Harvard Business Review is a thick, fibrous magazine, a green spinach of publications that when you pick one up at an airport newsstand provokes the clerk to do a double-take at the $16.95 price. Seventeen bucks? Really? Why does one magazine cost so much?
Quality, in fact. In the September 2012 issue, HBR unveils “Bringing Science to the Art of Strategy” — a simple and insightful framework for making the business cliche real. “Strategy” is too often tossed around as a buzzword, but the authors of this bit — who include A.G. Lafley, former CEO of Procter and Gamble — explain that strategy is simply about making a choice.
“Why do the operations managers in most large and midsize firms dread the annual strategic planning ritual?” the authors begin, and then answer it’s because most organizations get mired in data, analysis and issues without framing the discussion in terms of choices that drive action.
Chess is a game of strategy, and to play you have to move the pieces. You have to think of different outcomes, and then choose each piece, and then decide its direction. Running an organization requires the same actionable choices.
The authors provide an insightful framework for listing, and selecting, your strategic choices:
- First, don’t list “issues” in your discussion, but instead define “choices.” For instance, imagine your profits are down. A typical management offsite might prioritize that issue, and then brainstorm all the reasons why. But reframing “low profits” as a choice means coming up with options that move the problem. Say: (a) you could create new products with higher margins, (b) you could raise prices on current products, (c) you could drop supply costs on current products, (d) you could enter a new market with higher-margin products, (e) you could exit a sector with low-profit products, or (f) you could acquire another company that has higher margins. In general terms, list your major choices.
- Second, generate strategic possibilities. Look at the chess board, and don’t think of where you are now, but where you possibly could be tomorrow. Don’t be critical in this stage, simply imagine different futures. Say for (c) above, in one future you drop supply costs, so a strategic possibility is you find a new inventory supplier at the same quality levels with lower material or labor costs. As you list possibilities, be sure to include the status quo, where you are now, because staying in one place is a choice as well — and standing still can hurt you as the competitive market moves past you.
- Third, list the conditions required for success for each possibility. For (c) above, dropping supply costs, you must find a supplier in India; manage communication, time-difference, cultural, currency, and negotiation issues; assure quality control; test the products; have customers willing to pay for this new product. If all of those conditions could be met, the strategic choice is an option. If someone is critical in this stage, reframe it as a condition. “We don’t know any firms in India!” becomes “For this future scenario to work, we would need to find firms in India.”
- OK, OK, in step 4, now you can be critical. For each “condition” that must be met, define the barriers. This includes prioritizing barriers and designing tests to see if the barriers hold true. Because you are likely to have long lists of barriers, the authors suggest starting with the biggest, thorniest ones — if those fail, you can toss out the possibility.
Bravo, you are now ready to make the choice. Lafley and team tell the story of P&G going through this process in the late 1990s to solve the problem that while it had successful beauty products, it was missing millions in the profitable beauty care sector. P&G considered acquisitions and various brand options before deciding to move Oil of Olay upmarket from a perceived stodgy cream for old ladies to an upscale beauty product. It wasn’t enough to define the issue and list the problems; P&G had to make a choice from several possible paths forward. In less than 10 years the revitalized Olay brand was generating $2.5 billion in yearly sales.
You don’t play chess by analyzing the pieces and describing them. You have to decide where to move on the board. Thanks, HBR, that was worth seventeen bucks.