External vs. Internal: The Difference between Strategy and Planning
As we enter the first days of October here in Minnesota, the leaves are turning, football is back and our clients are diving deep into their strategic planning for 2017.
When the concept of strategic planning arrived in the business world in the mid-1960’s, corporate leaders embraced it as “the one best way’ to devise and implement strategies, according to Henry Mintzberg, the internationally renowned academic and author of ‘The Rise and Fall of Strategic Planning’. By the mid 1990’s amidst the dot.com bust, however, strategic planning had fallen from its pedestal and planning departments were being dismantled.
“Strategic planning is not strategic thinking. One is analysis and the other is synthesis.”
– Henry Mintzberg
Mintzberg explained that strategic planning had become, “strategic programming, the articulation and elaboration of strategies, or visions, that already exist.” On the other hand, he wrote that strategic thinking is about capturing what managers learn from all sources (including both ‘soft’ insights from experiences and observations as well as ‘hard’ data from market research) and then synthesizing it into a vision of the direction that the business should pursue.
In his 2014 HBR article ‘The Big Lie of Strategic Planning’ University of Toronto Professor Roger Martin laments that “strategic plans all tend to look pretty much the same.” They have three major parts: a vision or mission statement, a list of initiatives, and a conversion of the initiatives into budgets. While they may produce better budgets, they are not about strategy.
| Strategic Planning | Strategy |
|---|---|
| Internally focused: planning, costs, capabilities | Externally focused: customers and competition |
| Short-term | Future-oriented |
| Controllable | Uncontrollable in long-term |
| Comfortable | Uncomfortable |
| Accurate, predictive | Imperfect, directional |
| Risk elimination | Risk management |
| Objectives, steps, timelines | Placing bets |
Strategy is about what we choose to do as an organization (and not to do) and why. It is about where to place ‘bets’. Strategy focuses on the revenue side, where customers make decisions about whether to give their money to us, to our competitors or to a substitute. This is the hard work of acquiring and keeping customers. It is uncomfortable because our customers are making the decisions, not our own organization.
How to escape the comfort zone: embrace the angst
Because the problem is rooted in our natural aversion to discomfort and fear, Martin writes, “the only remedy is to adopt a discipline about strategy making that reconciles you to experiencing some angst.”
How can we stay focused on strategy this planning season and not fall into the trap of planning and cost budgeting? Some tips:
- Focus on choices that influence revenue (i.e.: customer decision makers). This boils down to just two basic choices: 1) where-to-play (which buyers to target) and 2) how-to-win (how to create a compelling value proposition for those customers). Customers will decide whether or not our value proposition is valuable and superior to competitors’, and whether or not to reward us with revenue.
- Acknowledge that strategy is not perfect. Managers and boards need to shift their thinking to focus on the risks involved in the strategic choices (i.e.: placing bets) rather than insisting on proof that a strategy will succeed.
- Explicitly document the logic. The assumptions about customers, industry, competition, internal capabilities, and others that drove the decisions should be documented and then later compared to real events. This helps to quickly explain why a particular strategy is not producing the desired outcome.
- Invest in data-driven decision making. Placing bets inherently involves risks. Because strategy is not perfect and risk cannot be eliminated, the objective is to increase the odds of success by understanding and managing risks. This is where knowledge and insight into customer needs and competitive offerings and dynamics provides tangible value.
Alignment
Of course, successful strategic planning occurs when both strategy and planning are aligned. The strategic “sweet spot” is the value proposition that meets customers’ needs in a way that rivals can’t. It must include both the external view of customers and competitors and the internal view of our own capabilities.
When the core elements of strategy are aligned (customers – competition – capabilities – mission/vision), and when decisions are driven by solid external knowledge, organizations can confidently place its strategic bets in a way that both grows revenue and delivers it in a way that is profitable for the company.
Top Five Digital Health Trends for 2016: Disruption Can be a Game Changer if a Business Can Predict it
- Intelligent Automation – big data, digital apps and devices handle the basics allowing people resources to focus on higher value tasks
- Liquid Workforce – technology has enabled anywhere, anytime access to healthcare. Crowd sourcing and workforce flexibility are leading to better outcomes
- Platform Economy – technology-enabled networks and the ability for consumers, providers, payers, and employers to all access them yield better outcomes at scale
- Predictable Disruption – once the ecosystem is established, it becomes more powerful with the addition of new, innovative offers. Many are coming from outside of health care such as gaming and consumer-based technologies
- Digital Trust – as ecosystems grow larger, vulnerabilities increase. Yet, consumer demand for security and privacy remain high
Predicting disruption across digital health encompasses a dizzying array of forces at play – technology, economic business model, consumer engagement, regulatory, and more. A thorough understanding of the competitive landscape where you play is a great first step to take if your market is rapidly changing.
The Challenge of Being Different
In a past life, I held the position of a product manager for a company that was the leader in a substantial and mature industry. As a product manager, I learned many things:
- First I learned that the product manager role in any organization is extremely hard work and not for the faint of heart. I mean, who would even want the job of being in the middle of demanding customers, unruly salespeople, tentative engineers, anxious operations managers, out of touch managers and cautious finance and accounting folks? Sounds like a perfect job for a middle child, which I am not. In addition, even though we had good market research, I always felt like I was running in circles, responding to the largest customer or market anecdotes without a good sense of the real market needs
- Second, I learned that responding to those counter pressures was the safest way to operate. While it was considered ‘customer focused’, in the end, our efforts often resulted in product features and pricing models that looked pretty much like everything else in the market, even though internally we felt we had invented something unique
- Last, I learned that working to make my product line truly ‘different’ in the market required skill, courage, leadership, and even a little luck.
In her book ‘Different: Escaping the Competitive Herd’ Harvard Business Professor Youngme Moon describes the concept of ‘category blur’. Her argument is that once a product category becomes a blur to customers, they start to adopt a consumption posture directed toward the category as a whole, as opposed to the individual brands within it. Professor Moon says, “We [buyers] no longer see the trees for the forest so we cop a stance toward the forest instead.” On the other hand, what she terms ‘breakaway’ products and brands deviate from these stereotypes in such a way as to cast doubt on the validity of the original generalizations.
The concept of ‘different’ implies the ability to compare and contrast one against another – for both customers and product managers. In order to deliver products that are truly different product managers must start with knowledge of his or her own product, production and pricing capabilities, etc. (the internal environment). At the same time they must have deep knowledge of the competitor’s products and capabilities along with buyer needs, perceptions and behavior (the external environment). In addition, since the external environment is constantly changing as customer needs change, competitors change, and technology and other trends drive change, the awareness of differences must be continuous. (Refer to the difficult role of the product manager above).
When we started working with one of our very good clients several years ago, the senior executive told me, “We have launched so many new products and product improvements over the years that have failed.” He added, “They not only cost money but hurt our reputation with customers, and we know that solid investment on the front-end is critical.”
It is the external environment where Line of Sight Group helps our clients. Our approach is to help product management professionals improve their effectiveness by collaborating with them to ‘out-smart’ their competition by identifying the disruption that represents opportunities and threats before their competitors do. We help them benchmark the competition, watch their ever-changing external environment and help them connect the dots. They apply the insight to close gaps to reduce risk and Identify ‘white space’ opportunities to make their products truly ‘different’.
As noted above, sometimes being ‘different’ requires a little luck beyond the leadership and hard work of a product manager. Sometimes that luck comes in the form of additional knowledge and insight – and it can mean all the difference.
Challenges in Education Services
A series of recent blog posts by Maria Manning-Chapman, VP of Research, Education Services at the Technology Services Industry Association (TSIA) provide solid insight for the broader education services market. Manning-Chapman analyzes two sides of the customer adoption coin and points out that while providers of education services have been historically focused on revenue, profitability, and market share, customers have begun to focus increasingly on business outcomes like higher levels of efficiency, improved satisfaction levels, and expense reduction. Providers are taking note of this trend and are thinking hard about these sought after outcomes. Each market or industry will have its own set of value determinants. What might have been a differentiator two years ago might now be considered “table stakes.” Most industries are also being impacted by disruption that is happening with increasing speed, fueled by technical innovation.
Providers have several challenges:
- Moving further along into adoption services creates the requirement to know more about their clients and their external environment.
- “Speed is God, Time the Devil.” Providers must deliver deeper knowledge continuously to a market that is changing at an ever increasing rate.
- Most providers face low adoption and partial utilization by their clients.
When confronted with such challenges, it is sound to take stock of the external environment as a first step. This yields intelligence about opportunities and threats which when combined with knowledge of internal strengths and weaknesses creates the foundation for effective go-to-market planning. Leaders in the product management, marketing and sales functions that align their offers, messaging and positioning around business outcomes will have a higher likelihood of success. This is especially true for a market seeking business outcomes in rapidly changing times with historical adoption and utilization challenges.