In your company, who is in charge of strategic planning?
Senior leaders are typically assumed to be strategic, whereas lower-level staff is not. But, if they are, how do they acquire the necessary skills? 90% of executives at the director and vice president levels have never been trained to be effective strategists.
Rich Horwath explains the reality of strategic thinking in his book Deep Dive and gives us a three-step plan to improve our skills and become one of the top 10%!
Horwath begins by defining strategic thinking as the continuous production and operation of business insights to stay ahead of the competition.
"But," you reply, "we already participate in strategic planning." Okay, but how often do you do it? I suppose it's only once a year, and it's in a closed room with other executives.
Horwath believes that strategic thinking should be a daily activity rather than a once-a-year chore. As a result, we're always on the lookout for new ideas and possibilities.
Lesson 1: The Four Types of Managers
Horwath utilizes ocean diving analogies throughout "Deep Dive." He explains four sorts of managers in terms of divers using this analogy:
Diver Type 1: Beach bums are the first type of diver. They sit on the beach and make no effort to touch the water.
Manager Type 1: This manager does not provide any business knowledge.
Diver Type 2: Snorkelers are divers who swim on the water surface while wearing a diving mask and swim fins.
Manager Type 2: This manager provides tactical answers to problems, but the solutions have little influence.
Diver Type 3: Scuba Divers—they swim underwater while wearing a diving mask, swim fins, a wetsuit, and a piece of portable compressed air equipment.
Manager Type 3: This manager can provide strategic ideas for solutions, but they will need help. Because they only get insights when they're well-equipped, they're rare and usually only happen in a properly organized encounter.
Diver Type 4: Free Divers—these divers dive underwater without portable breathing gear to reach greater depths.
Manager Type 4: To help them make decisions, these leaders employ a portfolio of questions, frameworks, and models. They enlist the proper tool and data to create insights that improve the company daily. They are strategic thinkers with a keen eye for a business opportunity.
Lesson 2: Strategy – What It is Not (and What It is!)
Because 90% of CEOs have little or no strategy training, there are many diverse views of what "strategy" means. Horwath advises that we first analyze what it isn't in order to grasp its actual meaning.
Misconception 1: Strategy is not the same as ambition. It's not about goals, objectives, or vision. It is not a strategy to be the greatest in the world! Too frequently, strategy is confused with ambition. The "what" you're attempting to accomplish, whether it's a goal, an aim, or a long-term vision, should never be confused with the "how" or strategy.
Misconception 2: Strategy is not the adoption of best practices. It is not a strategy to try to be better than the competition rather than different. Best practices degrade advantage because if the best method is used by more than one firm, the required distinction of strategy is lost.
Misconception 3: Strategy is not careful. It is not a plan to be cautious and constrained, reluctant to make trade-offs. You don't have a plan if you're not willing to take risks, make trade-offs, or offend people.
So, what does Horwath have to say about strategy? The following is a definition of business strategy: "the intelligent allocation of limited resources through a unique system of activities to outperform the competition in serving customers."
In the book, there's an interesting contrast offered. What do Johnny Cash, an American singer and songwriter, and the Mini Cooper car have in common?
The Mini Cooper isn't the fastest car on the market, and Johnny Cash didn't have the finest singing voice of his day.
They've both been incredibly successful, not because they were better, but because they were different in ways that their core consumers appreciated.
Lesson 3: Competitive Considerations
There are three competitive lenses that good leaders consider while conducting strategic thinking and planning, according to Horwath:
The industrial lens is the one with which we are most acquainted. What factors have an impact on our customers? Where do suppliers play a crucial role? Who are the new prospective market entrants? What alternatives or substitutes may there be?
At the corporate level, there aren't many of us. He proposes evaluating internal rivalry among teams, departments, product lines, or regions for limited resources.
Horwath also recommends that we strive to see inside our consumers' heads. It's frequently more difficult to change a customer's behavior than to upend a competitor's offering.
We all have deep-seated prejudices, experiences, and frames of reference, even within our heads. Many of us have been guilty of this, particularly if we are the ones in charge.
We may inadvertently limit our strategic thinking based on the mistaken belief that "we know best."
Lesson 4: The First Step to Strategic Thinking is Gaining Insight
The first step toward strategic thinking, according to Horwath, is to acquire insight, or, as he puts it, to build understanding.
A strategic insight, according to him, is a novel concept that integrates two or more pieces of information to influence the overall success of a company and lead to a competitive advantage. Strategists must center their thinking on insights and how to find them.
If a firm can generate genuine insights, establishing a plan to capitalize on them is a challenge that can be accomplished. Developing a strategy without insights, on the other hand, is risky since it might lead to unrealistic plans.
According to Horwath, there are a few places where we may look for answers.
Strategic planning must be done from the perspective of the larger picture. While we may all engage in blue sky visualization, we must keep the context of the assignment in mind.
It's wonderful to provide better services or goods, but only if the client perceives them as superior to the competitors. The objective is to identify changes in the corporate environment and use the resultant insights to capitalize on opportunities.
Horwath also advises that we use customers as a source of information. Get out of your corner office and see your consumer in their natural environment. This is referred to as genchi genbutsu in Japanese philosophy.
Customers may not convey their wishes verbally, but their actions often reveal them through important insights.
Questions are a third source of understanding. By creating mental obstacles that force us to pause and analyze, questions encourage us to think in new ways.
Horwath's strategy is simple: sleep on it! He recommends that we first prepare our minds by acquiring knowledge about the subject. Consider that for a moment, then let it simmer in our minds. Aspire to strategic success through daydreaming!
Lesson 5: The Second Step: Allocating Wisely
Allocation is Horwath's second step of strategic thought. The allocation of resources is at the heart of strategy. Effective strategy discussions boil down to determining how to best utilize limited resources to maximize corporate potential.
In any business, there are three sorts of resources:
- Tangible: Money in the bank. Cash reserves, tangible assets, and financial resources.
- Intangible: Culture, identity, and reputation.
- Human: Knowledge, qualifications, and skills.
Most firms with a lack of strategic thinking focus on physical resources, such as those that can be counted.
The intangible, on the other hand, has far more worth. People are your most valuable asset, but they become your greatest problem if we don't collect and apply their tacit knowledge.
According to Horwath, four conditions must be satisfied for resources to be a significant component of a successful strategy:
- The difficulty of replication: The resource must be difficult to duplicate.
- Value creation: The resource must improve the customer's value.
- The resource is abundant enough to be exploited again and over again.
- Absence of substitutes: Another resource that serves a similar purpose cannot easily replace the resource.
Our capacity and willingness to make trade-offs are crucial to allocate resources efficiently. One of the most challenging duties for managers is making trade-offs, which we seldom do. Instead, we hedge our chances by attempting to be all things to all people.
Horwath suggests that we should attempt to emulate eBay's success. No, not by establishing an online market, but by concentrating on their trade-off strategy. Do six or eight things completely instead of twenty things at 60 or 70 percent.
Take into account: While advertising and entertainment are intended to satiate our want for more of everything, doing less is, strangely, more vital.
Lesson 6: The Final Step: Putting It into Action.
Action is Horwath's third and final step of strategic thought.
When it comes to putting things into action, research suggests that more organizational discipline is required. We frequently believe that once a good plan has been developed, the rest will fall into place.
Poor execution, on the other hand, can almost always be traced back to one of the following factors:
Bad strategy: Trash in, trash out. That's all there is to it.
Uncertain resource requirements: A plan that lacks a clear definition of the tools and resources required to execute will fail.
Improper communication: Strategy execution must teach each group of workers how the strategy connects to what they do daily.
Poor accountability: Accountability is severely weak, especially in huge companies. No one can be identified as steering the ship without clearly delineating roles and duties.
To put things into action, you'll need a plan to back up your strategy, and it's important to understand the difference between goals and strategies, as well as objectives and tactics.
What has to be completed are goals and objectives. The aims and objectives will be achieved through strategies and methods.
That's all there is to it. In three easy terms, Horwath summarizes strategic thinking: acumen, allocation, and action.