Real Strategy
"Limiting culture to the narrow role of 'enabling' strategy prevents it from strengthening that strategy by being integral to it. It also weakens the power of strategy to turn your company's cultural strengths into a source of enduring advantage."
- Ken Favaro
Why are there so many things labeled as “strategy?” It seems the list keeps getting longer, diluting the word’s meaning. To name just a few, there’s brand strategy, innovation strategy, customer strategy, talent strategy, and technology strategy. These are all windows into a broader set of decisions that leaders need to address to get their growth flywheel spinning. Yet, as Ken Favaro points out in his book, Real Strategy, few teams agree on what strategy really is. Rather than answer the question “what is strategy,” Ken suggests the more practical approach is to ask: “what questions should a strategy answer?” Clarity on the right questions is key to leaders collaborating on the right answers. To help leaders frame the right questions and provide perspective on how he’s helped others answer them, Ken’s book is organized around 65 of them, grouped into themes.
As a starting point, Ken says that “every great strategy stands on the shoulders of a big idea – a novel solution to an unsolved problem or unmet need or unsatisfied want. No strategy and no amount of great execution can make up for the lack of a big idea that is still a ‘big’ idea.” In other words, you not only need to identify a big idea that provides clearly differentiated customer value, but you also need to ensure your big idea doesn’t lose its power. In the book, Ken shares stories about companies like IBM, Starbucks, Netflix, Walmart, Microsoft, and others that established and sustained market-leading positions, getting clarity and leadership alignment on their big idea and then pivoting over time to keep their big idea fresh.
Ken distills strategy down to three over-arching questions that leaders must continually revisit to provide “stretch” to their strategy:
1. Who should be the target customer for our products and services?
2. Why should our target customers choose us over their perceived alternatives?
3. What capabilities should we become the best at to be better than anyone else at meeting our promise to our target customers?
The book addresses how leaders can better address these questions and why, all too often, they fall short.
Why Many Definitions of Strategy Miss the Mark
Strategy is about making choices and providing clarity so that employees throughout the organization can make a steady stream of decisions to implement the strategy. Many strategy efforts fall short because they don’t address what’s in and what’s out, so everything and nothing are important all at once. There are two primary reasons this happens:
First, many companies focus on beating the competition rather than creating value for customers. Every great strategy brings a big idea to life, a solution to an unmet need, even if it hasn’t been voiced by customers yet. The way to minimize head-to-head competition is by creating innovative customer solutions and doing it in a way that evokes emotions that make customer experiences meaningful and memorable. Throughout the book, Ken reinforces that no strategy and no amount of great execution can make up for the lack of a big idea. Moreover, Ken calls out the importance of emotional benefits in creating value for customers, which is a core theme in my own book, The CX & Culture Connection. Generating differentiated customer value requires getting beyond the functional benefits of a product or service, tapping into deeper sources of meaning and fostering sharing and community.
Second, leaders sometimes confuse building alignment on an organization’s mission, vision, purpose, and values with a crisp and focused set of strategic choices. These are useful, but often at too high a level to be actionable. For the same reason that your mission, vision, purpose, and values need to be translated into tangible behaviors to evolve your culture, strategy requires leaders to make choices for what’s in and what’s out that enable managers and frontline employees to make thousands of decisions in service of the big idea. Greater clarity and alignment on the strategy helps empower employees and avoids wasting time, money, and credibility. It boosts and focuses your cultural energy.
How Leaders Collaborate on Creating and Keeping Strategy Great
Building a growth flywheel requires getting Ken’s three core strategy questions right and aligning your culture with your strategy. Each of the three questions –Who, Why, and What. – provides a mutually reinforcing pathway to accelerate growth and enterprise value.
Clarity on who is the right target customer comes first, though sometimes earlier stage companies iterate on this before finding the right product-market fit. Every company needs to make trade-offs to focus their human centered design choices for creating a better product, marketing campaign, digital experience, customer service levels, or other choices that bring their strategy to life. For example, in healthcare, companies need to decide whether to focus their experience design efforts on the patient, the physician and other caregivers, the hospital system, the payor, employers, or pharmaceutical companies. There are also multiple personas with distinct motivations, goals, pain points, and love points within each of these potential design targets. One way to provide stretch to your strategy is to focus design efforts on expanding your appeal to some personas without losing others in your customer base.
In addressing ways to provide stretch through focusing on why customers buy from you, Ken puts the emphasis on the intangible benefits from your product or service. Ken is currently the Chief Strategy Officer at Bera, a SaaS platform that “gives researchers, marketers, and brand builders the data, analytics, and insights they need to maximize their ROI and contribution to business outcomes.” Bera’s platform includes more than 100 individual attributes that impact an overall score for how the brand is perceived by customers. This allows you to see whether the brand is viewed positively in ways that go beyond the functional benefits of a product or service and taps into a stronger emotional connection via experiences and a connection to shared purpose. This data is more predictive of business outcomes than “golden metrics” like Net Promoter Score (NPS) or Customer Effort Score (CES).
The third way to accelerate growth through “stretch” is to evolve your capabilities system. Your capabilities are the ways your company leverages people processes, and technology to provide distinctive outcomes for customers. Focusing on capabilities helps leaders get beyond bolt-on thinking and expedient, short-term decision making. It can help breath fresh life into your big idea. For example, Walmart leveraged its capabilities system for last-mile logistics to provide solutions to local companies such as bakeries, auto parts stores, and other SMBs. H&M, the second largest fashion retailer in the US, is also offering supply chain solutions as a service. Both Walmart and H&M are following in the footsteps of Amazon, which parlayed its capabilities for cloud-based data and analytics into the success of Amazon Web Services, which was an early growth and profit engine for Amazon.
How to Make Sure Your Strategy Efforts Don’t Stall
Throughout the book, Ken emphasizes that strategy and nurturing your culture cannot and should not be outsourced by leaders to consultants or agencies. While outsiders can help support your leaders, your leaders need to “do the work.” Leaders need to help close the knowing-doing gap, shaping decisions and encouraging adoption of the right behaviors across the organization to turn insights into action (for more on why so many organizations fail to close this gap, see my review of The Knowing-Doing Gap by Jeffrey Pfeffer and Robert Sutton here).
Many critically important strategy efforts that start out on the right track end up fizzling out, chasing fads that the organization doesn’t stay committed to over time. Powerful concepts like Agile Product Management, Total Quality Management, or Human-Centered Design fade after some initial momentum within the organization. In my own book, The CX & Culture Connection, I talk about how focusing on cornerstone disciplines like these can galvanize shifts in mindsets and adoption of desired behaviors across the organization. But without a sustained focus on culture and how it enables your strategy, you’ll fail to turn great strategic ideas into scaled behavior through the thousands of decisions that are key to designing solutions for your target personas (Who), delivering on your brand promise through experiences that go beyond functional benefits (Why), and scaling your winning capabilities system (What).
I hope you enjoyed this book review and that you get a lot of value out of reading Ken’s book. Stay tuned for my podcast episode with Ken in the coming weeks.
If you’d like to check out other podcast episodes on related topics, go to www.cxandcultureconnection.com. If you’d like to browse some of my other book reviews, go to https://www.journeysparkconsulting.com/book-reviews.
Feel free to reach out to me on LinkedIn if you’d like to talk more. You can also check out the mastermind groups I’m hosting each month here. These masterminds provide a forum for leaders to go on their learning journey together with a peer group, while using them as a catalyst to engage other stakeholders in their organization.
I hope this sparks some great ideas and energy for you to act!