Sunday, June 19, 2016

Strategy Statement Imposters

Somewhere between vision and operations lies an organization’s strategy. A simple, powerful statement of that strategy mobilizes employees behind a common purpose, excites investors and draws customers to the company’s doorstep.

All too often, though, companies confuse the strategy statement for other kinds of messaging, some too aspiring, some too opaque and some too parochial to be meaningful. When that happens, employees wonder ‘What are we driving toward,’ investors ask ‘what makes them different?’, and customers say ‘why them?’

In Can You Say What Your Strategy Is?, the authors outline some common mistakes companies make in talking about strategy. Here are some other common traps companies seem to fall into:

Too often leaders disguise marketing as strategy. They use company advertising campaigns or re-brandings as proxies for well-formulated market positioning. These marketing messages, long on concept but sometimes short on details, leave operating gaps for employees to fill in. They understand how the company wants the market to see it, but don’t fully understand how to achieve it.

Then there are buzzwords. It’s tempting to align messaging to trendy buzzwords to make markets pay attention. But it can be confusing to employees who neither understand what they mean nor how the company’s operations reflect them.

Not every company is a “platform” company like Amazon, for instance. And not every company using technology to produce products or offer services is a “technology company”. Without a clear strategy statement, it’s challenging to make sense out of the buzzwords, or what they mean for setting priorities, building a budget and managing operations.

Analysts, too, quickly sort the fact from the rhetoric, and the glow from the buzzwords fade. Buzzwords work when company results and strategic direction clarify them and give them real meaning.

Some buzzwords to be aware of, or avoid, in 2016 can be found here. A more detailed list of everyday business buzzwords can be found here.

When messages from finance start serving as strategy stand-ins, that’s when employees worry. “We’re going to grow revenue, cut costs and innovate,” a finance leader might confidently state. Company Accounting 101 turns into numbers-based marching orders on strategy.

Suddenly anything that cuts costs is worth doing. Likewise for anything that grows revenue. And innovation becomes synonymous with “try something, anything, new” when there’s no guiding statement of strategy toward which innovation should be directed.

Managers, of course, know enough about the business to make directionally correct decisions. They’ll understand that cutting costs on a core product, when that cost cutting undermines revenue, doesn’t work. And they understand, too, that an auto parts manufacturer doesn’t innovate in lawnmowers (unless there’s some pretty clear strategy behind it).

But the ambiguity created by a lack of a strategy statement may lead managers into decisions that look right at the core, but on the margins miss the mark. And sometimes the margins are the only place to differentiate.

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