Emily Dickinson on Strategic Thinking

THE BRAIN is wider than the sky,For, put them side by side, The one the other will include With ease, and you beside.

  • This blog post first appeared in the Management Help Library.  For more from this great resource, go to http://managementhelp.org/blogs/strategic-planning/

Emily Dickinson’s greatest accomplishment, I think, is that she taught us to wonder. In Part One of her series called Life, the poet has us thinking about the vastness of our collective brain. As of late, the scientists and mathematicians have caught up with this sage poet.

Emily Dickinson on Strategy
Emily Dickinson on Strategy

Scientists have estimated the number of unique and disparate “thoughts” that a person can conjure. By estimating the number of possible neural networks, known as Hebbian webs these deep thinkers have estimated that you and I are capable of thoughts numbering ten to the millionth power! Contrast this number, by the way, to the number of atoms in the known universe, estimated at a mere ten to the 87th power… Yes, in a way of thinking, our brains are larger than the known universe. As Dr. Seuss said… “Oh the thinks you can think!” An even better poet, Dickinson, continues in her poem called Life:

The brain is deeper than the sea, For, hold them, blue to blue, The one the other will absorb, As sponges, buckets do.

And who out there thinks the biggest and grandest thoughts? Why, I’d have to say it is the readership of this column! Strategists, strategic planners, strategic decision-makers and the like…

Remember that strategy is about the big picture. Strategic thought is consideration of the long term future and the vast competitive environment around each person, company or organization.

C.K. Prahalad and Gary Hamel have suggested that strategic thinkers do three things:

  1. They think about the large-scale competitive environment around them.
  2. They think about the future.
  3. They engage others in doing the same, resulting in a “deeply shared, well-tested view of the long-term future.

To continue your train of strategic thought, do this:

  • Engage those around you in conversations about the future. What will happen next in your industry or competitive space?
  • Talk to technologists and futurists about the ways changing technology will affect your industry.
  • Study enterprises outside of your immediate industry. Look at how competitive advantages wax and wane. Consider ways that your own advantages could erode or disappear.
  • Talk about strategy and how even the most well-considered plans may change as circumstances and competitive dynamics change.

The brain is just the weight of God, For, lift them, pound for pound, And they will differ, if they do, As syllable from sound.

5 Essential Books for Strategic Thinkers by Mark Rhodes

good strategy bad strategy book
good strategy bad strategy book

This fresh approach to strategic thinking, just published in 2011, begins with tales of battles at sea in the days of Napoleon and continues to explain what kinds of strategies have made the difference for modern companies like Apple, Wal-Mart, Cisco, Starbucks and Wells Fargo.  Author Richard Rumelt shows that many recent high profile failures such as those of Lehman Brothers and Enron resulted not just from a poor strategy or a poorly defined strategy, but from a misunderstanding of what strategy is in the first place!  One acquaintance showed incredible ignorance by saying to Rumelt "“Strategy is never quitting until you win.”  Attitudes like that, of course, can only lead to wasted resources and eventual failure.

As Rumelt says, "The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors."

Strategy Safari

Strategy Safari Book, Mintzberg
Strategy Safari Book, Mintzberg

I have often been asked what book I would suggest to someone wanting an introduction to the world of strategy.  This is always the book I suggest, the eminent strategist Henry Mintzberg and his associates Ahlstrand and Lampel do a masterful job of explaining, in plain language, the various approaches to strategy.  My favorite section is the authors' treatment of Michael Porter's "Positioning School" of strategic thought.  While staying "fair and balanced" in explaining Porter's methodology, you can almost taste Mintzberg's poor regard for such a deliberate and plodding approach, which stands antithetical to Mintzberg's own bent to strategy: the Emergent Approach.

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Strategy, by B.H. Liddell Hart

strategy by liddell hart
strategy by liddell hart

The book now called, simply, Strategy, is essential reading for any student of the art and science of strategy-making.  Author B.H. Liddell Hart is the best example I know of who not only chronicled history, but shaped it.  In 1929, he published The Decisive Wars of History. Although Hart was a Briton, it is known that his work had greater impact on the pre-WWII military thinking among the German military than on his own countrymen. Among others, the German general Hans Guderian read and digested Hart’s work, which influenced his designs for employing tank (panzer) warfare in execution of the “blitzkrieg” strikes that quickly took the European lowland countries and France.

Erwin Rommel, the “Desert Fox” is known to have read and savored Hart's books.  Rommel's tank battles with the Allies in northern Africa are often seen as the prototypical Hartian strategic confrontation.  Applications of Hart's insights for modern business are quite evident upon reading Hart's historical accounts and analyses. For example, to truly understand the art of strategic thinking, it is essential to consider Hart’s notion of the indirect approach.

The Lords of Strategy

Until the 1960s, there were few books or business courses available that focused on the notion of business strategy.  Gradually, as the importance of the topic dawned on MBA providers and the business public alike, Strategy evolved as an important discipline of thought for leaders of corporate, organizational and government leaders.  As the field evolved, not surprisingly, so did the cadre of people seeking to make their living teaching and consulting with others in need of better approaches and strategies.  With time, the modern consulting inustry was born.  The Lords of Strategy is the story of the four men who invented corporate strategy as we know it and set in motion the modern, multibillion-dollar consulting industry: Bruce Henderson, founder of Boston Consulting Group Bill Bain, creator of Bain & Company Fred Gluck, longtime Managing Director of McKinsey & Company, and Michael Porter, Harvard Business School professor.

lords of strategy book
lords of strategy book

The publisher explains that "this book is a revealing account of how these iconoclasts and the organizations they led revolutionized the way we think about business, changed the very soul of the corporation, and transformed the way we work."  Well, it's a little more sickening and depressing than that, if you ask me.  I have personally seen, for example, PPT slides that an eminent strategy consulting firm used to goad Enron into "out-of-the box" and "break-through thinking."  We all learned, of course, that simply thinking out-of-the-box can lead people into "breaking through" ethics and morals. Enron paid for this "anything goes" approach with its very existence.  The consulting company that egged them on, though, is not only still at it, but is doing quite well for themselves.

Nonetheless, if you'd like to learn how today's consulting industry came to be the way it is, then I am sure you will find The Lords of Strategy to be compelling, if disturbing, reading.

Wired for Thought

wired for thought book
wired for thought book

If you are interested in the notion of strategic thinking, then you are certainly interested in the brain, the organ that allows you to think about things, strategic or otherwise.  Author Jeffrey Stibel applied his life-long fascination with neurology and brain science in order to  found a series of highly successful businesses.  In each case, he applied knowledge about how the brain works to thinking about how the internet should work, since, as he writes "the internet is a brain."

Stibel explains his fascination with the brain and neurology as a metaphor for thinking about the future of the internet:  "When I began to study the emergent internet as a whole, I had trouble fining areas where there were not analogies to the brain.  It finally dawned on me that if I wanted to build internet companies, I needed to know everything I could about the brain."

What is a Strategic Leader? A Person of Imagination by Mark Rhodes

Strategic Leadership Model

Recent attention to the Recommendations of the 9/11 Commission remind us of their key finding: A failure to "connect the dots" and imagine what was being planned by the terrorist community was an important contributing factor to the September 11 attacks.  The Commission concluded that "the most important failure was one of imagination."

While the notion of imagination is generally treated in a light-hearted, Disneyesque fashion, what the Commission was saying that in the pre-9/11 world, our country’s leadership lacked the kind of strategic thinking it would have taken to keep us to have a truly effective defensive strategy in place.  That in mind, the graphic above and text below show the capabilities necessary for strategic leaders. 

Strategy and Decision Strategic leaders make sound decisions.  They frame issues for their organization and insist that facts and data are gathered and considered. They facilitate a decision-making process by involving a diverse and appropriate set of people.  They make sure that the organization learns experience and adapts the decision-making process based on this learning.

To master strategy in an industry or competitive domain, the strategic leader must immerse him or herself in the four domains of strategic thinking:

  • Emergent Strategy and Imagination
  • Deliberate Strategy and Strategic Planning
  • Outward Focus
  • Inward Focus:  Builds Core Competence

Emergent Strategy and Imagination Strategic Leaders excel by imagining and exploring new opportunities and innovative ways of doing things.  They think strategically, which means they are thoughtful about the long-term future and are insightful about the competitive landscape surrounding the organization they lead.

Outward Focus: Understanding the Competitive Landscape Strategic leaders are engaged in matters of strategy.  They understand the competitive landscape and the dynamics of industry and regulation that affect the positioning of their organization.  They attend to competitive intelligence and understand the importance of gaining and protecting competitive advantage.

Inward Focus:  Building Core Competence Strategic leaders understand the core competence and key capabilities important to winning and succeeding in their competitive landscape.  They recognize the importance of talent and focus on keeping a competitive team and workforce.  They monitor and attend to performance at the individual, unit and organizational level.

Individual Capabilities

Leadership Strategic leaders determine the course their will business or enterprise will follow over the intermediate and long term future and make this direction clear to others.  they inspire, coach, teach and lead the way. 

Integrity The strategic leader must embody the vision and values of the organization.  As Gandhi said, leaders must "be the change they seek to create."  Leaders of integrity are humble and share credit, they think in terms of learning from experience rather than blaming, they are kind and respectful toward all members of their organization, and they are courageous when ti comes to risk-taking.  They can be trusted to follow through on commitments.

Business Acumen The strategic leader must possess business acumen and drive.  Whether in the for-profit or non-profit world, leaders must understand principles of cost control, revenue generation, stewardship of capital and risk mitigation.

Strategic Intuition by Mark Rhodes

Napoleon Strategic Thinking
Napoleon Strategic Thinking

Biographers of Napoleon Bonaparte talk about his ability to size up a situation with a single coup d'oeil, (pronounced koo-DOY), meaning “a stroke of the eye” or “glance.”  Napoleon was so knowledgeable about his strategic situation—the landscape, the enemy, available technology, similar situations from the past—that he could understand and respond quickly to ever-changing circumstances. To become a master strategist, you must develop strategic intuition.  Consider Warren Buffett’s masterful ability to see investment gems lying unnoticed in a huge pool of possibilities…. Or Steve Jobs’ ability to rightly intuit the features and qualities of technology that will bring magic to consumers…  Or Oprah Winfrey’s ability to discern what her viewers want to experience and learn about…  In the end, wisdom on this scale cannot be gained through analytical tools or logic… it is a matter of knowing without knowing how you know.

To study the dynamics of decision-making under pressure, Gary Klein lived with firefighters and other emergency or quick-response personnel.  His objective was to understand how people make decisions in the most hectic of moments.   In his book Sources of Power, he concludes that the keys to good spontaneous decision-making are entirely different than what matters when one ponders decisions with time available for analysis and deliberation.   The best decision-makers in chaotic “fog of war” conditions seem able to call on intuition – knowing what to do without knowing why or how they know.

For example, Klein tells the story of one fire captain who entered a burning house, got an odd feeling that something was amiss, and ordered his firefighters out of the structure seconds before it collapsed.  It turned out the source of the fire was in a basement that they did not know was there.  Something about the situation just felt wrong to the captain, and he acted on his intuition, saving the lives of his men.  Intuition, Klein says, is recognizing complex patterns "without knowing how we do the recognizing."

napoleon plotting strategy with map
napoleon plotting strategy with map

Pattern recognition, by the way, is a key indicator of whether someone has begun to develop a “Zen” way of knowing about his or her field of expertise.  Master chess players, for example, can take a brief glance at the pieces configured on a chess board, turn around, and accurately recreate the placement of all the pieces on another board.  The rest of us, at best, can remember where one or two pieces are placed.  The difference is that the chess masters look at the board and see a pattern – a story – that they can hold in memory and recall later.  To recreate the board, they just put the pieces into place in order to tell the same story.  This is the basis of intuition.  While the word conveys a bit of magic or mysticism, psychologists say that intuitive knowledge is the result of repeated experience.  The chess master has seen countless configurations on chess boards and gradually learns to see them as a whole experience, pattern of story.  To the master, the pieces are just elements of something larger.  In like manner, a quarterback who intuits where to find the open man or just seems to sense that it is time to get rid of the ball as he’s approached from behind, has achieved masters level pattern recognition.

Psychologist sometimes call the things that we know intuitively “tacit knowege.”  And we can only use langauge to speak about things that are “explicit.”  Psychologist Bill Snyder says that “Unless we can distinguish between tacit and explicit knowl­edge, we are likely to pay inordinate attention to explicit knowledge and underesti­mate the prevalence and value of tacit knowledge.”

Tacit knowl­edge refers to knowledge that one has but cannot explain.  In coprorate settings, we distinguish between “codifiable” knowledge that can be written down or documented in some way, and non-codifiable knowledge that you can only learn from experience.  This kind of knowledge includes intuitions, values, and basic assumptions  as well as “artistry” or Zen mastery.  Explicit knowl­edge involves knowledge that can be explained and codified.  For example, facts, theories, recipes, standards, and procedures are all examples of explicit knowledge.  It is important to distinguish tacit and explicit knowledge because research indicates that more than half of the knowledge in organizations is tacit.”

How to Develop Strategic Intuition. As Malcolm Gladwell has shown in Outliers, mastery of a field generally takes 10,000 hours of concentration in that knowledge domain. With time and practice, the individual begins learns to recognize patterns where others don’t and begin to recognize gaps in knowledge and begin to make new connections in order to solve or fill in these gaps.  Warren Buffet certainly put the time in to gain his legendary intuition about the world of investments.

Gaining napoleon's coup d'oeil it – comes from a mix of aptitude and hard, constant, persistent work.

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Strategic Thinking and the Book Industry

If you are interested in the theories of business strategy covered in the blog post below, you may want to read Henry Mintzberg's excellent book,Strategy Safari:  A Guided Tour through the Wilds of Strategic Management.  For example, Mintzberg and his co-authors provide a more lucent (and compact!) description of Michael Porter's Five Forces Model than does Porter himself!

The demise of the cozy and friendly book store was well told in the Meg Ryan/Tom Hanks classic, You’ve Got Mail.  Tom Hanks shows up in character as Joe Fox, and his Fox Books mega-store pounds the quaint little store owned by Kathleen Kelly (Ryan) out of business.  Even as the movie graced screens in 1998, we watched the real life rise of twin titans Borders and Barnes & Noble as they dominated the book seller scene, crushed the small business booksellers, and absorbed the struggling mall vendors Waldenbooks and B. Dalton (remember them?) .

Meg Ryan's book store from You've Got Mail
Meg Ryan's book store from You've Got Mail

Don’t you remember places like Ryan’s Little Shop on the Corner, where you could talk to someone who knew every book and would happily fill your order within the week?  We got our answers and stole away to find the book we needed cheaper-- and in-stock-- at Borders, B&N, or -- just as likely -- at Wal-Mart.

But as Ryan’s shop keeper might say, what goes around comes around.  Just this week, Mike Edwards, the President of Borders announced that the company would enter Chapter 11 Bankruptcy.  Battered by poor sales, continuing financial losses and heavy debt, the company will close about 200 of its 642 remaining stores and lay off about 6,000 of its 19,000 workers.

At its peak in 2003, Borders operated 1,249 stores under the Borders and Waldenbooks names, but now it will soon prune itself down to a third of that number. Its annual revenue has fallen by about $1 billion since 2006, the last year it reported a profit.

“You're at war,” Hanks told Ryan. “'It's not personal, it's business. It's not personal it's business.' Recite that to yourself every time you feel you're losing your nerve. I know you worry about being brave, this is your chance. Fight. Fight to the death.”

This week, Borders announced it was losing the war.  Citing reduced customer spending and a lack of liquidity, Edwards says the company "does not have the capital resources it needs to be a viable competitor and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term."

Strategic Thinking

Let’s turn to Michael Porter’s Five Forces model to understand betwixt which rocks and hard places Borders now finds itself.  Porter recently wrote that “ In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly, as if it occurred only among today’s direct competitors. “In addition to the competitive forces evident in today’s competitive landscape, Porter stresses the importance of the additional four “forces,” as shown in the graphic below.

Porter's Five Forces Model
Porter's Five Forces Model

Competitors:

Borders has effectively conceded the brick and mortar book market here in Chapel Hill to Barnes & Noble.  To get our big box book fix, we Tarheels will have to drive an additional four miles east toward a B&N in Durham, or a bit south toward Cary to the B&N sitting just outside the megamall.  For commoditized best sellers, we

ve got plenty of options at Wal

-

Mart, Target, and the grocery store.   And of course,

we

ll always have Amazon!

And the Kindle.  And the Nook.  And whatever else Steve Jobs is up to

Barnes & Noble entered the on-line sales in time to play second banana to Amazon.  Borders didn't open an online store until 2008.  Too little too late.  Big-box bookstores have struggled, as more people buy books online, in electronic form, or at grocery stores or discounters such as Wal-Mart

Substitutes: In Porter’s Five Forces model, substitutes are thought of as challenges from other industries.  In this case, there are a remarkable number of industries beginning to infringe on the turf of the bookseller.  Amazon and the internet, sure, but what about the telephone industry, for goodness sakes?  You can read books on your smart phone now! And why wouldn’t Starbucks begin to feature content for readers next to the featured CDs they already offer.  Why, they could hand you a classic book on a thumb-drive you can start reading before your latte is finished.

Buyers: Clearly, consumer habits are changing, our culture irreversibly affected by innovations in technology.  Next time you fly, walk up and down the airplane aisle and look to see what people are doing.  I see 20% watching movies on laptops, 15% listening to music on their iPhones, 30% reading a book or magazine, and as of today, a full 35% are reading their Kindles, iPads and Nooks.  (Yes, these statistics are entirely made up by the blogger, but the point of my story is nonetheless true.)  Suffice it to say, consumer habits are changing, and changing fast.

New Entrants: Here in the second decade of the 21st century, internet services and electronic book readers are hardly new entrants.  Best guess for the future, look to the Apple iPad.  Once upon a time, a company called Wang enjoyed modest success selling dedicated word processing machines, until consumers realized they could do the same tasks – and so much more – on personal computers.  The makers of Kindle and Nook know this, but as they work to add functionality to their machines, look for the iPad and other tablet computers – not to mention our smart phones – to take market share from the dedicated reading tools.

Suppliers: Some publishers have already stopped shipping books to Borders altogether. But of Porter’s five competitive forces, the supplier base has the least impact on current market dynamics.  The relevant suppliers are the book publishers, authors, artists and other content providers.  Traditional publishers stand to lose along with Borders, and continue to fall into the black hole already populated by the uh, record companies (remember them?)

Back to the Little Shop on the Corner

You May Not Be Interested in Strategy… But Strategy Is Interested in You... Leon Trotsky

So as we see, the game of strategy is being played around us all the time and we are all actors in the play.  As Trotsky said, we may not be interested in strategy, but strategy is interested in us, and will continue to affect our everyday lives.  We can learn from this war over book-selling and apply insights to our own businesses and other endeavors.

Whatever business you are in, the winds of change are blowing your way too.  What to do?

  • Anticipate the future. How will changing technology affect you?  What do you need to do to mitigate this threat?
  • Set up barriers to entry. How can you lock in your customers and stave off competitive threats?  Perhaps push your strategic approach to greater customer intimacy?
  • Attack competitor weaknesses. Come to think of it, there is some room in the Chapel Hill market just now for a little bookshop on the corner.  As you’ve read, Borders has gone away. The wicked witch is dead.A smaller, more nimble competitor can take advantage of still-profitable market fragments.  In fact the up-start competitor enjoys several competitive advantages, as I have written about here:The Strategic Advantage of the Upstart Competitor

Suggested Reading:

strategy safari book
strategy safari book

Strategy Safari:  A Guided Tour through the Wilds of StrategicManagement.

Click on the Image of the book for further information provided by Amazon.

The Rise and Fall of Strategy and Planning by Mark Rhodes

Imagine that you could dump all the words of a million books from the past 500 years into a giant database, and look to see how various words have waxed and waned in usage over the centuries.  You could look and see when archaic words like thou and yon disappeared from popular usage.  You could identify the year the word internet first appeared, and when people started saying garbage instead of rubbish. Oh… You can do that now?!  Yes, the Google Monolith has indeed scanned more than a million books into a searchable soup, and we can now play with this facility using something called the Google Books Ngram Viewer.  Let’s put the thing to work and examine our favorite topic: Strategic Planning.  In the graph below, we can see the degree of usage of the words planning (in red) and strategy (in blue) since 1860.

strategy versus planning

Doesn’t that picture tell a story!?  As you see, planning took off just after the turn of the 20th century.  In the world of business theory, a notion called “scientific management” was proffered by one of the first management consultants, Frederick Winslow Taylor. This approach, now referred to as “Taylorism,” sought to apply a scientific discipline to management practice.  During this same era, the field of Psychology was dominated by an equally mechanistic view of mankind, called Behaviorism. In 1913, John B. Watson published what is known as “the Bahaviorist Manifesto,” and said that “the behaviorist… recognizes no dividing line between man and brute.”  There was no need to consider a concept such as “consciousness,” said the behaviorists, as human behavior could be understood as a sequence of cause and effect, of stimulus and response.  With enough control over the variables in our environment, it was thought, we could predict the future… and we could plan for success!
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A funny thing seems to have happened, as you see in the graph, at about 1976.  Planning peaked and began to fall in favor, while strategy began a triumphant rise. My hypothesis?  That’s when one of our most original management thinkers, Henry Mintzberg, started writing and publishing his observations on what does and does not work in the real world of business and organization.  Mintzberg shows that strategy cannot be planned because planning is about analysis and strategy is about synthesis. This is why, he asserts, the process has failed so often and so dramatically.
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Strategic planning is an oxymoron.  Strategic thinking does not lead to a plan, it leads to a strategy.  Rather, planning must follow strategy.  If you don’t want to call it operational planning, call it “Planning that Follows Strategy."

Henry Mintzberg, The Rise and Fall of Strategic Planning 

Mintzberg argues that organizational strategy is often “emergent.” That is, answers to strategic questions do not arrive like the result at the bottom of a math equation.  Rather, strategy emerges and changes as the strategist observes the world and reflects upon the dynamics of the competitive environment. 

Of course, there is debate among experts as to what exactly constitutes strategic thinking.  Michael Porter, perhaps the most widely cited expert on organizational strategy, says that “strategic thinking rarely occurs spontaneously.” As if to prove his point, Porter provides a dry, methodological approach to the quest for competitive advantage and organizational strategy.  Porter provides a set of strategic analysis tools that are serious and rational enough to make any Taylorist or Behaviorist proud.  And granted, I have often found Porter’s framework and methodology useful in understanding the competitive dynamics of an industry.

But a quick study of the History of Strategy provides a blinding flash of the obvious:  Successful strategy-making is most often an "emergent" process.  Employing the emergent approach, the strategist maintains an open mind as to the future direction of the organization, and seizes the moment when opportunity matches organizational capability. 

In the end, strategy-making must be thought of as a creative process, as rich in spontaneity and magic as any other art.  To apply these notions to our own decision-making , remember that strategic thinking is a yin and yang of left and right brain thinking.  To engage in strategic thought, think and reflect on the big picture – the diverse players and forces in your environment.  Think about the future.  Use your left brain’s capacity to generate rational questions and answers.  Use your right brain for intuition and wisdom.

Choosing the Words of Strategy by Mark Rhodes

Abraham Lincoln, Strategic Communicator
Abraham Lincoln, Strategic Communicator

The strategist is one who is concerned about the future of his or her personal, family or organizational life, and spends time and thought considering the best possible direction upon which to set forth. Yes, this makes us all strategists. 

Strategy is, simply, chosen direction.  Smaller, perhaps, than the mission or purpose of an individual, group, or organization -- strategy can nonetheless be considered the directions we choose in our quest toward mission fulfillment. 

To establish direction, a strategy must be articulated to others.  That is, in addition to establishing a course for the future, one must get others on board for the ride.  Influential strategists Gary Hamel and C. K. Prahalad posit that strategic leaders must not stop at analysis and resolve, they must spend quality time engaging others in understanding the chosen strategy.  So as a planner of strategy, you too must spend considerable time communicating... expressing... teaching... articulating. You must find ways to lead, inspire and move others.  How to do this?  Let’s look to one of the greatest communicators in history, Abraham Lincoln.

 Lincoln’s deep empathy for the people of America motivated him to agonize over finding just the right words to truly articulate his vision of the future.  Garry Wills points out in Lincoln at Gettysburg:  The Words that Remade America that in Lincoln’s three minute address during the dedication of the Gettysburg cemetery, he reestablished the meaning to which Americans attribute the Constitution.

 Surely, you recognize the words, which began: “four score and seven years ago our fathers brought forth on this continent a new nation conceived in Liberty and dedicated to the proposition that all men are created equal.”  This brief introductory sentence encapsulates what we now remember as what the American Civil War was about – freedom and equality for all people.    Gary Wills and other historians tell us, though, that until Lincoln spoke these words, these ideals were not what the war “was about.”  Wills says that today the Civil War means, to most Americans, “what Lincoln wanted it to mean.” The majority of Southerners fighting in the war were not slave owners.  Rather, many believed that they were fighting for a “way of life.”  Larger issues such as the dynamics of the Southern economy also contributed to the situation.   At the 1864 gathering at Gettysburg, Lincoln knew that he needed to articulate what the nation was fighting for -- and he did.

 Lincoln’s facility for expression -- his “way with words” – enabled him to frame the meaning of the war for the people of his day in a manner that would empower Americans to frame their quest for civil rights a century later, and to the present day. 

 Lincoln’s use of the Declaration’s phrase about all men being equal elevated the notion to a single, supreme proposition about which we must all agree.  Wills says that “by accepting the Gettysburg Address, its concept of a single people dedicated to a proposition, we have been changed.  Because of it, we live in a different America.”

 Now from Lincoln back to you.  Remember that you are surely the master strategist for something.  Whether we are talking about your own life, that of your family, or that of an organization you help to lead, it is important to articulate a desired direction for the future. 

 To talk about the future in the manner that Lincoln did, try the following:

 1)  Don’t just state facts and numbers.  Speak in emotional terms in order to connect with other people.  Talk about the meaning of the places and accomplishments toward which you travel.  A great way to bring emotion and meaning into your words is through story telling.  Lincoln was a master story teller, endearing him to those around him.  For more on this, look for an article called Story Telling that Moves People containing an interview with Robert McKee, in the June 2003 issue of Harvard Business Review.  You can download it from HBR.org, or write to me at markrho@mindspring.com and I’ll send you a synopsis.

2)  Use metaphors and imagery to convey a larger meaning.  Lincoln’s well known metaphor that “a house divided cannot stand’ served to perfectly state his strategic position on matters of cessation.  As another, Lincoln’s use of the phrase “the mystic chords of memory,” invoked a rich and spiritual understanding of how the American people are connected to each other… people of the north and south… people of the past and the present.  A metaphor always draws the reader or listener from a specific matter in the here and now to a more general and larger truth to be told.  For more thoughts on the use of metaphor in strategy, see my blog post called Metaphors Be With You:  The Strategist as Poet.

Strategy First… Then Structure by Mark Rhodes

strategist alfred chandler The historian Alfred Chandler of Harvard Business School wrote a seminal book published in 1977 on the history of strategic decision making at the highest levels of Corporate America , including DuPont, General Motors, Standard Oil and Sears Roebuck.  The book was called The Visible Hand:  The Managerial Revolution in American Business.  In this work Chandler proclaimed a maxim for the ages that has been followed as doctrine by strategists and consultants alike ever since.  The maxim:

“Structure follows Strategy.”

That is to say, all aspects of an organization’s structure, from the creation of divisions and departments to the designation of reporting relationships, should be made while keeping the organization’s strategic intent in mind.

Strategy, of course, lines up the arenas and markets in which a company will compete, proclaims a targeted customer base, and asserts the matters by which the company will seek to differentiate itself.  Chandler described how the successful progress of mid-twentieth century General Motors can be attributed to the strategic foresight of Alfred P. Sloan, who laid out the famous divisions of GM:  Chevrolet, Pontiac, Oldsmobile Buick, Cadillac – listed here in order of pricing segment and lined up with market segments --  so that each division could seek to please an intended customer segment. 

This is structure following strategy. Chandler showed that the need to reorganize --  or to “restructure” --  is triggered by a strategic shift driven by new technologies or market changes.

The way that you organize your company or organization to optimize the pursuit of strategic objectives is an important part of organizational design.  Other design elements, such as hiring and personnel development practices, communication and decision-making systems, reward, recognition and renewal systems, all must be aligned around the chosen structure, but first you must decide upon the optimal structure for attaining your strategic objectives.

When considering a change in organizational structure, keep in mind the following criteria for a good structure:

  • Aligns the organization to best follow strategic direction
  • Allows for clearly defined roles and responsibilities
  • Clarifies who makes what decisions.
  • Enables clear accountability.
  • Minimizes handoffs that affect the customer experience.  Minimizes the customer “runaround.”
  • Minimizes handoffs that create confusion over who is responsible for what outcomes.
  • Pulls together the people who most need to work closely with each other.
  • Allows information to flow unrestricted to those who need it.
  • Creates manageable spans of control.
  • Is augmented by informal channels of cross boundary communication.

Generally, there are five ways to structure a company or corporation:  Organize by Function, Product, Customer Segment, Business Process, or Matrix.  Here are the pros and cons of each:

Functional Structure (e.g. Operations, HR, Finance, Marketing Departments):

Pro:

  • People with a common profession work together so standards of performance are well understood
  • People in a unit “talk the same language”
  • Easy to maintain stability

Con: 

  • Conflicts arise between organizations/departments since priorities and objectives often conflict
  • Decision making must be done at the top, where a cross-functional team sits together at the same table

 Organizing around Product Lines or Programs

Pro:

  • Strong identification with products
  • High degree of coordination between functions
  • Can allow rapid response to market changes affecting a class of product
  • Employees can see big picture and relate to a common outcome
  • Opportunity for employees to learn other functions
  • Decisions can be made closest to those working on product, more bottom-up decision making

 Con: 

  • Can be lack of coordination between product lines
  • Functional or professional development can suffer as functional experts are isolated from each other
  • Can be duplication of efforts across product groups.  R&D can be parochial, only focused on present clustering of products

 Organizing around Customers or Market Segments

Pro:

  • Deeper understanding of customer needs.
  • High coordination among functions aimed at meeting customer needs.
  • More responsive to customers.  Greater flexibility within business units for purpose of adapting to needs of a particular customer segment.
  • Team members see the big picture.
  • Innovation is customer-driven.
  • Can be more satisfying for workers, as mission of customer focus is clear. 
  • Opportunity to learn new functional skills.

 Con: 

  • Can be lack of coordination between business units.
  • Functional or professional development can suffer as functional experts are isolated from each other.
  • Can be duplication of efforts across product groups.  Team members cannot relate to disparate customer segments.

 Organizing as a Business Process (as championed by many experts on corporate “reengineering”)

Pro:

  • Clarifies business outcomes at every stage of value delivery
  • Organizes people in such a way that problems do not fall between the cracks or go unattended
  • Enables people with a common language across the organization, making it easier to identify and reinforce accountability
  • Facilitates cross-functional understanding of the business

 Con: 

  • Can diminish focus on the customer unless customer-facing processes are truly prioritized
  • Experts in functional areas such as Finance, HR, Marketing, etc. can be devalued and unheeded
  • Can be duplication of efforts across process groups.

 Organizing as a Matrix (e.g. customer segment groups crossed in matrix form by functional, supporting departments.

Pro:

  • Simultaneous focus on external and internal business requirements. Can lead to more integrated, holistic decision-making.
  • Employees can be reminded of the needs of the whole business enterprise.
  • Functional expertise can be directly and immediately applied to needs of program, product or customer issues.

Con: 

  • Can lead to diffusion of accountability. 
  • Can be difficult to locate cause of organizational issues.
  • Can mean doing more with less people, and result in individual frustrations.
  • Can lead to confusion among customers who wish for a single point of contact.
  • Requires a very high level of competent lateral communication capability

Brain as Metaphor for Organization

Since Kurt Lewin’s founding work, organizational behaviorists have viewed the organization as an “organism” which exists in an interacting system. “Open systems theory,” in turn, looks at the organization as an organism with permeable boundaries between its internal capabilities and competencies and the external environment, from which it draws sustenance (customers, investors, suppliers), restrictions (regulators, industry structures) and hostility (competitors).

In their textbook Organizational Development , French & Bell, C. provide the following characteristics of open systems:

  • Open systems are input–throughput–output mechanisms. They take inputs (e.g. people, resources, information), change them in some way, and then return the processed input to the environment as an output.
  • Open systems have permeable boundaries, which separate the organization from the environment.
  • Open systems have goals and exist for a purpose. These purposes must be compatible with environmental needs otherwise the system will cease to exist.
  • Open systems are homeostatic—they seek to achieve a state of equilibrium and minimize the impact of disruptive forces, whether internal or external.
  • Open systems are predisposed to becoming increasingly differentiated, getting more elaborated, complex and specialized over time. Thus increased co-ordination and integration are needed to manage systems as they develop.

Organization as organism, of course, is an excellent example of the power of metaphor. By examining the properties and characteristics of one concept, such as a living, breathing animal, we seek to understanding that we can apply to another concept, such as the complex nature of today’s organizations. Literature falling out of the open systems tradition of organizational development have generally depicted the organization as a one-celled organism interacting with its rather primordial environment.

Linguists and literary critics tell us that metaphor consists of two parts: the

  • tenor

and

  • vehicle

. The tenor is the subject to which attributes are ascribed. The vehicle is the subject from which the attributes are borrowed. (I.A. Richards in

The Philosophy of Rhetoric,

1936). Thus, open systems theorists in the domain of organization behavior typically deem the one-celled organism as the vehicle, and seek to extract learning about the organization as tenor. While the analogy has yielded considerable and useful insight about organizations, the simplicity and limitations of the vehicle - the simple-minded organism - diminish the potential utility of the metaphor.

Fortunately, the field of Neuroscience offers a much richer vehicle for understanding living systems: the brain. Like the tenor of our metaphor, the organization, the brain is composed of constituent systems that decide upon purpose and strategy (the frontal lobe of the cerebrum), motivate action (the amygdala), manage the flow of key information (the hippocampus), and enable communication from one sub-system to another (the corpus callosum).

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Metaphors Be With You: The Strategist as Poet by Mark Rhodes

Strategy-making begins with an idea.  Without a guiding idea there can be no sense of direction.  Yet many articles and books about strategy do not address a most important matter:  how to generate ideas.  To conceive the essential set of ideas that we call strategy, the strategist must understand and master the art of the metaphor.  As Aristotle said in Poetics, “the greatest thing by far is to be a master of metaphor.” It is “a sign of genius, since a good metaphor implies an intuitive perception of the similarity in dissimilars.” Effective strategic thinkers display openness to new and different ideas, and one way to generate ideas is through the use of metaphor, or its close relative analogy, perhaps the most advanced form of human thinking.

Good strategy does not fall out at the bottom of an equation.  Yes, analysis is necessary… Yes critical thinking is essential… But in the end, great ideas about “what to do” come to us through inspiration.

In a wonderfully insightful book called An Alchemy of Mind  Diane Ackerman says that “Metaphor is one of the brain’s favorite ways of understanding the ‘this and that’ of our surroundings, and reminds us that we discover the world by engaging it and seeing what happens next.  The art of the brain is to find what seemingly unrelated things may have in common, and be able to apply that insight to something else it urgently needs to unpuzzle.”

In their Harvard Business Review article entitled “How Strategists Really Think,” Giovanni Gavetti and Jan W. Rivkin show that reasoning by analogy plays a major role in the thinking of successful strategists. As an example, these writers point to Intel chairman Andy Grove’s story of how he came up with an important business strategy. Attending a management seminar, Grove heard the story of how fledgling “mini-mills” in the steel industry began in the 1970s to offer a low-end product—inexpensive concrete-reinforcing bars known as rebar. Establishing market share with the low-end products, these steel companies then began to migrate up the hierarchy of products toward the higher-end, more lucrative steel products. U.S. Steel, which had ceded the low-end products to the smaller and seemingly insignificant players, was caught unawares by the companies attacking the market for their core business and lost market share over a number of years.

An epiphany struck Andy Grove as he sat in that management seminar, thinking about the steel industry. Using what Gavetti and Rivkin call “analogical thinking,” Grove saw that Intel was sitting in a similar situation to that of U.S. Steel in the 1970s. Intel had theretofore leaned toward ceding low-end computer chips to niche players, a strategy that, Grove now realized, would put Intel in a dangerous situation. He began to see low-end computers as “digital rebar,” a metaphorical image that helped him in articulating his strategy to Intel management. “If we lose the low end today,” Grove said, “ we could lose the high end tomorrow.” As a result of this thinking, and the deliberations that followed, Intel redoubled its efforts to market the low-end “Celeron processor” for low-end personal computers.

As Diane Ackermans says “… the brain forms metaphors in order to understand ‘one kind of experience in terms of another,’ as new metaphors create new realities…”  It is the leap of thought from one set of conditions to an analogous one, that brings us that truly great idea for action.   As Ackerman concludes, this is “what metaphor does so well:  illuminate some of what can’t be wholly understood. “

Kenichi Ohmae says in The Mind of the Strategist, “In business as on the battlefield, the object of strategy is to bring about the conditions most favorable to one’s own side, judging precisely the right moment to attack or withdraw and always assessing the limits of compromise correctly.  Besides the habit of analysis, what marks the mind of the strategist is an intellectual elasticity or flexibility that enables him to come up with realistic responses to changing situations, not simply to discriminate with great precision among different shades of gray. 

In strategic thinking, one first seeks a clear understanding of the particular character of each element of a situation that makes the fullest possible use of human brainpower to restructure the elements in the most advantageous way. “

To conclude?  Perhaps a poem…

We’re coming to the edge

running on the water

coming through the fog

your sons and daughters...

Let the river run

let all the dreamers

wake the nation

come, the new Jerusalem

... by Carly Simon

For more thinking about strategic thinking, see Mark's website;  http://strategybydesign.org

What is a Strategic Decision? by Mark Rhodes

Eisenhower led the strategic decision-making process for the Allies
Eisenhower led the strategic decision-making process for the Allies

What is a strategic decision, and how is it different from an operational or tactical decision? Strategic decisions determine the grand direction upon which an entity will embark.  Always, strategy precedes action. The object of strategy is to bring about advantageous conditions within which action will occur.  In the military context, this means positioning forces for best advantage and judging precisely the right moment to attack or withdraw.  Strategic decisions prior to D-Day in 1944, for example, included setting the day and time of the invasion of the European mainland as well as the choice of battleground. The campaign and each battle were conducted within the boundaries of time and space as set forth by strategy.

Strategy is more, though, than laying out a plan—long-term or short—of what you are going to do.  Continuing with the D-Day analogy, the triumph of strategy at Normandy was the deliberate framing of the mindset of the enemy.  For example, the German army was forced to spread itself across a wide swath of the western coast of the European continent because of strategic positioning and deception staged by the Allies.

Once strategy is determined, second tier or operational decisions can be made in the proper context.  By definition, operational decisions are those pertinent to the broad execution of strategy. In the realm of business, operational planning is usually conducted with a one-year time horizon, fitting into the context of a longer-range strategic plan. 

In the military, endeavors resulting from operational decisions are often called campaigns.  A campaign is a series of military operations or battles carried out over a large geographical area—such as Normandy in World War II—in order to achieve a large-scale objective during a war. Operational plans for D-Day, for example, set the stage for landing hundreds of thousands of men and significant amounts of equipment and materials on five Normandy-area beaches as part of the overall strategy for taking back France and ending the war in Europe.  Other famous military campaigns include Sherman’s march through the Civil War South, Napoleon’s incursion into Russia, and Schwarzkopf’s Desert Storm conflict in Iraq.

Of course, we talk about campaigns all the time in the context of political elections or a series of television ads.  The dictionary tells us that a campaign is “an operation or series of operations energetically pursued to accomplish a purpose.”  Generally, a campaign has an identifiable objective and expected time of completion. 

On the personal level, operational decisions relate to the “campaigns" that we conduct in pursuit of our life goals.  A college course is a campaign toward a degree.  A job that we take for a year or so is a campaign toward a more fulfilling career.  Setting up a lifestyle in an apartment or condo might be seen as a campaign toward an eventual house.

After operational decisions come tactical decisions, those third-tier decisions made “in the heat of battle.” Military tactical decisions are made on the ground during battle when, inevitably, things do not go as planned, and officers and soldiers must improvise as they adjust to changing circumstances. Tactical decisions must be aligned with strategic and operational decisions.  Despite the exhaustive operational planning prior to D-Day, countless tactical decisions were made once soldiers arrived on the scene and took stock of the situation.

As the Chinese general and famed strategist Sun Tzu said 2,500 years ago, “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”  Decisions at any level, of course, are a matter of choosing among options.  But strategic decisions differ from operational and tactical decisions in matters of scope, authority and timeframe.

For more consideration of the history of strategy, visit Mark's website called Strategic Thinking.

The Strategic Advantage of the Upstart Competitor by Mark Rhodes

From the days of ancient warfare, large armies have struggled with an inherent disadvantage: Sheer size presents an easy target for a quick and nimble attack force. The red-coated, regimented British struggled to fend off undisciplined American revolutionaries. The Vietnam era Americans could not defend themselves adequately from the pesky, unpredictable Viet Cong. In the modern strategic arena, an upstart company can gain advantage over larger and well established rivals by identifying an attractive and profitable niche of their rival’s customers. “Cherry picking” initiatives seek to snatch away the most profitable customers from a market leader, while leaving the other company with the more cumbersome and less profitable dregs among their customers.

Have you seen the Progressive Insurance commercials touting the way their service people will provide you not just with a quote from Progressive, but also with sometimes even more desirable quotes you might receive from their competitors?

Altruistic? Hardly. Because of their superior information technology, Progressive is able to sort the customers they do want from the ones they don’t. That is, if you as an automobile driver are likely to drain off more money in claims than you’ll restore by paying premiums, Progressive will gladly help you find a nice insurance provider down the street… one who’ll give you a lower fee than will Progressive. If you are recognized by the company as a safe driver – meaning Progressive is safe from the risk of having to pay you for a claim – then Progressive wants you and will compete aggressively to get you. For Progressive as the smaller attacker, that’s cherry picking the profitable customers while saddling the larger opponent with an ever more needy and draining customer base.

In recent years, Progressive has reinforced the notion of the insurance business as a free wheeling “marketplace,” as characterized by their “store lady” hosting a grocery market of insurance products, encouraging us all to “shop” for the best deal. Allstate’s notion of “good hands”? The comfort of a long and trusting relationship as touted by State Farm? Well, that’s defensive strategy as the insurance behemoths of old urge us to stay in place. By way of contrast, the Progressive lady wants us out shopping for new and exciting relationships so the company can pry loose the most desirable customers.

What to do? Let’s look to the ancients for advice… The most influential treatise on military strategy between the age of the Romans and the Napoleonic era was written by the Roman citizen known as Vegetius in the fourth century A.D. His writing was cherished as the Bible of Strategy by Charlemagne, Richard the Lion Hearted, and England’s Henry II. Vegetius’ De Re Militari contains insight into strategic and operational planning that are relevant still.

By Vegetius’ time, the great empire of Rome was in its waning days, its once mighty military descending into atrophy and decay. The days of Julius and Augustus Caesar were a vague memory, having passed four hundred years earlier. Vegetius wrote about “the ancients,” the generals and leaders of Rome a centuries before his time, and sought to capture and share concepts of strategy that had put Rome civilization into its long-held position of dominance. Despite his aspiration to help restore Rome to its days of glory, Vegetius came along too late to make an impact, and he was little noticed by Romans of the time. In the centuries to come, though, his work became a staple for strategists and leaders throughout Europe.

Among the key advice we receive from Vegetius: Avoid unnecessary impedimenta. Impedimenta, the encumbrance of supply trains and support people and materiel, impedes the ability of an army or organization to move about the strategic space in a nimble, flexible manner. Clearly, for example, Southwest Airlines has sustained its success for decades in competition with the so-called “major” air carriers because its leaders have minimized impedimenta, while American, Delta, United and the others remain encumbered by large “hub” airports, a variety of planes and equipment requiring redundant teams of pilots and technicians, and large, entrenched, and increasingly inflexible workforces.

Vegetius said this: “An army too numerous is subject to many dangers and inconveniences. Its bulk makes it slow and unwieldy in its motions; and as it is obliged to march in columns of great length, it is exposed to the risk of being continually harassed and insulted by inconsiderable parties of the enemy. The encumbrance of the baggage is an occasion of its being surprised in its passage through difficult places or over rivers. The difficulty of providing forage for such numbers of horses and other beasts is very great.”

Advice for the strategist: heed the direction of Vegetius. Smaller, ambitious businesses should and will identify desirable niche markets and pursue them aggressively and precisely. You cannot take on the established competitor full force to full force. But you can win a niche and establish a beachhead from which to pursue future expansion.

If you are the entrenched but wary player, then as strategist you must slow the erosion of advantages, and continually seek new high ground representing future competitive advantage. Good strategic thinking for established businesses means scanning the competitive environment for unwanted challenges, and staying nimble enough to do battle in the niches that count. Moreover, the strategist must erect “barriers to entry” to protect present advantages.

Planning for Disaster: from Oil Spills to Credit Crises

In preparing for battle I have always found that plans are useless, but planning is indispensable.

Dwight D. Eisenhower

One of the ironies of the recent oil spill debacle in the Gulf of Mexico is that it is the oil industry that is most often credited with devising and putting to use a strategicplanning tool meant to anticipate major changes in the environment – from disaster to depression – and to enable organizations with plans for immediate strategic response. The tool is called scenario planning.

Cleanup during BP oil spill in the Gulf of Mexico

Scenarios are “alternative futures” that cannot be predicted due to uncertainty.  The term is borrowed from the world of drama, since each alternative future is described in the terms of a “story” or scenario.  Scenario planners identify clusters of events that could happen, and imagine how things would be impacted should these events actually occur.  The story is then shared as the beginning of a long range planning exercise.

In order to respond to undesired happenings such as the collapse of credit markets or the recent oil spill, strategic leaders must devise and develop flexible, adaptive, nimble organizations ready to change and respond as circumstances dictate. Noted economist and strategic thinker James Bryan Quinn said that “The essence of strategy – whether military, diplomatic, business, sports [or] political – is to build a posture that is so strong (and potentially flexible) in selective ways that the organization can achieve its goals despite the unforeseeable ways external forces may actually interact when the time comes.”

Scenario planning as we know it today got its start in the 1970s.  Though oil prices had remained stable since World War II, leaders at Royal Dutch Shell worried that disruptive change could happen with severe adverse effects on their business.  Among the disruptive events they feared was a sudden increase in the price of oil sparked by the rise of the Organization of Petroleum Exporting Countries (OPEC).

The price increases did happen in October of 1973.  Many oil companies struggled with the effects of the new competitive dynamics.  Shell thrived.  They had prepared a plan – a scenario plan – for what they would do as these circumstances unfolded, and they implemented their plan while others were just gathering to deliberate on next actions.

Today Americans are deeply concerned with another sort of oil crisis -- the disastrous and seemingly unstoppable gusher in the Gulf of Mexico.  Many are outraged that BP had no apparent contingency plan for dealing with the crisis.  Though the oil industry is known for thinking out plans for dealing with price changes or the introduction of alternative sources of energy meant to challenge dependence on oil and gas, it is now apparent that the hunt for oil at increasingly remote or deep places led to risk-taking without appropriate contingency plans.

Eventually, the unexpected is going to happen.  That, we can expect.

Scenario planning has been the topic of numerous books over the past twenty years.  Numerous companies have been touted for their use of the technique – Novo Nordisk, Electrolux, AT&T, BellSouth, Nissan, American Express, IBM, Cisco, Ford, and on and on.  One survey indicated that as many as 50% of Fortune 500 companies have incorporated scenario planning into their broader strategic planning efforts.  The extent to which these companies have heeded their scenario planning process is likely somewhat less than so many authors would have us believe, but examining possible scenarios as alternate futures is invaluable as one seeks to build strategic flexibility.

Before beginning scenario planning, remember that it is often the planning process per se, rather than the resulting articulated plans, that matter most.  Dwight Eisenhower, as general in charge of the D-Day planning process, said “in preparing for battle I have always found that plans are useless, but planning is indispensable.” By involving a broad swath of people in the planning process, the intent of the plans will be etched in their hearts and minds, allowing people the flexibility to make wise and well-reasoned decisions once a crisis occurs.

The basic steps of scenario planning include:

  1. Identify the uncertainties that could affect your company.  Uncertainties can come from the worlds of politics, technology, economics, government & regulation, societal, as well as the cataclysmic or climatic changes that can happen in the natural world.
  2. Identify possible futures that would present change from the status quo.  Ask “What events, whose outcomes are uncertain, could have significant effects on the implementation of our strategic plans?”  Drilling down (please excuse the phrase) you may ask “do we know what we’d do if the economy enters a recession or depression?”  “Do we know what we would do if a natural disaster destroys our headquarters?”  Are we prepared for changes in the market should a competitor introduce a new and highly desirable product?”
  3. Formulate plans for dealing with each scenario.  Identify key departments and resources throughout your organization who must know ahead of time what would be expected of them.
  4. Craft overall strategic plans that will allow your company to stand prepared in case each of the scenarios comes to fruition.
  5. Monitor the environment and watch for carefully identified trigger points that will tell you when a given scenario has arrived.  In the classic case of Royal Dutch Shell anticipating the manipulations of the market by OPEC, trigger points were based on the price per barrel of oil.  Obviously, quantitative triggers are easiest to monitor and recognize, but not all scenarios come with neat and apparent warning signals.  Rather, strategic leaders must have thought about each scenario before its arrival, and must learn to observe clues of its arrival.
  6. As scenarios become more plausible with time, increase investment and preparation for the scenarios that are becoming more likely.  Embed scenario planning into organizational development and corporate education programs.
  7. Continue to assess what you do and don’t know about what will happen in the future, and shape strategic plans accordingly.

Mark Rhodes. Ph.D.  consults on strategic planning and decision making.  He has facilitated dozens of scenario planning exercises for clients in a variety of industries.  See his website, Strategic Thinking.

Strategic Thinking and the Law of Nemesis

Nemesis, the Greek goddess who meted out divine retribution for wrongdoing

The Law of Nemesis is a useful concept for leaders, strategists and strategic planners. In a nutshell, the law states that if things are going well in your enterprises, you must be aware that Nemesis is lurking, since no successful effort goes unnoticed by competitors. Mark Rhodes of Strategy by Design explains the concept in this short clip of his teaching.

Click here to see Mark explain the law of Nemesis in a short YouTube video: The Law of Nemesis

Does it ever seem to you that just as prospects for your business begin to look brightest, someone will rise out of nowhere to pick off a valued client, or to introduce a product line that matches or trumps your own?  This dynamic is sometimes referred to as the Law of Nemesis: “Find a good thing and count on this: a nemesis will want to snatch it from you.  Nothing good is yours forever because others will always want a piece of it.”

Nemesis was the Greek goddess who meted out divine retribution for wrongdoing…  especially hubris.  If Nemesis believed that some mere mortal was having all the luck – or getting too much credit for things – she would find a way to smite the individual by sending bad luck and ill fortune in the direction of the offending person.  The Romans, too, believed that fate will eventually punish those who have gained unmerited advantage.

All of us, of course, have the notion from time to time that the luck always seems to fall the other way.  But whether these were matters of divine retribution or not, strategists know that one thing is certain:   Every positive situation in life and business bears the seeds of its own reversal.

Count on this:  Competitive advantages will always erode. Find a good corner for a gas station, draw some interest, and someone will open up another station across the street.  Work to craft a new offering of professional services, and copy cats come out of nowhere.  Design a nice blog or website, and find an exact duplicate a week later.  Without question, competitors learn how to imitate sources of competitive advantage.

To stave off the Nemesis, you must find sustainable advantages.  The strategist must slow the erosion of advantages, and continually seek new high ground representing future competitive advantage.  Moreover, the strategist must erect “barriers to entry” to protect present advantages.

Strategic planning must include plans for defending ground, for minimizing the work of Nemesis.  Companies can:

Continue to set up and defend barriers to entry in order to slow the entrance of new competitors and to stay a step ahead on the innovation curve.  This can mean locking in intellectual capital and proprietary procedures.  It can mean staying very close to existing customers and locking  in relationships by establishing mutual trust and dependencies.  It can mean making capital investments in improvements that competitors cannot match.

Another way to stave off Nemesis is through competitive intelligence gathering, so that you, as strategist, are aware of what the competition is up to and how competitors will likely react to your own initiatives.  Because so much information about competitors is now available over the internet and through public domain sources, many companies are empowering their entire work force in seeking information helpful in adapting to changes across the competitive landscape.

A simple way of thinking about this is that strategic decision-making is about putting your army onto the battlefield, your company into competitive space, armed with strategic advantage - a head start of sorts. Strategic advantage is essential.  Some say, as a matter of fact, "if you don't have advantage, don't compete."  Then, once you are in the game and have advantages in place, be aware the Nemesis is watching and that competitive advantages always erode.  Add the Law of Nemesis to your arsenal of thought as a strategic thinker, and enjoy success over the long term.

——————————————————————————— Mark Rhodes is a highly experienced organizational strategy and design consultant with Strategy By Design. You can reach him via email at markrho@mindspring.com.

A Key Strategic Choice: When to Outsource Work by Mark Rhodes

Nike makes shoes, right? Well, not exactly. Nike is a wonderful company with superb marketing capability. But Nike outsources the actual manufacturing process to someone else. So in that sense, Nike does not make shoes. Nike’s competitive work is the design and marketing of athletic shoes. Obviously, the company has succeeded for years at doing just that. Knowing when to outsource work and when to keep it in-house is a key to successful strategy. The underlying principle of business strategy is that you cannot excel at everything since resources are always finite and limited. Instead, you must make strategic choices. Key among these choices is a critical decision: which elements of work must be done by the company itself, and which elements should be outsourced? To make a sound decision of this sort, begin by identifying the work of the organization that is "mission critical." Mission critical work cannot be trusted in the hands of another organization.

As a start toward culling the mission critical work from work that can be outsourced to others, it is helpful to perform and assessment of all the work processes performed by your company and sort each into one of three categories. Once work is categorized, the organization can be aligned to properly support the requirements of each type of work. These three categories are:

Competitive or Strategic Work. This is mission critical work. It is the core competence of the organization. Strategic work is that which creates sustainable competitive advantage and distinctiveness. For example, Nike differentiates itself through its strategic marketing work (sending non-core work such as manufacturing overseas), while Apple excels at product design. Competitive Work is always performed and managed in-house.

Competitive Enabling Work. This work “leverages” the competitive work, or enables the competitive work. Companies that stake their reputation on the excellence of their personnel will often consider employee development and education to be Competitive Enabling work. As another example, while Wal-Mart's strategic differential and competitive work is considered operational excellence -- managing information and keeping stock ever present on its shelves – the company’s competitive enabling work is both the development and maintenance of their state of the art information technology (IT). If Competitive Enabling work is done better, the Competitive Work becomes more distinct in the eyes of stakeholders.

Business Essential Work. This work must be done to stay in business, but is work that customers don't really value. Even if done at a world-class level, business essential work does not create sustainable competitive advantage. Nonetheless, if done below industry standards, the outputs of business essential work can cause disadvantage and/or poor performance. Business Essential work includes “compliance” work which is performed to comply with governmental regulations or to mitigate legal risk to the organization. Designers of high performance organizations should heed this important guiding principle: Business Essential work, if left unabated, will consume the organization’s competitive work. That is, people can get so consumed by the busy work of the company that they put off and lose focus on the organization’s truly strategic endeavors.

It’s critical for leaders to understand that by categorizing work as Business Essential, it doesn’t mean that this work is not important to the organization. On the contrary, it is essential to the organization to stay in business. In fact, if Business Essential work is done below the industry standard, it can lead to disadvantage. At the same time, if leaders invest a lot to get this work above a level at parity with competitors, it will never lead to distinctiveness in the eyes of the customers.

Outsourcing selected business processes has become an important strategic option for companies wanting to maintain a focus on their strategically important or competitive work. Resourcing decisions should be dictated by the type of work and the nature of the individual skills and knowledge required to perform the work.

Work that is not categorized as competitive work is subject to consideration for outsourcing of one sort or another. To determine the best possible distribution of work, we use the following model

——————————————————————————— Mark Rhodes is a highly experienced organizational strategy and design consultant with Strategy By Design. You can reach him via email at markrho@mindspring.com..

Five Essentials of an Effective Strategy by Mark Rhodes

The principles of strategy are timeless.  The following notes on the essentials of strategy are drawn from the great works of strategy… Sun Tzu’s The Art of War, Napoleon’s Maxims, Clausewitz’ On War. Though dating up to 2,500 years ago, the advice of these strategists is helpful today no matter your competitive landscape, from high tech to agriculture, from manufacturing to government.

1)  An effective strategy is deeply understood and shared by the organization.

Genghis Khan’s Mongols defeated far larger armies because they were able to make adjustments on the battlefield despite ancient systems of communication that limited the way orders could be delivered to warriors already in action.  The secret was instilling battle strategy in the hearts and minds of all soldiers so that they could make correct tactical decisions without direct supervision or intervention.

Like the mission statement published in your annual report or guiding principles framed in your lobby, a strategic plan itself accomplishes nothing.  What matters is whether the people of your organization understand and internalize the strategic direction you have articulated and can make tactical choices on their own.  Strategic plans must be articulated in a manner such that operational and tactical decision-making can follow suit.

As a strategist, you must count on the employees or members of your organization to make sound tactical and operational decisions that are aligned with your desired strategic direction.  To ensure that these decisions are well made, your articulated strategic direction and strategic plans must be applicable and clearly related to the issues that people face.

Remember that an effective strategy provides a picture of the desired long term future.  In order to make sound day to day decisions, all members of the organization must be able to begin with the end in mind.  All steps must ultimately keep the company on course toward the long term objective.

2)  An effective strategy allows flexibility so that the direction of the organization can be adapted to changing circumstances.

Watching the rise of Napoleon’s French empire in the first decade of the 19th century,  the Prussian generals were anxious to do battle with Napoleon’s army because their soldiers were highly trained and disciplined in battle tactics that had succeeded for Frederick the Great fifty years before.  It turned out, though, that the Prussian army was designed to fight “the last war” while Napoleon’s innovations, including soldiers carrying their own provisions instead of the supply train of impedimenta typical of the traditional European armies, allowed Napoleon’s troops to react and adapt to conditions far faster than could the Prussians.  When the Battle of Jena-Auersted occurred in 1806, Napoleon’s army out-maneuvered their slow and plodding enemy and destroyed the Prussians in that pivotal confrontation.

A rigid strategic direction seldom turns out to have been the best course of action.  To assure that your business is nimble and able to react to changes in the marketplace, it is essential that your strategy is flexible and adaptable.  As a strategist, you will count on timely and accurate information about market conditions.  It is essential to build and employ effective mechanisms for observing and listening to what is going on in the competitive environment.  Real-time information, in turn must feed on-going strategic and operational shifts and deployments.

3)  Effective strategy results from the varied input of a diverse group of thinkers.

Moreover, participants in strategic decision-making must be unafraid to state contrary opinions.  In Doris Kearns Goodwin’s excellent book Team of Rivals, she explains how instead of bringing in a cadre of leaders whose thinking closely matched his own, Lincoln made a point of surrounding himself with his political rivals, naming William H. Seward, Salmon P. Chase, Edwin M. Stanton, and Edward Bates – all of whom had opposed Lincoln in a bitterly fought presidential race – as members of his cabinet.  Despite initial misgivings, this unlikely team learned that Lincoln valued their opinions, would consider and reflect on their disagreements and challenges, and would not stick unnecessarily to preconceived notions.  Though the mix of personalities and opinions inevitably led to debate and verbal conflict, Lincoln was able to facilitate and mediate, tapping into a rich variety of ideas in order to find the optimal solution to political and military issues.  Goodwin attributes this ability to manage disagreement and lead an effective decision-making process as perhaps Lincoln’s greatest strength as he led a troubled nation.

To ensure that your strategic team is ready to make effective decisions, look carefully in the mirror.  Do you encourage debate, even argument, among your team about key decisions, or do you encourage toeing the company line?  Remember that the well documented occurrences of groupthink – Kennedy’s ill-fated bay of Pigs invasion, NASA’s decision to launch the Challenger space shuttle, Bush’s reaction to presumed weapons of mass destruction in Iraq – occur not because of oppressive or stifling leaders.  Rather, groupthink tends to occur when leadership groups enjoy collegial and fond relationships, leaving deliberants unwilling to rock the boat, or to voice contrary opinions.

4. An effective strategy follows a thorough and deep analysis of both the external environment and the internal capabilities of the organization.

This is the essence of the famous SWOT model  (Strengths, Weaknesses, Opportunities and Threats).  The strategist must understand the effects and dynamics of external entities such as competitors, suppliers, regulators and strategic partners.  A sound assessment of these external factors leads to a rich understanding of threats to ward off and opportunities to pursue.  The strategist must also understand the internal capabilities of his or her organization.  A realistic self assessment enables the organization to leverage the strengths of the organization and to shore up areas of weakness.

To take advantage of intelligence gained through a SWOT analysis, the strategist must ensure that intelligence does not sit idle, but is immediately mined for insight that can be used in strategic and operational decision-making. All historical stories of the great strategic achievements of history – from D-Day and the Normandy invasion to Napoleon’s greatest campaigns – include anecdotes of decision-makers poring over maps and data and striving to find the optimal course of direction and events.

5. An effective strategy identifies areas of Competitive Advantage

Writing in The Art of Wart of War some 2,500 years ago, Sun Tzu postulated two dialectic forces:  Zheng is the “ordinary” element that fixes the enemy in place.  Qi is the unexpected and devastating blow. Qi is indirect, unorthodox, extraordinary. Qi does not work, though, unless Zheng is able to hold the opponent in place until the decisive blow is struck.

To put this in the context of today’s competitive dynamics, understand that many aspects of business  must be held at parity across a wide swipe of the competitive landscape. In business, this is called the “business essential” elements of organizational design.  You don’t need to be world class at mundane business practices that are not your distinctive competence, but you must maintain standards of work equal to that of your competitors.  That is, the organization must maintain parity with competitors in the ordinary and mundane matters.

But at the same time, every successful organization is able to explicate an audacious Qi or extraordinary force.  You must be world calls at something that differentiates you from the competition. Moreover, all members of the organization must keep the uniqueness of their company in the forefront, always keeping competitive advantages unharnessed in order to compete in a vigorous manner.  In short, every strategic plan must educate the full organizational team how it must use carefully identified competitive advantages in order to compete and win.

What do you think?

--------------------------------------------------------------------------------- Mark Rhodes is a highly experienced organizational strategy and design consultant with Strategy By Design. You can reach him via email at markrho@mindspring.com.

Juicy Fruit

Ken Kesey, the novelist who wrote the book One Flew Over the Cuckoo's Nest seized on Juicy Fruit for its symbolic value.  The novel uses a huge Native American as the protagonist who tells the story of "Mac" who arrives at 60's style insane asylum as a messianic figure ... of sorts.  Mac is full of life, vim and vigor; his mental illness appears limited to a lack of tact and a disrespect for rules.  To the other, truly injured patients, Mac carries a message of freedom and hope.  In this scene, "the Chief" as he is called, opens up to Mac in an exchange over a stick of Juicy Fruit gum.

 

In the scene above, we learn that the Chief is not deaf and dumb, but just hiding in the asylum as a defense against his fears of an outside world that has treated him, and his people, with cruelty and disregard.  In the scene below, you'll see the Chief in an earlier sequence, still in disguise, looking on as Mac tries to lead the group in an escape toward the pleasures of the outside world.

 

In the final scene of the movie -- perhaps the best movie ending I've ever seen -- the Chief is horrified to find that Mac has been given a frontal lobotomy, effectively killing off the essential aspects of his personality.  Watch as the Chief decides to carry Mac with him in a long-awaited quest for freedom, just as we carry the Holy Spirit inside of us in our own life journeys.

 

 

Peace Maker: Bonner Ritchie's Story

Bonner Ritchie

In the late 1980s, the Palestinian uprising in the West Bank and Gaza Strip began as a protest against the continued Israeli occupation.  Then, as now, a number of people from both sides worked in the interest of creating a lasting peace.  During this period, Bonner Ritchie, a professor of Organizational Behavior at Brigham Young University was asked to visit the Middle East and join the peace process.  Without a background in international relations, Professor Ritchie was surprised to be asked, and did not particularly look forward to spending time in the Middle East, since his children were in their teens and, of course, in need of their dad.  Still, the calling seemed important to Ritchie, and he did agree to help out as best he could.

During one of his trips to the West Bank, Professor Ritchie was driving through the area and became lost.  Finding his progress thwarted at the end of a cul-de-sac, he slowed his car and began to look out the rear view mirror in preparation for backing up.  As he did so, four young men ran out toward his car and began to throw rocks at him.  In a panic, Ritchie could not quite get the car into reverse, and was frozen in place for a frightening moment or two.  Some rocks pierced his windshield and blood began to run from his forehead onto his shirt and lap.

Dr. Ritchie did manage to escape the situation, though when he returned to their hotel , his wife was shocked at his appearance and insisted on taking him to a hospital for treatment.  Wanting to understand what had happened to him, and why, Ritchie asked one of the Palestinian men with whom he worked to accompany him back to the Palestinian village in which he’d been attacked.  They did so a few days later.  After a conversation with a neighborhood elder, Ritchie and his associate were able to identify the young men who’d hurled the rocks.  They turned out to be 14 year old residents of the neighborhood. 

A meeting was set up between Professor Ritchie and the boys, and eventually they were able to sit together and talk about what had happened.  During the conversation, Ritchie learned more about the situation the Palestinians experienced, and about the roots of the intifada.  He also learned that it is easy to tell the nationality of the owner of a car in the Middle East, because the license plates of each country carry a unique and recognizable color.  The yellow plates of his rental car, Ritchie learned, identified him as, apparently, an Israeli driver.

The boys learned that Bonner Ritchie was there in the interest of peace.  Eventually, the boys would show their respect by visiting with Ritchie again at the airport in order to say goodbye.

At the end of their conversation, the boys summed up their learning: “we like you, but you have an evil car.”  

Why we feel the goose bumps

Here is a wonderful explanation from movie critic Roger Ebert about the visceral feelings of "elevation" that we feel at those magic moments in life when we are observing human beings at their best.  A couple of excerpts follow, but please follow this link and read the entire article:

http://blogs.suntimes.com/ebert/2009/01/i_feel_good_i_knew_that_i_woul.html

Elevation has always existed but has just moved out of the realm of philosophy and religion and been recognized as a distinct emotional state and a subject for psychological study. Psychology has long focused on what goes wrong, but in the past decade there has been an explosion of interest in "positive psychology"--what makes us feel good and why. University of Virginia moral psychologist Jonathan Haidt, who coined the term elevation, writes, "Powerful moments of elevation sometimes seem to push a mental 'reset button,' wiping out feelings of cynicism and replacing them with feelings of hope, love, and optimism, and a sense of moral inspiration."


Studies have indicated that Elevation is triggered by the stimulus of our vagus nerve, described by Wikipedia as the only nerve that starts in the brainstem and extends down below the head, to the neck, chest and abdomen, where it contributes to the innervation of the viscera. It must be involved in what we call "visceral feelings," defined as "relating to deep inward feelings rather than to the intellect."

 

Strategic Learning from Disaster

Dietrich Dorner - The Logic of Failure

In order to study decision-making in complex environments, Dietrich Dorner and his associates created a computer simulation in which participants took on the role of a small town "mayor." The fictional town controlled a municipally owned watch factory, and interacted with a number of constituents, including a bank, retail stores, medical practices and restaurants. The "mayors" were allowed to control spending and make important strategic decisions over a simulated ten year period.

Many of the 48 mayors ran their small towns into economic ruin. In these cases, unemployment ran rampant, home ownership dropped, businesses failed, and the citizenry was, as a result, quite unhappy with the leadership displayed by their mayor.

Other mayors, though, presided over a town displaying remarkable economic growth characterized by housing growth, financial success of business institutions, and a delighted citizenry.

As they examined the differences between the "good" and the "bad" mayors, the Dorner group found that success was quite predictable, varying according to the decision behaviors of the mayors. They found:

The good mayors made more decisions than did the bad ones over the ten year period. Moreover, good mayors tended to make more and more decisions over time, while the bad mayors made a number of decision early on, and then tended to stick with the plans they'd made early in the process. As the game rolled out, though, the good mayors continued to find possibilities for influencing the fate of their town than the bad mayors.

As the authors note, "a town is a complex system of interlocking economic , ecological, and political components." It is impossible to make a decision about one aspect of municipal or economic life without impacting some other part of the system. The good mayors were able to see the town as a complex system, and were better at recognizing the cause and effect relationships among variables. Moreover, they anticipated possible unintended consequences of their decisions. When decisions did not result with anticipated effect, the good mayors were able to "tweak" their initial decisions and nudge the town back on the hoped-for economic track, rather than "staying the course" toward economic ruin.

Two essential elements emerged as researchers studied the difference between the good an bad mayors. First, the good mayors seemed to understand that they were dealing with a complex system, and sought to balance complex relationships among a variety of variables. They sought to understand the dynamic underpinnings of the town's economy, and the dynamic relationship among variables.

Second, the good mayors tended to ask more "why" questions. The good mayors tested their hypotheses more often than did the bad mayors. Bad mayors tended to take events at face value, and were less introspective about the ways their own decisions and behaviors had affected the fate of their town. For the bad mayors, "to propose a hypothesis was to understand reality; testing the hypothesis was unnecessary. Instead of generating hypotheses, they generated 'truths.'"

* * * * * * *

The Chernobyl disaster provides an excellent example of decision making about complex systems gone awry. Most remember that a nuclear reactor exploded at the Chernobyl facility in the Ukraine, then part of the USSR, on April 26, 1986. The fact that the disaster was caused entirely by human error of highly experienced and well educated technicians is less widely recalled.

A nuclear reactor is designed to generate intense heat in order to created steam that is then converted to electrical power. The nuclear reactivity must be contained within certain limits so that the reactor does not overheat. The balance between the degree of reactivity necessary to create power and the degree of reactivity that can send a reactor out of control is regulated by what are called control rods. To mitigate reactivity, rods are inserted . To increase reactivity, rods are withdrawn. At Chernobyl, there were 211 rods available for use in Reactor 4. A rule-of-thumb was widely understood that there should never be less than 15 rods inserted into the core.

On that day in April, 1986, a series of experiments was planned for the purpose of identifying improvements to existing safety systems. To conduct the experiments, engineers wanted to reduce the reactor's output to 25% of capacity. As it happened, though, the reactor was cut down to 1% capacity because of a miscalculation by an engineer. Running at such low capacity was known to create instability in the reactor, and the engineers were anxious to bring the process back up to the safe 25% level.

The group was anxious to get started with their study. To allow the reactor to "heat up," the engineers began a series of over-correction, and removed all but all but 6 to 8 of the rods, ignoring well established safety rules, and putting the nuclear process into a state well below safety standards.

With the benefit of hindsight, we can see that the engineers did something we have all experienced in one way or another: They over-steered their vehicle. We all know that you must not over-correct when a wheel slip occurs while driving over ice, because the over-steering can send a car on an even more dangerous course than the one spurring us to make the adjustment. Likewise a ship's captain must not over-steer in adjusting his course because once instigated, forces of physics cannot be easily undone.

Getting the reactor heated back up seemed to take an inordinately long period of time and, perhaps due to simple impatience, the engineers decided to perform their experiments even though the reactor had only returned to 7% level. They knew that they were working with a system with dangerously low stability, but they were an award-winning group of well qualified experts. Relying on their intuition and experience, the group continued, perhaps, because they knew that they were collectively too smart for anything bad to happen. To begin their experiment, the engineers shut off a steam pipe to observe the effects on other elements of the system.

Quite suddenly, the reactor began to react to the series of adjustments the engineers had made. With so many rods removed, the reactor was getting very hot very fast. Imagine the panic experienced by these men as they watched the reactor go out of control. Quickly, they attempted to reinsert the ever-critical rods back into place. Unfortunately, the pipes that received the rods had bent because of the heat and pressure, and the rods could not be pushed in. They reactor exploded within two minutes of the beginning of their experiment.

The immediate explosion took two lives.

On 26 April 1986 at 01:23:44 a.m. (UTC+3) reactor number four at the Chernobyl plant, near Pripyat in the Ukrainian SSR, exploded. Further explosions and the resulting fire sent a plume of highly radioactive fallout into the atmosphere and over an extensive geographical area. Four hundred times more fallout was released than had been by the atomic bombing of Hiroshima.[1]
The plume drifted over extensive parts of the western Soviet Union, Eastern Europe, Western Europe, Northern Europe, and eastern North America. Large areas in Ukraine, Belarus, and Russia were badly contaminated, resulting in the evacuation and resettlement of over 336,000 people. According to official post-Soviet data,[2] about 60% of the radioactive fallout landed in Belarus.

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