Strategy

Our goal is to help you discover options and make great choices.  Strategy is just choice-making for organisations.  It is challenging to put aside the day-to-day detail and step back, take a fresh look at your business and the landscape in which you operate and think creatively about the options available.  That's where we can help. And strategy must lead to action; it is not an ivory tower exercise but grounded in delivering results that matter.

Lack of a written strategy leads to a lack of focus.  Rather than develop propositions that truly fits with customer needs and market trends, businesses become reactive, chasing all opportunities without any logical way to set priorities.  Even in small firms, individuals build business silos to focus on areas which they believe are beneficial.  In the short term this can work and appear profitable.  But in the long run such tactical wins are hard to build and sustain.  We have seen many cases where opportunist investments that lack a strategic fit have become financial and regulatory burdens.  The organisation becomes forced to invest in maintaining a product or platform which cannot be scaled enough to be profitable or spend effort and money dismantling it.

What is "good strategy"?  A good strategy will:

  • State a clear description of the problem

  • Define your approach to address this problem

  • Be credible and execution ready

 

For strategy to be effective it must come from within the business. You need to believe it, understand it and own it, and it needs to align to your values and purpose. But creating a strategy is hard, and even more difficult on your own – we are often too close to our own business, so struggle to be objective or create new ideas.

​If you google “strategy” you will quickly learn that Apple has a fantastic strategy, Kodak had a terrible strategy and that you too can have a strategy by downloading a template.  That might be interesting if you were signed up to an MBA course, but it is hardly practical.  No matter how many templates you complete, how can you know if they are any good? You may end up with several half-completed templates and a headache, or a few grand sentences that have no practical use. A good strategy is not something you can get from a template. There is no magic formula, because a strategy is personal and relevant to each business, so has to be built from within, not by filling out an external form.

Good Strategy

Good strategy starts with a clear description of the problem.  It doesn’t need to be brief – we are not aiming at a sound bite – it needs to be right.  The Charity Commission strategy starts by saying that there are many charities well-loved and funded, “yet when it comes to trust and confidence, the challenges facing charity are considerable”.  No mincing of words.  The problem is well laid out with context. 

If you asked charity trustees about their problem, you might get a different set of answers about fund-raising, governance or well-being.  But that is not the role of the Charity Commission.  It is a regulator, “providing effective regulation with a purpose: to ensure that those we regulate are able to inspire even greater levels of public trust and confidence”.

Organisations find it tough to get clarity on their exact problem and a template won’t help; they also miss off the landscape.  Both sit together.  If the problem is “my company looks just like my competitors” then the strategy you adopt might depend on the landscape: who are the competitors, are customers loyal and why, who are the suppliers, what new entrants are likely to disrupt the market and are my customers likely to switch to an alternative?

The strategy sets out a problem and then sets out an approach.  The US defence research unit DARPA is another great example. DARPA says it invests in futuristic weapons research.  It is not interested in more accurate rifles or better missiles.  Even laser cannons are old hat.  DARPA will meet anticipated future military needs by building science-fiction weapons.  That isn’t quite what the strategy says, but it is not far off.  The DARPA strategy is clear, specific and lays out the direction: it sets out what they do and what they don’t do.  They are not going to get dragged in to look at issues in today’s hardware or worry about future procurement.  It is more about what weapons will be needed in 2040 and beyond.

Lastly, a good strategy is execution-ready.  It does not need a plan, budget or any of the execution components to be in place, but it must be credible that they could be put in place.  Near targets are a very practical way to get started.  TSB Bank believes it’s “aspiring middle” customers want “brilliant basics” and a “great digital experience”.  Their strategy says “over c. £120 million will be invested to further build on TSB’s digital channels to provide mobile in-app onboarding / sales, as well as investing in the automation of some of the Bank’s branches”.  This alone is not enough to give a “great digital experience”.  It is a near target, a baby step.  But it is execution-ready.  If the strategy was just to “build on TSB’s digital channels” then there is another layer needed to define where the priority lies.  

 

 

Bad Strategy

The first sign is the use of fancy words – the rhetorical laundry list.  Beware of disintermediation, monetisation, customer-centric, synergy and disruption.  If it isn't plain English, then chances are it is style over substance.

We are also allergic to “apple pie” strategies.  These are strategies which emphasise that the organisation will excel at what everyone acknowledges as important.  "Excellent cleanliness" is not a strategy for a hospital.  Aspiring to give "excellent customer service" for a bank is just what all banks aspire to.  These are not strategies, but part of the specification for the  service.  We are not saying there isn't merit in truly excelling at something competitors are failing at, it is just that a strategy cannot comprise doing the very thing that defines the sector.

Strategy is all about choice.  And it must be a clear choice.  So that means it also has to be clear on what you don’t do.  A strategy that does not have “edges” is just not very useful. The Charities Commission have a well-crafted strategy which sets out a clear problem and with a solution approach of legislation.  For its employees, there is no ambiguity.  They are not tempted to achieve the desired outcome by means other than legislation.

Sometimes we see "to do" lists pretending to be strategies.  Often it starts from some sensible goal – say “improve education in Scotland” – but gets broken down into tasks to combat truancy, improve infrastructure, invest in IT and dozens of other things that contribute to the goal.  Restating that list as "strategy" misses the point.  

This is not a complete list of how to spot bad strategy, but I have one more to add: the “elephant-in-the-room”. You cannot be serious about a strategy that ignores fundamental changes in the landscape like Covid-19, Brexit, recession and supply-chain damage.  Digital trends, climate change, market entrants or demographic shifts probably impact you too. Strategy always needs to consider the landscape of customers, suppliers, competitors, new entrants and technology change.

Kodak Revisited - "You press the button, we do the rest."

The potted history of Kodak is that they democratised photography for 100 years then ignored the importance of the digital camera, something they themselves invented in the 1970's then abandoned less it cannibalised their lucrative film business.  But this that a fair narrative and was the demise of Kodak the consequence of poor strategy?  Authors have suggested that Kodak did not take the competition from Fujifilm seriously, inflexible, did not fully embrace digital, were complacent and avoided creativity.  But how did these factors play out and would we have done things differently without the benefit of hindsight?

Imagine yourself in the Kodak boardroom. The year is 2000, and new CEO Daniel Carp has been appointed. you made $1.3b profit.  His new strategy will focus on commercial printing, display and components, health imaging, digital and film imaging systems, and commercial imaging.  Partnerships and acquisitions will be needed to refocus revenue away from imaging so the strategy will take time and energy.

The "Kodak moment" has been part of the language since 1961 and Kodak specialised in simplicity. The move to digital for Kodak started in 1990.  You manufacture the Apple Quicktake camera, your subsidiary Eastman Chemicals is a Fortune 500 company in its own right and you have made an assessment of digital cameras.  You are already the second-largest manufacturer behind Sony, but recognise that digital cameras are poor for taking snaps.  The marketing of Kodak made it every mum's duty to be the archivist of their children's growth, making the 4" x 6" glossy photo key to sharing memories with the family. 

Soon you will start work on the groundbreaking Kodak EasyShare LS633 which came with a bespoke print dock.  This will suit the Kodak "razors and blades" model in which the profit would come from consumable sales not the hardware, analogous to film.  That business model, known as the "Silver Halide" model within Kodak, had worked for 120 years.

The strategy in 2000 may have made perfect sense.  Continue investing in the domestic digital image proposition (by which I mean cameras, printers, file sharing, ink and storage) and plan for a gradual wind-down of film.  The move to digital is not cost-effective for most American households and will therefore take some time,  Film sales are rising and Kodak is a leader - they account for 72% of revenue.  Digital camera sales are rising too and Kodak have a strong play based on sound research and market presence. The cliff-edge seen in the graph below would have been unpredictable.

 

 

Image Source:  Jake Neilson via Twitter

2000 is a pivotal year.  By 2005 the company makes a $1.3b loss - it made a $1.4b profit in 2000 and the stock price was double.  Five years of litigation, factory closures and job losses follow.  In January 2012 Kodak filed for Chapter 11 bankruptcy protection, with the writing on the wall by 2010 when shares slumped to $5.  Given the size, structure and investment life-cycle of Kodak, 2000 was really the last chance to transform the company.  But why should the boardroom change strategy when it had committed to investing heavily in digital cameras and would go on to manufacture several world-first over the next decade?  There are some missing facts.

Making colour camera film is a very complex process with a lucrative Fujifilm and Kodak quasi-duopoly.  Making a digital camera is more like an assembly job, with low-cost entrants able to undercut US corporates.  Kodak were manufacturing in the US and loosing $60 on every camera they sold.  For the strategy to make sense, Kodak needed large cash reserves (which they had) and to make their profit from printing (which was likely if the world kept printing photos).  It all fell apart through a combination of outside forces and a reluctance to revisit and change strategy.

The collapse of film sales reflected a change in the role of images and cameras in society.  Before the internet became ubiquitous, home photography was about "preserving memories".  Most cameras were simply point and click.  Then a combination of technological opportunities led to a sociological shift over just a few years.

 

Digital cameras are gadgets that need to be integrated with the PC and technologies which are ubiquitous today but were still emergent in the home market in 2000 like email, blogs and photo sharing (social media and camera phones were to follow later). Men were now the family photographers and the driving force was "sharing the moment".  The Kodak assumption that no one would want to look at a photo on a screen was proving wrong and the imperative to print was eroded faster than anyone could have imagined.  By 2008, Nokia sold more camera phones than Kodak sold film-based simple cameras.  The majority of images were never printed.  

What are the takeaways? Kodak was a one product company, selling ways to preserve memories on paper, as it had been doing since the 1880's.  Fuji was far more diversified and then diversified more by making cosmetics (it knew a lot about gel technologies), LCD screens (it knew about thin film technology) and healthcare.  Kodak may not have seen itself as a one product company, but financially it was and that contributed to an inability to absorb change.  Today we might draw a parallel between Fuji and Google or Amazon.

Above all though the Kodak strategy was not reviewed frequently and did not react to rapidly changing customer demands.  Instead it created a false synergy in thinking, quite understandably, that mass-market film photography and digital photography met the same customer need where printing is key. 

 

Kodak tried hard to change but placed the wrong bets.  It was a time of radical uncertainty, and Kodak management did not fully recognise that photo printing would change beyond all recognition. Today Kodak provides packaging, functional printing, graphic communications and professional services for businesses around the world and is trading profitably on NYSE.  But is it a fraction of the size it was in 2000.

 

Strategy with ABC

We prefer to be "Business Consultants who do Strategy" than "Strategy Consultants".  Semantics maybe, but we prefer to focus on co-creating good strategies that come from within the business, rather than create it for you in isolation. You need to believe it, understand it and own it, and it needs to align to your values and purpose.  The strategy must be execution-ready; do-able within your resources and constraints and aligned to your vision and purpose.  But that does not mean that leaps of innovation, transformation and leadership will not be called for.  

Developing and implementing strategy is a leadership challenge.  The strategy absorbs the uncertainty from your teams so that they can focus on what they do best without worrying about the (known or unknown) unknowns.  It is not a committee compromise.  We can help you develop your leadership, innovation and transformation mindset and act as independent mediator between your key stakeholders.

Whatever your organisation's size or sector we are open for a chat about whether we can help. 

Acknowledgements

University of Cambridge

Good Strategy, Bad Strategy by Richard Rumelt

Black Swan by Nassim Taleb

Radical Uncertainty by Mervyn King and John Kaye

Petapixel

Democrat and Chronicle

Wikipedia

Charity Commission

DARPA Strategic Framework

BusinessWire

Forbes

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