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.
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.
Profiting From Change: How Some Health Care Organizations Are Navigating Industry Chaos
For every industry there is a ‘current state’ and a ‘future state’. The space between them is called ‘change’….and in an industry like health care, the term ‘chaos’ is more appropriate. This chaos can represent either opportunity or threat, depending on an organization’s ability to understand and respond by making the right decisions and investments. Innovation is happening at a pace never seen before in the health care industry. Political and regulatory change, technology change, demographic and societal change are all driving new market needs for consumers, providers, payors and others. From telemedicine to population health management to connected health, to social patient experience and crowd-sourcing solutions, the pressure on organizations intensifies as they jockey to fill those emerging market needs.
In the midst of all this change, executives are trying to make the right decisions to survive and grow. Product managers and developers need to place bets on new products and innovation, chief marketing officers need to invest in campaigns that position their organizations effectively, and sales executives need to compete ‘in the trenches’ against a dizzying array of competition. CEOs and other leaders need to bring all of these functions together to create strategic plans. Beyond making sense of the chaos, how does an organization gain the confidence to make the right investments in order to grow and not get left behind?
Unfortunately, there is no silver bullet, no single solution.
Although no one can tell the future, some organizations are better at preparing for it than others. How is it that companies like Catamaran (now part of OptumRx), Coloplast and Express Scripts are recognized by Forbes in its latest list of the most innovative companies, while others seem to be paralyzed?
One way in which we’ve observed health care organizations change their mindset has been when they apply their expertise on the clinical side to their business strategy. These organizations are mining data from many sources and analyzing it in a longitudinal, systematic manner. They use the information to identify opportunities to engage directly with consumers, their providers, health coaches and others to close gaps in care. The concept has been applied across the health continuum in wellness, chronic condition management, pharmaceutical safety and adherence, population health management and many others. Optum’s Care Management program, Express Scripts’ Rational Med, Healthways’ TargetTM and Humana’s Gaps in Care programs are only a few examples.
What if this model could be applied to business strategy?
While there are distinct challenges with applying this model to business strategy, the basic model is something we’ve been applying for our customers for nearly 15 years to give them clarity about the changing world around them and the strategic moves that can help them grow their business. They apply this insight to everything from training their salespeople to developing new products and services to making high-stakes technology investments and more.
For health care organizations that are heads down, charging hard and working to meet growth and profitability goals, it can be difficult to take a breath and consider the benefits of applying systematic market and industry intelligence to strategic decisions. Applying the concepts of what they already know gives them a place to start. The basic notion of using empirical data to make decisions and perform interventions that improve outcomes is at the heart of healthcare….and at the heart of strategic intelligence applied to your business to improve growth and profitability outcomes.
If you will be attending the American Telemedicine Association conference May 14 to 17 in Minneapolis, please stop by booth #1325 to say hello and learn more about how Line of Sight helps organizations like yours make sense of, and grow, amidst the chaos.
Our Journey Continues
Welcome!
This – the creation, care, and feeding of the Line of Sight Group consultancy – all started as a passion for two kinds of challenges:
- the challenge of impacting the strategy of organizations, and
- the challenge of making sense of seemingly random data and turning it into meaningful, strategic insights upon which our clients could act.
Since 2002, it has been our clients, staff, partners, and mentors guiding me and shaping Line of Sight Group into what we are today…and where we are headed next.
I started Line of Sight having worked in various sales, product development, market research, and strategy roles with three respected Twin Cities organizations across three different industries – Deluxe Corp, Jostens, and Optum/UnitedHealth. Building out and leading competitive intelligence functions at those organizations leveraged my skills and provided the kinds of challenges I was seeking.
The idea of Line of Sight was to do work similar to what I was already doing as an employee – only to do it as an outside partner. I soon learned that it was much more complex and risky than I had thought. However, it was the relationships formed during those years that led to our early success. We grew through referrals and those who knew my work. I’d get calls from people I’d worked with previously who had moved on to another organization saying, “Remember that strategic analysis you did for us last year at my old company? We need a similar ‘deep dive’ at my new company!”
The work load quickly grew beyond what I could handle; I was able to convince talented people who had similar skill sets and passion to join me. Jen Loehr was just out of college with a degree in Journalism and a strong, Midwestern work ethic, and helped to build out Market-i, our cloud-based platform and the first intelligence monitoring programs. I had previously worked with Sara at Deluxe and at a weak moment she agreed to help me with analyzing the newly developing Medicare Advantage industry. Derek was a student in my competitive intelligence course at St. Catherine’s and began doing part-time monitoring work before becoming our first full-time employee. Others have joined along the way, each adding their own unique skills and personalities. Jennifer S., Jennifer E. (yes, we have 3 Jennifers), Jessica, Mike, Glenn and Brett all share the same values and drive for helping our clients better serve their customers by understanding and taking advantage of change in the business environment.
Our new website and brand refresh is just part of our continued evolution. It started with feedback from our clients – those corporate researchers and their associates who are developing products, communicating with the market, selling, and sometimes running the entire organization. They told us what they value most about how they work with us. We kept those things and built on them. We looked at our competition. We focused on where we are different and better. We listened to our clients’ stories, we observed, we made some strategic decisions. We brought on new talent and developed new relationships. We re-prioritized some activities and reallocated some resources. As Peter Drucker said, “The first step in a growth policy is not to decide where and how to grow. It is to decide what to abandon.” We stepped back to better understand how we provide value to our clients and developed the Grow, Protect, Focus mantra to reflect what we had been doing all along.
The future for Line of Sight Group is bright. Not only do we have a new look and feel but a new focus and energy. We excel at helping our clients grow their business in health, financial, education, and manufacturing/retail spaces and will continue to do that. We have assembled the skills, technology and talent to better serve our core clients:
- Executive teams and CEOs with sharper strategy creation and alignment of Sales, Marketing and Product functions;
- Sales teams so they can win more and target more accurately;
- Marketing teams can listen to the market to create superior content and messaging; and,
- Products teams to create differentiated products the market ultimately wants to buy.
Through it all, our core purpose and passion will remain as it has been: To help our clients grow, protect, and focus their business by making strategic moves that provide unique and better value to customers than their competition.
As always, we’re here to help. Have a look around our new website and (newly launched) social media presences (links below), and take a moment to say “hello” from wherever you may be. We’d love to connect.