Close your eyes for a minute and imagine a strategy.
Are you imagining a simple, specific document you refer to for helpful guidance that summarizes your company’s north star?
Or are you imagining absolutely nothing?
Don’t blame yourself. In Michael Porter’s books, or anywhere else, I haven’t been able to find many examples of what a strategy should look like.
Here’s a proposal: open any book on strategy and go to the Index. Lookup “Strategy, an example of”. Find anything?
The “4 Steps to Develop a Strategy” outline the four major components that a good corporate strategy needs:
A strategy could cover these four components in ten to twenty sentences.
Why not a 200-page plan? Because if every one of your employees can’t remember the strategy and don’t know how to use it to prioritize their day, what good is it? A strategy needs to be specific enough to be helpful, but short enough to be memorable. It should be something that everyone can refer to. Companies often either do too little strategic thinking and/or create too much “strategic material”. Either way, they avoid the hard work of these 4 Steps.
Here’s my best guess at Southwest Airlines’ strategy circa the 1970s (it has changed little since)
Southwest Airlines’ Strategy
Every employee can understand this and can apply it to decisions they make day-to-day. Even though it (or a variant of it) should be shared across the company, it should be specific enough to be confidential.
Here’s my guess at Fitbit’s strategy circa 2015:
In the Southwest example, note the four top-level bullets in section four are the “two to five unique and pivotal decisions of our solution”.
The “such as…” examples in the lower-level bullets are the specific activities. Not having meals is not part of a strategy. It is an example, among many, that reinforce a commitment to limited passenger services and being low cost. Not having meals means also that they don’t have to wait for a lot of food to be loaded at the gate. That’s possible because they only fly short distances and it helps make the door-to-door faster as well. Southwest’s four unique and pivotal decisions are coordinated.
What strategy experts often overlook
I’ll also point out that all four decisions follow a natural storyline. Once they established the core concept of short routes to compete with driving, then deciding to be low cost made sense. Flying into smaller airports was a natural decision as well. And so they followed the thread to establish a full list.
The examples in Section four are important. They give the strategy real punch. But you need not have figured them all out on Day One. This is something that experts either miss or overlook explaining. As much as I’m a big fan of both Michael Porter and Kim and Mauborgne’s Blue Ocean Strategy, neither one observes this in their analysis of Southwest.
The Blue Ocean Strategy book, for example, introduces a “strategy canvas”. This is a set of five to ten customer-facing attributes that each competitor is scored on. For Southwest, the list includes lounges, meals, and hub connectivity.
Michael Porter has the “activity map” with eighteen activities in the graph. I have two issues with the activity map:
- Showing these details that way makes them appear as if they have always existed and were prescribed in advance. (In fairness, Porter’s activity maps often have major/hub and minor/spoke activities colored differently. In that case, the major ones are the “two to five unique and pivotal decisions”; the minor/spoke ones match the sub-bullet “such as…” items. Though Porter himself doesn’t explain the development of a strategy as such.)
- I see people confused about what to put in activity maps. In Playing to Win, an otherwise great book on P&G’s strategic evolution, the P&G activity map listed are sources of advantage (e.g. “scale”, “innovation”, “go to-market capabilities”, “customer understanding”)—not decisions made. And the co-author of the strategy and book is a long-time consultant of Porter’s own consulting firm, Monitor!
Why is it important to get the guiding principles and not a full list of all the specific tactics? For one, listing out the ten ways you will compete can’t always be possible on Day One of a startup. You need to learn them over time. For another, not everyone in the company can remember all ten in their heads, thus violating the “keep-it-short” rule.
And finally, a company like Southwest learns over time. It wants all of its employees out there thinking about new ways to reinforce these approaches. Provide a list of ten detailed ideas to your employees and it will always stay ten. Provide four governing thoughts and your employees will give you hundreds of new specific ideas. Toyota made their Toyota Production System a strategy because they made it strategic and evolutionary while none of the other automakers did; others simply tried to copy specific parts of the system they observed.