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description, and perhaps I could never succeed in intelligibly doing so. But I know it when I see it.”
Strategy is similar. If one can look at your actions and see how they set you apart from the pack, you probably have one. If you can clearly articulate what your strategy is in a couple of sentences, you might have one. If your employees know what aligned set of actions to take for you to be successful, you likely have a good one!