How to Stop your Strategy From Turning into a Fantasy
Strategy is a broad but often misunderstood term. This post provides a series of steps to help create great strategies.
NOTE: This is an updated version of a blog post originally written in 2011. You can see the original here.
A favourite topic of many entrepreneurs, product managers, marketers and executives is strategy. You hear it all the time. People talking about company strategy, product strategy, marketing strategy, sales strategy etc.
The interesting thing about strategy is that while everyone talks about it, many people have a difficult time explaining it.
If you look in the dictionary, you’ll see something like this:
Strategy n. a plan, method, or series of maneuvers or stratagems for obtaining a specific goal or result
OK…that’s not really helpful is it?
From a business perspective, the most common description of strategy seems to be tied to Michael Porter’s 5 forces that shape strategy.
Here’s a short video of Porter talking about his model.
And here’s his original HBR article on the topic from 1979. Yes, it’s over 40 years old. While it helps to listen to Porter, there’s still something missing in truly understanding what strategy is.
And if you don’t want to read Porter, there’s a LOT of other books and articles you can read.
And while Porter’s 5 Forces is a helpful model, the model is over 40 years old and doesn’t really help most people define strategy in today’s dynamic, high-tech markets.
So what exactly is Strategy?
My take is that strategy is more than a plan, and more than a set of guiding principles. A strategy is a framework for decisions and actions, that will help guide a company or organization to success.
It’s as much about understanding what you will NOT do (and knowing why), as what you will do.
Another way of thinking about a strategy is that it is a hypothesis (a bet) about a critical means to solving a problem or achieving a goal.
Think about a strategy you’d use to solve a crossword puzzle or soduku, or a strategy to beat another team in a basketball game or cricket match, or a strategy to win a big sale against stiff competition.
In each of those cases, you’d think about approaches you’d take, the barriers you face, and what you will and won’t do. And you’ll apply those approaches and if they work, you’ll continue to use them. But if they don’t seem to be working (and there’s no guarantee they will), you’ll likely change them when needed.
That’s what I mean by strategy being a “bet”. There’s no certainty that any strategy will work, but all strategy should be informed on whatever knowledge and insights (albeit incomplete) you have, but include some assumptions (and therefore some uncertainty) on the situation or context you’re operating in.
Elements of Strategy
For a strategy to have a good chance of success, it has to incorporate 4 essential components:
- The right, achievable objective(s) to focus the strategy
- Clear understanding of the reality of the situation
- Effective actions to address and leverage market conditions
- A means to measure the strategy’s success as time progresses
Before I explain each of these, let me say that if any one of these are missing from the strategy, it can quickly turn into fantasy.
For example, if there’s no objective to focus on, why do you need a strategy? A strategy to achieve what?
Likewise, without measurement, how do you know that the actions are working?
Strategy is about thinking within constraints. Porter’s Five Forces can be seen as operating constraints for a company. Those constraints are both internal and external.
Internal constraints basically come down to your organization’s ability to execute. Do you have the money, the people, the resources, the skills and abilities etc? If not, then your plan will fail.
Similarly, the external constraints come from competitors, the economy, market trends, channel constraints and other factors that are usually beyond your direct control.
The key to a successful strategy is understanding those constraints, and defining the path that will lead you to your goal. And in business, that goal should be related to sustainable competitive advantage and clear differentiation in the marketplace.
This could be by exploiting market trends, attacking competitor weaknesses (or strengths), or heading into new uncharted territory and defining and claiming new market space.
I’m going to use Blackberry as a running example to show how these elements were missing in the relaunch of their devices back in 2013.
Remember, they OWNED the smartphone market back in the 2000s, until the iPhone and Android phones came out.
After that, they were playing catchup and took a long time (too long) to come out with competitive devices
1. Achievable goals and objectives
Everything starts with having clear and ACHIEVABLE goals. I highlight the word achievable because the first mistake that companies often make is to set unattainable targets.
If your product is growing at 25% per year, and suddenly your CEO wants you to double revenue (i.e. 100% growth) in the upcoming year, it’s unlikely that any strategy is going to make that happen. This is where the fantasy begins with a lot of companies.
Goals can be related to sales/revenue, market share, acquisition, retention, time to customer success or some other major business objective, but there should be some belief that they can be acheived.
The iPhone and Blackberry (RIM)
The iPhone was first released in 2007. By 2010, it was clear Blackberry (RIM) had fallen behind Apple (and Android) in technology and the touchscreen phones were all the rage.
Although Blackberry’s revenues were still growing (they peaked in 2011), the lock-in they once had with enterprises was diminishing with the “Bring Your Own Device” (BYOD) trend.
RIM acquired the QNX operating system in 2010, which was going to be the basis of their new generation of devices. Their goal was to have a strong 3rd platform (in addition to Apple and Android) in the mobile phone market.
Was this objective achievable and realistic? Possibly. To the company, it made sense at the time and that’s what they pursued.
But keep in mind that in MANY markets, there are usually 2 dominant players, and then a series of smaller competitors. Think Windows/Mac, Coke/Pepsi, UPS/Fedex, Marvel/DC, Lowes/Home Depot, McDonalds/Burger King, etc. etc. There are not a lot of markets where there are 3 dominant players in a market. Yes, it happens, but it can be difficult for that 3rd competitor.
So, right out of the gate, this was a challenge that RIM would have to overcome.
2. Clear understanding on the reality of the situation
Assuming the goals are achievable, the next step is to clearly understand the situation you are facing. I use the term “market situation” — the state of the market (customer demand, competitive forces, network effects, impacting trends, prevailing moods etc,) — to describe this.
It’s critical to have a clear and honest understanding of the challenges you face and the opportunities that exist. This context forms the foundation of the way you will define your strategy and the assumptions that will be built into it.
A strategy based on false context will include false assumptions and will almost certainly fail.
Being honest about the market situation is important. Often companies tend to inflate their own strengths and/or diminish their weaknesses in these assessments. Likewise, they’ll often inflate the opportunities in front of them, and/or diminish the threats they have to overcome.
The iPhone and Blackberry (RIM)
In the first few years after the iPhone came out, RIM executives essentially ignored it. The original iPhones were limited in many ways, and Apple didn’t have the extensive relationships with major carriers around the world like RIM did.
RIM saw the iPhone as a consumer device, whereas the Blackberry was a business tool. Blackberry had their Enterprise Server software, used by many large companies to manage the devices their employees had.
Blackberry also had their network infrastructure that helped carriers optimize and secure the data traffic from all the users. And Blackberry also had the physical keyboard and long battery life that their users all loved. Apple had none of these. How could Apple be a threat to RIM?
So, on one level, RIM saw the market situation as very favourable to them. But what RIM didn’t see, or reacted very slowly to, were the fundamental changes in the market and with their customers:
- the consumerization of smartphones
- the wonderful, rich browsing experience of the iPhone
- the benefits of the big screen sizes (compared to Blackberrys)
- the growing loyalty people had to these devices
- and the BYOD trend in companies that had benefits for both employees and businesses
All of this meant that RIM was in a much tougher situation than they realized, and the market was changing very quickly.
The fantasy was starting to unfold.
3. Effective actions to address and leverage market conditions
You will find both tailwinds and headwinds in any market. Tailwinds (Opportunities) are factors that help you achieve your goals. Headwinds (Threats) are factors that can thwart you. Additionally, within your company, you’ll have strengths to leverage and weaknesses to address.
This combination of internal/external pluses and minuses are factors that you can leverage or address in any strategy.
Another part of the fantasy occurs when companies don’t realize the obstacles in their path, or simply choose to ignore the reality of overcoming those obstacles on their way to meeting objectives.
Most strategies look great when you ignore the challenges you’ll face.
It’s important to articulate HOW the barriers will be overcome. Some people would view this as a set of tactics, but understanding HOW to overcome barriers (and the required assumptions) is still about understanding the constraints that existing for your strategy. It’s one thing to decide you want to enact a strategy. It’s another to successfully do so.
Blackberry’s Developer Network
By 2012, it was clear that the Apple App Store and Google Play App Store were core to the success of those devices. And Blackberry needed to have a broad array of 3rd party apps for their devices to be successful.
But there’s a catch. Developers are not going to develop apps until/unless there are a lot of potential users for their product. And by 2013, when Blackberry released their next-generation devices, developers were already creating apps on iOS and Android. What incentive did they have to add a 3rd platform, particularly one with only a small number of users?
This is an example of a strategy that failed to understand the challenges that needed to be overcome. Recall that Apple released SDKs to developers in 2010, 3 years AFTER the iPhone was released, and when there was a sizeable base of iPhone users to target. e.g. by the END of 2010, Apple had sold over 70 million iPhones, and that number was doubling year over year.
Blackberry’s fantasy was that their reputation and financial incentives would lead developers to them.
Eventually, Blackberry created a means to support Android Apps. While that generally solved the App issue, it was not without the need for certain hacks, workarounds and other limitations that made the process painful when compared to the ease and simplicity of Apple and native Android devices.
4. Measuring success along the way
Let’s say you’ve implemented the strategy. How do you know it’s working? Are you on track for success? Ahead of plan? Behind plan? How do you measure it, particularly in a dynamic market?
Objectives that looked good 6 months or 1 year ago may be completely irrelevant today because of external issues beyond your control or required changes in assumptions you made.
When defining your strategy, identify how to track it’s progress. What are the best indicators that can be used to track the success of various aspects of your strategy? These will help you identify and address problems quickly, if they arise.
Success (or failure) of an App Store
What is the real goal of the App Store? The ultimate goal is to have the applications that people want to download, and provide an easy way for developers to create, post and monetize those apps as well.
So there are actually a number of metrics to track, but key ones would be tied to apps on the store, availability of popular apps on other platforms (e.g. Netflix, Instagram, Facebook, WhatsApp etc.) and the downloads and usage relative to the number of devices sold. Based on these (and other metrics), one could evaluate success (or not) of the strategy and take necessary actions if things are not progressing well.
I’m only hypothesizing, but I’m pretty sure the metrics didn’t look good for the native Blackberry store and this forced Blackberry’s hand to create a way to get Android apps to run on the Blackberry.
Visualizing Your Strategy
The 4 steps above are just a way to think about strategy and break a complex topic into manageable parts. Visualizing the parts often helps understand and analyze the strategies. I use a tree diagram for this purpose, but you can use whatever format works, or none at all if you don’t want to visualize it.
To me, the visualization looks like this.
For each objective, there will be 1 or more strategies to help achieve the objective. There really shouldn’t be a lot for any objective. In this example, I’m showing 2 strategies. for the first objective.
NOTE: Some people may argue that the 2 strategies are really parts of a single strategy to achieve the objective. i.e. BOTH are needed for success, so they are really part of a single strategy. I agree with that. But I’m using this terminology to more easily identify the specific components overall — i.e. Objectives etc.
For each strategy, there needs to be a way to measure if the strategy is working. I’ve shown 3 measures — i.e. 3 metrics or ways that will help measure success of that strategy.
For each metric/measure, you’ll have 1 or more actions, initiatives or programs etc. that should impact that metric. Here I’m showing 4 actions tied to that first measure.
One thing to note is that I’ve switched the order of Measures and Actions from what was described above. I’ve done that here because this shows the dependency, whereas above, I was just talking about them descriptively and it made more sense to talk about actions before measurement.
Strategy is difficult
The point of this post is to outline a way to help make defining strategy more structured and hopefully more successful. But to be honest, defining great strategy is HARD.
As we now know, Blackberry’s strategy was indeed a fantasy and was completely unsuccessful. They didn’t become a major 3rd player in the market, nor are they even a minor player. In 2016, Blackberry announced they were exiting the smart phone market completely.
As mentioned earlier, strategies are essentially bets that we make to create a future that we want to see. Strategies are fraught with uncertainty and execution against them will never be flawless.
A key point to realize is that markets/competitors/customers etc. will all react to any strategy and so vigilance and adapting to changes is a part of executing any strategy.
One must expect some percentage of strategies to fail. There’s no set number, but if ALL of your strategic bets always succeed, then you’re not betting big enough, because no company is THAT good.
Gibson Biddle, former VP of Product at Netflix, says that about 50% of your strategies should succeed. If it’s much higher than that, you’re not taking enough risks and if it’s a lot lower, then your bets are too risky.
Regardless of the actual number, if you’re making big bets, you really want to do everything you can to make sure they’re based on honest and sound insights and your actions/tactics to achieve them are real and meaningful.
What could/should BlackBerry have done?
First let me say that’s it’s easy to be on the outside looking in AND have the benefit of hindsight and propose a way of winning, when the actual company didn’t. I’m saying this just to be fully cognizant and transparent about what is coming next.
Given that most markets DO NOT support 3 major (equal) players in them, AND Blackberry was entering the touchscreen smartphone market late, they needed to do more than just have a good product.
Instead of trying to compete head-to-head with Apple/Android, to regain their previous market position, BlackBerry should have acknowledged the late entrance and found a beachhead or a niche, initially focused on that, and once established, moved into broader markets when opportunity presented itself.
This is a land/expand strategy and has been used successfully by many companies.
e.g. Microsoft used it with their SQL/Sever database. When they entered the database market, the enterprise space had established players including Oracle, IBM DB2, Sybase, Informix etc. SQL/Server started as a lower end departmental and project database and as it gained awareness, customers and market share in the lower end, MS increased its capabilities and moved into the enterprise space, eventually becoming the #3 player in that market.
Blackberry could potentially have picked a couple of business or industry segments to focus on based on their existing customer segments and then leveraged their hardware expertise, carrier relationships and strengths of the QNX operating system to differentiate their offering and position it as a better option than either iPhone/Android for those markets.
They could possibly have worked with developers to create specialized applications and integrations for those segments to further demonstrate that differentiation.
This is of course all hypothesis, and this may not have been feasible for the company for a variety of reasons. I’ll say that I was a loyal Blackberry user for many years and REALLY REALLY wanted them to succeed, but the market shift and their inability to adjust to it was quite sad.
Like other market leading companies before them (e.g. Nokia, Motorola), the world changed and unfortunately left them behind.
Remember the HP Touchpad?
Here’s another example, and one that happened around the same time as Blackberry’s troubles were growing.
See the two articles below? See the headlines?
Guess how long it was between the first article and the second talking about the failure of that TouchPad strategy?
The first, from March 14, 2011, is about Leo Apothekar (then CEO of HP) indicating that WebOS (the OS in their HP TouchPad tablet) was key to their overall market strategy “for at least the next TWO YEARS”.
Notice the “two years” part?
The second article is from August of the same year. Just 5 months later. Apothekar’s grand strategy was already a failure and the subject of media analyses.
This is not an indictment of the CEO, but just an example that even the most experienced executives (Leo was CEO of SAP prior to HP) can turn strategy into fantasy very easily.
Saeed
A little feedback please
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Further Reading
Gibson Biddle’s 12 part series on Strategy
Apothekar laying out HPs strategy in March 2011
Apothkar explaining his disasterous strategy 5 months later
