Strategy Lab

For CEOS, Entrepreneurs, Consultants

I never cease to marvel at how some entrepreneurs discover a “secret” that represents the direction the world is heading and results in a one-in-a-million company that captures lightening in a bottle and grows like a weed without care and feeding.

I also marvel at how once-market-leading firms (like Yahoo, Best Buy, and even Bank of America) start losing ground to start-ups like Google, Amazon, or crowdfunding on Kickstarter because their CEOs failed to see around corners at the future that was coming towards them.

Given we are living in a world of disruptive innovation, it is curious how most CEOs, entrepreneurs, and owner operators, view the introduction of a new strategy as an “exceptional event,” not the norm.

They don’t recognize that the CEO’s number one job is to be a chief visionary and master strategist, part of which involves the capacity to see around corners at what’s coming. If you ask most CEOs if they do strategy, they will say “yes,” yet in fact, strategy is one of the many things that they do. Strategy is often delegated to specialists and often viewed as a problem that was solved and settled a long time ago.

Part of the problem lies with the annual round of strategic planning and budgeting meetings, which are often more about politics than strategy. Do strategy sessions really matter? They actually don’t matter, if management hubris causes you to automatically accept the same strategy as given, focus on a strategy for operational excellence, and spend most of your time at the meeting talking about how you are going to make next quarter’s numbers for your PE firm or Wall Street.

The Problem with the Traditional Strategy Session

One way to understand the problem with the traditional strategy session, as well as to see what is missing that will make a difference is to consider “Three Box Thinking,” as articulated by Vijay Govindarajan of the Tuck’s School of Business.

  • Box One is where the conversation starts with the present strategy as given and is largely about everything need you to manage and improve performance within it.
  • Box Two is scanning the horizon to see what is coming around the corner, which helps you stop spending all your time fighting competitors and following trends that are no longer relevant.
  • Box Three is strategic thinking about rewriting the future of your industry with a game changer and creating billion dollar companies by maximizing and optimizing your core business model.

The traditional strategy session can tell you how to increase revenue per square foot in a Barnes and Nobles, but it can never give you an Amazon.com.

The problem is that in most strategy sessions  “Companies spend all of their time in Box One, and think they are doing strategy,” Govindarajan says. “The fact is that strategy is really about Box Two and Three. The challenge is to rewrite the future so that you will lead the industry in the years ahead. It’s about scaling a million-dollar business to a 100 million or a 100 million to a billion.” This could mean maximizing your current core business model, or seizing the white space, providing what’s missing,  and creating a whole new dynamic business model.

The Strategy Lab is such a world apart from the annual round of Strategy Planning and Budgeting meetings, so as to be almost unrecognizable.

My intention in this post, and others to follow, is to show you how to run a Strategy Lab that is as different from your typical strategy sessions as night and day. I am going to provide you gratis eye-opening, brain-rattling principles and simple-to-learn methods that translate across the world.

I would like to say that the Strategy Lab is brain surgery, but it’s not. I respect the intelligence of the people I meet in business and I am certain that CEOs, Entrepreneurs, Consultants will be able to conduct a Strategy Lab, if they use the methods in my next series of posts. Of course if you need my help, you can reach out to me at any time.

I am going to teach you how to run a Strategy Lab, absolutely free, sharing all of my IP. If you need help, you can reach out to me and my group.

The Strategy Lab actually commences with establishing a shared purpose by asking one simple, but very powerful question: Who do we intend to be as a company, why will it matter, and to whom? This is much more important than asking how are we going to beat the competition this year or deliver on quarterly results for Wall Street this quarter. Yet to energize the Strategy Lab and the company, we create a Winning Aspiration or 10 X goal. This is followed by a 2 to 3 day process that is summed up by the term hybrid thinking.

The Strategy Lab needs to be eye-opening, brain-rattling, and fast-paced. You can achieve this easier than you might think through time compressed exercises that combine the analytical brilliance of a McKinsey with the creative cool of an IDEO. For example, to help the CEO and team to assess the strategic situation, I might ask them to create a White Paper. I ask people to include things like: Mission, Brand Promises, Competitive Position, Customer Base, Revenue, EBIT, Gross Margins, for this year and projected for next.

Later, when it comes time to generate multiple strategic options, I take the group through a series rapid fire exercises. For example, Disrupting the Competition, Empathy Fuels Innovation, Serious Play, Rapid Prototyping, What would Midas do? etc. I will teach you all of these things through my posts, so stay tuned.

Let me give you an overview of the basics of a Strategy Lab and its 10 building blocks to think about in advance. (It’s generally a 2 to 3 day process, with follow up each quarter.)

1) Meet with the CEO or top team to discuss the leader’s role in strategy and establish a date for the Strategy Lab. The idea is to get the leader to step up to the job of being the company’s chief visionary and master strategist. Once this happens, it changes everything. One of the key things in this meeting is the CEO thinking about setting a 10 X goal that represents a moonshot, and that represents a Strategy of Preeminence. JFK said, “We will put a man on the moon by the end of the decade.” A 1X goal would have been to stay competitive with the Russians in space explorations, by putting a dog into space.  JFK declared a moon shot, even though it looked impossible and we had no idea how to reach it. It caused the whole space program to be reinvented from scratch.

2) Invite participants: the 30/30/30 rule. Thirty percent of the people attending the Strategy Lab should be the top executives who are good at keeping the organization focused on the future and managing today’s performance (but who also may tend to get stuck in Box One). Thirty percent of the people in the group should be market facing with strong empathy for customers—innovation, marketing, distribution sales, etc. The final thirty percent should be people around 30 years old.

3)  Three Simple Ground Rules.

  • Everyone is to be treated as a colleague. The Strategy Lab is not about where you sit in the hierarchy of the organization, but who you are and your capacity for strategic thinking and inventive and effective planning.
  • It’s okay to disagree. Disagreement has to be viewed a as a resource not a threat. The truth comes from a clash of opposing opinions.
  • Discuss the undiscussable. If someone sees the company heading toward a default future or train wreck, they need to talk about it. Invite people for 1 to 1 meetings ahead of time and encourage candor about their concerns.

4) Ask people to do some Dumpster Diving for 14 days in advance to see what’s coming around the corner. The Strategy Lab helps people build an expansive map of what’s coming around the corner and exciting new possibilities and business opportunities. The magic happens when people get beyond industry orthodoxies and existing market activity and explore the customer’s unspoken, unmet needs. The key is to spend some time doing some dumpster diving in advance of the Strategy Lab. This involves crawling around websites to catch the trajectory of new technologies that are potentially disruptive, hanging out with new competitors on the fringe of your industry, and gabbing with customers in supermarket aisle (like Alan Lafley of P&G did to get insight for new billion dollar businesses, like Swiffer or Mr. Clean Magic Erase.)

5) The Strategy Lab starts with where you are. The first conversation in the Strategy Lab starts with assessing the current business situation, which leads to goal setting and generating multiple strategic options. There are many roads to the post office, but I would like to suggest an updated version of the age old SWOT exercise:  1) Trends, 2) Strengths, 3) Weaknesses, 4) Opportunities.

Plaster the wall with flip charts and get going. Draw people out, keep asking “Anything else?” I have discovered that 9 times out of 10, this kind of exercise gets people to see that the company is heading toward a Default Future, which is what will happen if nothing changes. This leads to talking to the group about rewriting the future.

6) Make the Strategy Lab a catalytic event by asking people to set a 10X goal.  If the CEO and participants set a 1 X goal, increasing revenue by 10%, you will get an incremental improvement. If you set a 10X goal, you have to back to square one and rethink your business model, offerings, delivery mechanism and profit formula. Example of 10 X goal: to move the company. Strategy is how! You have to gain enough insight in the biggest choke points in reaching the 10X, as well as a a strategy to overcome them.

7) Start searching for transformational opportunities.  “Let’s leverage the cloud.” “Let’s go to China.” “Let’s make an acquisition to better integrate our supply chain.” All of this may interimly be useful and ultimately necessary, but it’s never going to produce a competitive disruption and or a giant step-change in the growth of your business. To do that, you need a transformational event. When Howard Shultz decided to shift from one Starbucks coffee shop to a chain, it was a transformational event. When Apple shifted from the iMac to the iPod, it was a transformational event. When Michael Dell cut a deal to buy EMC for $65 billion so Dell could make the shift from Dell Direct to Business Services, it was at least intended as a transformational event.

8) You are going to spend  time in your Strategy Lab building a road map. The purpose of the road map is to guide you on your journey toward your 10X goal and this year’s economic performance. The road map starts with making winning choices about what route you are going to take, and what off-ramps to get off or on-ramps to drive up. Does it make sense for your organization to focus on your core business, given your brand, sunk costs and infrastructure (Nike, P&G, Exxon Mobil)? Does it make sense for your company to focus on seizing white space and doing something more than core (Apple, Google, Amazon)?

9) Plan to have a discussion around building off the company’s strategic competency. A new blockbuster business model is great, but it has to match the core competency of the company or group. Leverage what you always do well to drive value creation. There are only four strategic competencies. Choose one of the four to focus on vs try to be all things to all people: 1) Analytical Brilliance (Goldman Sachs), 2) Innovation (Google), 3) Leadership (G.E.), 4) Execution. For example, one of my CEO coaching clients is in the oil business. He told me, “Robert, we are never going to be innovative like the Apple iPhone or Google. We are not going to invent the next fuel of the future. We have sunk costs in a huge infrastructure. Our strategic core competency is superior execution. Knowing that has allowed us to drive tremendous value creation.”

10)  The Discipline of Execution. A road map in hand is a great thing to have, but strategy comes down to execution – actually being able to make something happen. This means you and everyone in the company acts in a way that is not “business as usually.” There are five disciplines that will help you and your organization achieve this, not just in the Strategy Lab, but on a day in day out basis. Each of these may vary in importance depending on the nature of your business:

  • Customer empathy
  • Customer focused innovation
  • Operational excellence
  • Brand management and marketing
  • Financial discipline–profit formula

Capture all of this in the One Page Strategic Plan – OPSP. The Strategy Lab represents a lot of good conversations, but in the end, conversations disappear. You need to put it all down in one page that you and your team  can refer back to at any time to return you to your commitment to your vision, 10X goal, strategy and implementation plans. The One Page Strategic Plan does an excellent job of this.

It’s a Journey. As I said at the outset, creating 10X goals is a journey, not a destination. Strategy has to be looked at as an ongoing process, not as a problem that was solved and settled, given we live in a world of disruption. I suggest you hold a Strategy Lab with your group the first quarter of the year, then have a refresher, one-day session during the second and third quarter.

Note: In future posts, I will drill down into the CEO Meeting, which asks the questions: “Whose job is strategy in your organization?”

Keep your eye out for other posts, which will involve such key topics as:

  • Building a trusted team at the top—People First, Strategy Second
  • Strategy starts with purpose: Define purpose, greater goal, BHAGS, this year’s goals
  • The CEO who can see around corners—How to do Dumpster Diving
  • TSWO—Trends, Strengths, Weaknesses, Opportunities
  • One Page Strategic Plan
  • Execution
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