I experienced a lot of uncertainty growing up. As a child, you don’t understand why people behave the way they do, you just do your best to navigate your environment. Note to self; don’t sacrifice your dreams on the altar of your obligations. Anyway, I was happiest when alone. I loved chess, technical drawing, and maps.
I didn’t play chess with an opponent. I spent hours working out how the game worked. I wasn’t academic but my approach to chess was. Technical drawing was a way to control things. Drawing something precise was also a calming experience. And maps were about stories. I had a copy of Treasure Island and spent hours staring at the map in that book and imagining my own version of events.
Fast-forward to today and I’m mostly occupied with strategic planning, building financial models and constructing program and project timelines. Chess became strategy, technical drawing became financial models and maps became timelines. And I have my own business because I preferred the uncertainty of entrepreneurship, to the certainty of someone else making decisions for me.
Incidentally, I finally gained all this insight while working through the Self Authoring Program by Jordan Peterson et al. At least I think that’s what did it. It could equally have been all the philosophy books, the long bike rides, or the red wine. Having just read Fooled by Randomness by Nassim Taleb, the one thing I now know, is that I can’t know for sure.
I know what I like though. On the rare occasion that I find myself with a few spare hours, I’ll be sat in front of a Christopher Nolan movie. My other main past time is mountain biking. With a few welcome exceptions, I ride alone. I ride down hills as fast as conditions allow, and back up them very slowly. If you saw me ride, you might worry for my safety. Thing is, it’s a form of meditation for me. It’s dangerous, so it requires experience and total focus, which quietens the mind.
All a bit self-indulgent this isn’t it. Well, there’s a common thread running from my childhood passions to my career and current pastimes, and its strategy. When you think about it, strategy only exists because of risk and uncertainty. It’s an interdependent relationship. Strategy is my obsession. Lots of people like strategy, but many seem to confuse it with planning. In a business setting, people have meetings under the heading ‘strategic planning’ but it’s extremely rare for a conversation about strategy to occur. And you’re missing a trick. A carefully considered and well-executed strategy brings about clarity and cohesion, from which value flows.
As a consultant I’ve attempted to facilitate many strategy sessions. Working with small and medium size businesses, means working with people who have multiple roles. You usually have the owner or owners (still on the tools) and one or two managers. The owners are often keen to describe their vision and the managers are generally anchored to problems. When the discussion gets tricky, everyone just wants to talk about clients. The outcome? Keep doing what we’re doing.
For many years, I had this marked down as a failure of mine. I tried to use some of the tools I picked up along the way, but they were all aimed at large corporates, so they rarely worked. I wasn’t short of opportunities to practice though. Many of the owners I worked with, also worked with a certain coach of the strategic variety. They’d fly across the pond and return with a new trademarked silver bullet. Problem was that they were rarely able to explain the concept or its applicability, and so it was impossible to implement as intended.
Over time I came to some conclusions about these coaching propositions. One, they relied on slow learners with deep pockets. Secondly, not all the right people were in the room. If high-level doesn’t get disseminated, nothing will come of it. Three, no consequences if you don’t do your homework. It’s group dynamics. Once one person doesn’t do their homework, no one’s doing their homework. And no one gets kicked off a paid course for not doing their homework. So no execution. Fourth, no one ever gets fixed. Graduate one course and you’re invited to the next one. You suffer from attribution bias (you’ve been successful since you joined this course, so that must be the reason), so you stick with it. Eventually, you realise that the facilitator is learning from your group and passing that knowledge down to the group below and that’s when you escape. So I feel like coaching and so-called accelerators don’t really work. There’s no skin in the game and precious little accountability for results.
Now, many of you will be reading this and thinking ‘what about the guy who fixed this problem?’. He wrote a book that stopped you spinning your wheels. You know the one. Turns out he was alumni of the strategy coach thing. His management model was picked up by a lot of small and medium sized business owners and held aloft as the answer. As a management tool, it’s great. Gives you a track to run on and has all the trinkets that make one feel in control. But it appears to have all the strategic depth of a puddle. I must admit I’ve not read the book, just observed the results. As such it may not be his fault. What I frequently observe is too many, disconnected rocks, being tossed into the sea of the future. And that means no strategic advantage.
Stay with me. I’m done moaning. Let’s pull all this together. First, how should we best define strategy? For this, we can turn to one Roger Martin: strategist, advisor, author of a new book on strategy and creator of a video for Harvard Business Review called A Plan is Not a Strategy. It’s received over a million views in four months. You can watch it here, but I’ve pulled out a few key insights below.
His definition of strategy is “an integrative set of choices that positions you on a playing field of your choice, in a way that you win.” He goes on to explain that planning is about managing resources (inward focused and often an extension of the previous period), whereas strategy is about markets, customers, and competition (all outward focused). Planning is comfortable because you’re the customer, strategy is uncomfortable because you’re not the customer. So you’re making educated guesses as to what the customer might want. This is important because the development of good strategy requires self-awareness, confidence, and humility. Your starting position is likely to be wrong, so you need to be comfortable with that.
Okay, so that might help define what strategy is, but it’s still high-level. To move towards practicality, we turn to a book called Good Strategy/Bad Strategy by Richard Rumelt. In it he introduces the concept of the ‘kernel’, the essence of a strategy. The kernel has three components: diagnosis, guiding policy and coherent action. Your goal is to find a way to combine your resources to create leverage across the entire firm. Leverage is the primary advantage of strategy. Get everyone pursuing the same goal, make educated guesses about how best to achieve that and make sure actions in one area of the firm, support actions in other areas, making it easier to move towards the goal and increasing the probability of hitting it at the same time.
Here’s some practical tips to help you undertake your strategic planning: –
- Understand that it’s a process. Not a single meeting. Invest the time to do it properly and hire outside help to provide you with a framework, tools, practical knowledge of what works and what doesn’t and facilitation – like me for example.
- Get the right people involved (owners and those responsible for making it happen), but make sure everyone leaves their day job behind when working on strategy. Participants need to play the role of a strategist – define this role in advance.
- Set the vision for the firm, driven by the shareholder(s) requirements. Define what shareholder value means to you – read this blog for more.
- Honestly appraise the current situation. Both recent performance and the overall shape of the firm. Identify areas of strength and weakness. This is critical as you don’t want to build a strategy around weakness.
- Think about your optimum client, what they should experience and what would need to be true about your firm, to make this a reality – this is key and should help shape your strategy.
- Just FYI, service firms like financial planners run on time. If every new client is different, it takes more time to do the work. That’s why picking a niche works well. But chose wisely. If every client is going to have a similar challenge and solution, you’d better make sure there’s a strong reason to select this niche. Passion helps.
- Look across the entire firm and identify areas where change is required. To increase the probability of success, build on strengths and address weaknesses. Remember ‘means to ends’ and be practical.
- Set strategic objectives that relate directly to what you plan to do. Check that the achievement of an objective in one area, supports success in other areas. Make sure you explore proximity when firming up strategic objectives. In other words, do you already have resources and know-how, that mean success has a higher probability than if you didn’t.
- Once you have a plan, break it. Explore how it all goes wrong. This requires everyone in the room to argue the pros and cons of each strategic option, while keeping their personal preferences in check. The role of strategist.
- Once you have an outline strategy, sketch out a timeline, making sure projects that are inherently difficult, or those that will take a long time to produce results, are addressed first.
- Test your priorities with the insurance policy test – if you could take out an insurance that guarantees that one of your projects gets done, which one would it be and why?
- Adopt a method of developing and testing strategy over time. Set the success criteria in advance, so you have something concrete to measure performance against.
Done well, strategic planning follows the scientific method. So you should have a question (‘how do we position ourselves to win’?), a hypothesis (by definition a leap of faith – ‘maybe like this’), a prediction (strategic goals and a financial forecast) and a series of tests with defined outcomes (your timeline, data points and decision-making criteria). I find this is a good checklist.
When we build a plan, we always have strategy at the core. Our final output includes words, numbers, and a timeline. We’re rarely engaged in the construction of a plan for permission, so we can avoid the overly optimistic assumptions and focus on something that will move the firm forward.
Next week, we’ll go through growth stages for SME firms. What they are, why they’re important, how to know which one you’re in and the model strategies you can use to either thrive where you are, or move from one stage to the next, with the least amount of friction.