Author Archives: Andrew Rudin

Feeling Morally Queasy at Work? Tips for Voicing Your Values

I’d like to encircle the workplace with yellow safety tape. Long ribbons of it. “Caution! Do not enter!” That would give others an inkling of the dangers lurking within. I’m not talking about back pain, eyestrain, and paper cuts. I’m talking exploitation, harassment, and passive aggression.

I’d use safety tape to protect people from the risks that threaten their personal values. Since 1943, Norman Rockwell’s Rosie the Riveter has inspired workers with her power, ebullience, and obvious self-reliance. Today she’d be tweeting #metoo.

In an uncertain world, we can count on one thing: our personal values will be challenged in the workplace. They will be challenged by what we witness, experience, and are asked to do. Mine have, many times.

Concern over this problem was revealed in a 2001-2002 Aspen Institute  survey conducted on a group of MBA students. “When asked whether they expected they would have to make business decisions that conflicted with their personal values during their careers, half the respondents in 2002 (and more than half in 2001) believed they would. The vast majority of respondents both years reported it would be ‘very likely’ or ‘somewhat likely’ that they would experience this as stressful,” according to Professor Mary Gentile, author of a book, Giving Voice to Values: How to Speak Your Mind When You Know What’s Right.

Predictably, that issue spreads risks across the organization like foul air propelled by the wind. “In 2001, over half of respondents said their response to such a conflict would be to look for another job; in 2002 that number declined to 35 percent, still a significant number.”

Nearly two decades on, the Aspen Institute findings corroborate what I see today: employees are under-prepared for responding when their values are challenged at work. Most business schools don’t teach techniques or approaches, and the few that do present choices through a moral lens that defines or prescribes right and wrong. That turns people off.

Professional development in sales and marketing is no better. Aside from the ambiguous demand, “put customers at the center of everything you do,” practitioners ignore the issue altogether. “Don’t lie. Ever.” Huzzzzahh! Easy to say at the sales kickoff. Looks nifty on PowerPoint. But Job #1 for business developers is customer persuasion. Such admonishments are flimsy, and don’t penetrate the thorny dilemmas employees routinely encounter, like choosing between pressuring customers to buy and keeping their jobs another quarter.

During my career, I have repeatedly contrived rationalizations and reasons for not speaking up when my values have been confronted. I’ve learned I’m far from alone. As we endeavor to preserve a self-image of high integrity, we have cultivated a parallel talent for sweeping concerns and better judgement under the carpet.

Not that business development culture would have it any other way. Put aside that creative mantra for a moment. In my experience, marketing and sales organizations are hives for conformity and group think: “Quit giving excuses!” “I want to know how you are going to sell, not why you can’t!” “We’re not a problems focused group, we’re a solutions oriented group.” “You’re either on the team, or you’re not.” There’s a theme to these edicts: check your personal values at the door before you begin work. Little wonder so many marketing and sales professionals find it nauseating to rock the organizational boat.

Instead of thinking, “well, I’ve already slipped on that ethical slope, so I guess I’ll just continue the slide,” recognizing past imperfections in ethical decision making frees us to move in better directions. There’s nothing to be gained beating ourselves up over workplace decisions that we’d rather re-do. Wearing egg has never been fashionable, but as a practical matter, you can’t hold a conversation about ethical choices if the person leading the discussion cops an attitude of finger-wagging judgment. And I’ve yet to meet a colleague, client, or direct report who doesn’t wear symbolic egg.

Which values challenges do business developers experience?

Pressure from management:

  • “You must not share information with [Customer X] about this defect, because it will delay their purchase.”
  • “We won’t offer [Customer X] the lower market price because it will cause us to miss our revenue target. They’ll never know.”
  • “We can give our customers verbal commitments not to raise their prices, but that information must not be explicit in our contracts.”
  • “When you prospect a C-Level executive for the first time, always make it seem that you’ve had an earlier conversation with them.”
  • “This product has high potential for misuse, but it’s too important to our profits not to aggressively promote it.”

Pressure from prospects:

  • “We haven’t made a purchase decision yet, but if you can promise a better price, I will share [Competitor X’s] proprietary proposal.”
  • “I’m willing to award your company the order, but I need a personal favor . . .”
  • “We need your developers to modify the quality algorithm so the defect rate we report to the government appears lower.”

Since 2014, dozens of companies have been inducted into the Annual Sales Ethics Hall of Shame. Theranos, Wells Fargo, VW, Takada, and Purdue Pharmaceutical became notorious because their business strategies became deeply infected with nefarious intent.

In September, 2018, Theranos announced it was formally “dissolving”, which suggests its downfall was less ugly than it was. Its two senior executives, founder Elizabeth Holmes and Sunny Balwani, were indicted the same year, charged with engaging in schemes to defraud investors, doctors and patients. Takata filed for bankruptcy. Wells Fargo got spanked with onerous restrictions on its asset growth. And VW, well, I’ll never buy a car from a company that gleefully sacrificed my respiratory system to pad their profits.

For all these companies, the proximate cause for their bad fortune wasn’t a cliché risk like rabid competition. It wasn’t warp-speed market disruption. It wasn’t onerous government regulation or economic chaos. Instead, it was unchecked greed.

Opining greed in the C-Suite won’t make it go away. Nor will moaning about high pressure sales tactics. After all, sales forces are predominantly paid on revenue production, and as we know with incentive compensation, the goal is to get what you pay for.

Instead, risk mitigation for corporate malfeasance begins at the grass roots. Employees who are prepared and equipped to voice their values provide the most effective way to stem corporate misbehavior. Put another way, we have met the responsible party, and it is each of us. Time to take the bull by the horns and wrestle it to the ground.

Some tips for voicing your values:

  1. Know what your values are. Write them down – it doesn’t need to be a long or complicated list. Own them. This is essential, because they are yours, and that makes them unassailable.
  2. Believe that your values deserve to be taken seriously. It doesn’t matter whether you’re an intern or board chair.
  3. Prepare yourself for situations where you know you will need to draw the line. This means anticipating challenges such as the ones described earlier and developing a response ahead of time.
  4. Don’t judge the action of others or presume to understand them. If you assume a manager or colleague has malintent, you will come across that way, and will be less likely to change his or her mind.
  5. Invite conversation about the issue. For example, “This doesn’t work for me. I don’t think it’s right. Do you see it differently? Help me understand.” (reference Giving Voice to Values, page 157).
  6. “Frame choices in ways that align them with broad, widely-shared purpose.” (Giving Voice to Values page 159). It’s easier to redirect a problematic request when you can gain consensus on a larger goal.
  7. Craft a description that focuses on the advantages of your recommendation or role, rather than the disadvantages.
  8. Practice, practice, practice your responses to values challenges. Reflect on your experience and that of others, figure out what you’ve learned, hone your tactics, and practice some more.

“Once we identify the common challenges in our particular line of work, it is especially useful to look for and note any examples of individuals who have effectively voiced and acted on their values in this type of situation,” Professor Gentile writes. Examples are abundant online. It’s also important to familiarize ourselves with common rationales for not resisting. The top four, according to Giving Voice to Values,

 

Expected or standard practice: “Everyone does this, so it’s really standard practice. It’s even expected.”

 Antidote question: “If the practice is accepted, why are there often rules, laws, and policies proscribing it?”

 

Materiality: “the impact of this action is not material. It doesn’t really hurt anyone.”

 Antidote question: “Does the apparent small size of this infraction make it any less fraudulent?”

 

Locus of responsibility: “This is not my responsibility; I’m just following orders here.”

 Antidote question: “Is the issue likely to cause significant harm, and are there few (or no) others able to act to prevent it?”

 

Locus of loyalty: “I know this isn’t quite fair to the customer but I don’t want to hurt my reports/team/boss/company.”

 Antidote question: “Am I being truly loyal to the company if I perform this task/operation/process and it undermines trust and credibility?”

Paraphrasing the immortal words of Glenda, the Good Witch from The Wizard of Oz, “You’ve always had the power to act on your values, my dear. You just had to learn it for yourself.”

“We are beginning from the position that we want to act.” Professor Gentile writes. “Therefore we are trying to answer the question: “How can we do so most effectively?”

Five Elements that Create Service Stress for Customers

Despite rigorous measurements and sentiment analysis, the number of bad customer experiences that occur every second isn’t known. How many living trees currently populate our planet? We should know these things. For now, I’ll speculate that they are both large numbers, and one is escalating while the other is declining. You know which is which.

Instead, I’ll explore more scrutable questions. Poor customer experiences occur in every industry. Why do some create nary a ruffled feather, while others cause everyone to go bat-poop crazy? Dr. Dao knows what I’m talking about. Is there a “perfect storm” of conditions where a weak spark of customer letdown will ignite an inferno of pain and outrage? Finally, how much repeat vendor ineptitude, crassness, inefficiency and apathy will consumers accept before saying “enough!”

The answers impact the profits for every organization across every industry. Customer service delivery carries uncertainty and risk. Some issues are cheap to mitigate. Clear directional signage for airport car rental return areas are inexpensive but avert headaches for harried travelers arriving late to catch a flight. Others are costly. Rapid product delivery involves capital investment for sophisticated logistics and IT infrastructure.

“Customers expect perfection every time.”  That admonishment has been beaten into our heads for so long, we’ve forgotten to question whether satisfying this alleged truth really matters. We need balance. How about, “don’t waste the company’s money on projects that don’t bring meaningful improvements.”

Not every business can address every CX risk. Fortunately, not every business needs to. Some CX outcomes can be plain-old good, and that’s good enough. I offered to send this article to my trash hauler, but the service manager politely declined. Seems he was busy planning the company’s annual golf outing coming up in May. That was fine with me. I just told him to just make sure he continues to collect my refuse around once a week.

Does this mean that some companies get a pass for providing impeccable customer service, while others are firmly on the hook?

Yes.

There are situations when underserved customers are especially prone to getting wigged out. Companies that understand what they are can avoid squandering resources fixing things that don’t need fixing, and they’re more likely to improve what’s consequential. According to a 2015 Harvard Business Review Article, When the Customer is Stressed by Leonard Berry, Scott Davis, and Jody Wilmet, there are five conditions that portend high levels of customer stress.

Customer stress is elevated when customers face

  • lack of familiarity with the service being delivered
  • lack of control over the performance of the service
  • major consequences if things go wrong
  • complexity that makes the service a black box and gives its provider the upper hand
  • long duration across a series of events

After the authors gleaned these findings, they applied them in the most difficult and demanding context: service delivery for cancer treatment centers. I’ll survive my missed trash pickup. Safety pins can replace dress shirt buttons that my dry cleaner ruins. I’m not offended if the grocery cashier fails to make eye contact, or to thank me for my business. But every cancer patient faces life-changing consequences. Every interaction matters. Adopting a strong customer service ethos and CX risk mitigation is crucial for these organizations.

“The [Bellin] cancer center, which opened in 2008, surpassed its five-year growth and revenue targets in just two years, and nearly 100% of patients (who are regularly surveyed) say they are ‘highly likely’ to recommend its medical and radiation oncology services. Bellin achieved these results in large part by following the four guidelines for succeeding in highly emotional contexts,” according to the article.

The guidelines extend to any service operation that meet the stress conditions:

  1. Identify emotional triggers. The authors suggest using surveys, interviews, focus groups, controlled experiments, and experience mapping. “Open-ended prompts about common frustrations can be particularly revealing: “Describe the worst experience that you or a family member ever had when using this type of service.” “If you were the CEO of this organization for a day and could make just one improvement for customers, what would it be?”
  2. Respond Early to Intense Emotions. That includes preparing customers for what to expect in the sequence of events, and communicating with care. “A valuable exercise is to convene top providers and ask them to identify phrases that needlessly undermine customers’ self-esteem, confidence, or hope. These ‘never phrases’ can be incorporated into training sessions for the purpose of eliminating them.”
  3. Enhance Customer Control. Many companies overlook this important tactic. Post-service call, many customers feel abandoned (except for the instantaneous How did we do? survey). The authors suggest mitigating the problem by offering a mobile application to consolidate content for ancillary service and support needs.
  4. Hire the Right People and Prepare Them for the Role. My most memorable support calls were with agents who were also users of the same product or service. “People who deliver high-emotion services must be able to effectively cope with stress, respectfully communicate with customers, and strengthen customers’ confidence. Thus excellent service organizations view the process of hiring and training employees as crucial to serving customers well.”

Pursuing excellence in service delivery is a potentially worthy goal. But delivering it matters more for some companies than for others.

Revenue Growth: Don’t Let the Funnel Fool Ya!

Sales funnels symbolize a widely-known reality among marketers: s*** happens.

Funnels instantly remind us that interactions between buyers and sellers are fraught with risks – not that we need any reminding. Funnels also represent our fear that we can assiduously attempt to convert a prospect to a customer, but lo, there’s a chance we won’t prevail.

I like funnels because they are easy to understand. Funnels mansplain uncertainty and risk. When you need to justify a pipeline multiplier, or reveal the rationale behind a multi-channel lead generation campaign, simply fire a 2-D trapezoid shape onto the projection screen. Divide the image into equally-spaced horizontal stripes. Use bright colors. Then, dive into funnel taxonomy.  “Raw prospects enter the gauntlet at the top. From there, they undergo a metamorphosis, becoming Leads, then MQL (Marketing Qualified Leads), then SQL (Sales Qualified Leads). Those that emerge will be anointed as Opportunities before moving south, eventually crossing into a hallowed zone marketers call Paying Customers.” My presentation includes a bloated money bag positioned near the funnel’s bottom to drive home the idea. The screen glows even brighter. Warmth envelops the room. This is everyone’s favorite topic.

You already have recognized that my scenario is called The Happy Path. Happy paths, as we know, make people happy. Everything on the slide is linear. Everything is ordinal, with a prominent, single-headed arrow to emphasize the direction of actions, activity, and interest. The partitions between funnel stages are always crisp and distinct. “Questions? . . . No? Great! Let’s move on . . .”

I advance to the next slide to continue my speil when inevitably, someone – often a new hire – lobs a question with the antecedent, “What about . . .” I’m prepared. I press the “back” button, and ask, “Was there a question about the funnel?” Indeed. Many questions, actually. A partial list of ways to complete the interrogative:

. . . Lead qualification and disqualification, changed priorities, low buyer motivation, misaligned or insufficient sales incentives, faulty CRM data, lack of project funding, buyer fear, seller fear, redirected budgets, raised customer expectations, increased ROI hurdles, misunderstood needs, bad assumptions, new assumptions, strategic re-prioritizations, project starts-and-stops, buyer confusion, atrocious sales processes, predatory buying, industrial espionage, new decision hierarchies, flawed business intelligence, process breakdowns, competing internal agendas, technological innovation, tariffs, product recalls, spikes in monetary exchange rates, increases in the cost of capital, mergers and acquisitions, personnel changes, passive aggression, essential conversations that never materialized, relationships gone awry, cruddy demos, software bugs, regulations, external competitive maneuvering, internal competitive maneuvering, and stupid tweets from anyone with access to the company’s “official” Twitter account  . . .”

I don’t consider any of this the Unhappy Path. I call it Life. Here’s the problem: beyond their purpose for symbolizing risk, funnels don’t represent the myriad conditions companies encounter when executing revenue strategy and tactics. These examples obliterate the template funnel’s shape, and shatter that straight North-South arrow into countless, itty-bitty pieces.

For me, the funnel’s most meaningful features are its taper and length. The angle degree at the top should invite concern, interest, and discussion. “Our funnel is wide as a tank container at the top and narrow as a pipette at the bottom, and it takes one year to travel from top to bottom. Perhaps we’ve found the root cause for our cash flow problems.” In practice, few seem interested in dissecting the risks that cause the delta, and how to manage them. A funnel is a funnel. Counter-intuitively, the funnel’s ubiquity as a risk symbol has made us less risk aware.

Time for a fresh look.

Twitter abandoned its egg silhouette in 2017.  Assuming their objective was to render a human-ish image, the replacement – two detached shapes that faintly suggest a human head and shoulders – offers scant improvement. Imagine what we’d be purchasing if design engineers adopted such anonymized forms to use for prototyping. I suppose we’d have a visceral understanding of what daily life was like in the 1700’s. Similarly, how can companies create revenue strategy when using generic funnels as design templates?

Overlooked differences. At best, funnels suggest risk in marketing and sales. But they don’t mirror reality. I love Roadrunner cartoons, but for my safety and that of others, I resist letting them inform my understanding of physics.

Three real-world deviations from the funnel symbol:

  1. Pathway

Prospects enter sales funnels at many different points, not just at the top. Sales funnels are highly porous, and exit points vary, too.

  1. Re-cycling

Not every lead remains permanently outside the funnel. Prospects that have exited the sales or buying process can re-enter.

  1. Effort

Opportunities in sales funnels generally don’t drop from top to bottom on their own. As leads descend through the funnel, effort and costs increase for both sellers and buyers. In fact, if funnels reflected aggregate cost of sales, the model would be exactly flipped – small at the top, and large (or very large) at the bottom.

. . . And two overlooked similarities:

  1. Connectedness

As cash engines, revenue funnels are connected in several ways to the organizations they serve. They are not free-floating in space, as they are often depicted in presentations. Marketers implicitly understand that revenue funnels often receive inbound leads from a messy universe of opportunities, and that revenue flows from the bottom. But marketing funnels are but one component of a large system. They require additional input such as cash, information, talent, and other resources to operate.

  1. Throughput

With physical funnels, smooth material flow from top to bottom signal that the funnel is operating well.  But marketers often defer to a flawed proxy for funnel health: fullness. The problem is, full funnels can also be clogged. Rather than using funnel fullness as portents for cash-flow vitality, marketers should emphasize velocity and throughput as meaningful metrics.

 

General recommendations for funnel management: 

  1. Make sure the funnel opening is as wide as it needs to be, but no wider.
  2. Match the size of the opening at the bottom with the company’s revenue needs. That includes ensuring orders won’t swamp the company’s ability to fill them.
  3. Don’t take the taper for granted! Make sure it aligns with the company’s risk capacity.
  4. For planning purposes, net the funnel’s cash output against the resources required to operate it.
  5. Remember that throughput velocity is as important to consider as overall funnel value.

I’m not declaring funnels dead. Not by a long shot. The marketing and sales profession has long suffered from lack of probabilistic thinking, and funnels offer a symbolically-accurate representation of revenue generation risk.

Put another way, a picture that tells us  s*** happens is worth a thousand words.

One Sales Interview Question We Can Live Without

I often disagree with opinions that I read online. No biggy. Much rarer is when I read business advice so wrongheaded, so ill-conceived, and so dangerous that my forehead collides with my keyboard.

“awfjsoefivfdljkmdvfl;jkvxcljkvxcljk;m,..,m.” You can quote me.

That happened recently when a colleague shared an article on LinkedIn from Inc. Magazine titled, Recruiters Share Can’t-Miss Interview Questions to Disarm Candidates. A banal topic, but the word disarm piqued my curiosity. I had to read on.

At the top of the article appeared a paragraph, For sales positions. More curiosity. But that character string flew onto my screen when I got to the last sentence – a true zinger! Actually, the whole paragraph is just wrong:

“We interview candidates for both our internal company and for clients throughout the US. If someone is interviewing for a sales position, we’ve found that this question provides a lot of insight: What is the most expensive item you’ve ever purchased? The rationale behind it is that salespeople typically stop producing when they are ‘comfortable’ with their income, so this question provides insight into what may be ‘enough’ for them. For example, if I said that the most expensive thing I’ve ever purchased is a pair of $50 shoes, I may potentially not strive to make as much money as someone who answers, ‘I splurged and purchased a $500 pair of shoes because I knew that wearing them would be my motivation to make even more’.” 

Do top producers make a lot in order to spend a lot? Or, do they spend a lot, and therefore, they’re uber-motivated to make a lot? Either way, the notion that proclivities for acquiring expensive things predicts sales success is absurd, and perpetuates a horrible stereotype about salespeople.

At best, the recruiter’s question is misguided. At worst, it’s patently discriminatory. People who grew up with limited means are less inclined to make self-indulgent purchases than those who grew up wealthy. What about people send a chunk of their monthly income to family in their home country? What about solo-breadwinner parents who save every month to provide a college education for their children? My bet is that you’ll find them shopping at Target for footwear, not Neiman-Marcus. This recruiter wouldn’t understand their motivation or hunger for income because her myopia doesn’t allow her to. Not good, when your raison d’être is discovering the talent in others.

I don’t buy her rationale. I know top-producing salespeople whose penury makes Jack Benny look like a spendthrift. And I’ve met others who couldn’t sell their way out of a wet paper bag. But that idiosyncrasy didn’t prevent them from repeatedly hurling themselves into consumption traps. “His n’ her jet skis? Sure! I’m in!” So fawning over a candidate whose appeal comes from the fact that he swaggers in wearing a pair of $800 Santoni Darian Cap Toe Oxfords seems short sighted. Probe a little further beyond his conspicuous consumption, and you just might learn that he’s been paying the minimum on his credit card balance for the last 25 months, and lives with his parents.

Maybe for the purveyor of this advice, the best evidence of potential motivation shouldn’t be the candidate’s shoes, but his physical behavior. For that, I’d suggest she seek someone who chugs a bottle of Maalox daily, and chain smokes. Now there’s someone outwardly nervous! About what? Making money? Why not. The clothes add another data point to the desired fact pattern, thereby affirming the logic. It’s a vicious circle of self-congratulation.

But is that aggressive, stressed image really what companies want? Is that the face vendors want to project to customers? And, more ominously, what does an employee’s insatiable drive for disposable income portend for the safety of organizations, customers, employees, and other stakeholders? The questions are not intended to be facetious or hypothetical. I see the aftermath whenever I read about sales scams and betrayals of customer trust.

If you seek the One Best Question to ask sales candidates in 2019 – and there really isn’t a single question – I suggest ditching “what’s your most expensive purchase” for “when do you plan to retire?” If the candidate is 30-ish and says “not one minute past 40,” hire that candidate immediately! I don’t care whether he or she wears $4.99 flip-flops, and drove to the interview in a Hyundai Elantra. Or rode a bike.  F-I-R-E: it’s the new expensive wardrobe.

Online, you can find loads of more useful questions to ask sales candidates. In practice, however, I don’t believe sales interview questions need to differ much from those you’d ask a non-sales executive. The best guide I found comes from Harvard Business Review (7 Rules for Job Interview Questions that Result in Great Hires, by John Sullivan, February 10, 2016).

  1. Avoid easy-to-practice questions
  2. Be wary of [answers to] historical questions
  3. Assess their ability to solve a problem
  4. Evaluate whether they’re forward-looking
  5. Assess a candidate’s ability to learn, adapt and innovate
  6. Avoid duplication [by asking for information that’s already on a candidate’s resume]
  7. Allocate time for selling [your organization to the candidate]

I’d also ask the candidate to talk about resilience. Salespeople experience frequent setbacks. So, in addition to learning how goals were over-achieved, find out about responses and reactions to failure.

For many interviewers, the last rule represents an often-missed opportunity. Not only does it help reveal whether your organization matches what the candidate wants, but it offers the interviewer a reciprocal chance to convince the right candidate to join. And if the candidate isn’t right, he or she could share that information with a friend or colleague who is.

How to Execute Better Strategy

In these tumultuous times, I lust for every bit of surety I can find. I search for rules, immutable truths, and superlatives. My motive is patently self-serving. Limiting my perspectives saves time. Nuance? Things to consider? Outliers and exceptions? Too squishy! Give me something concrete I can hold onto for dear life.

Here’s a superlative that has endured since I learned it in graduate school in 2005:

“All business failures result from using the wrong strategy, or executing right strategy the wrong way.”

If only I could find more like this one.

Over many years, I’ve experienced revenue craters fomented by bad decisions, misguided assumptions, and cruddy planning. I blame myself for some of them, but that’s between us. Regardless, this trusty superlative worms its way into every aftermath I’ve analyzed. Thank you, Professor Todd.

Organizational vitality depends on sound strategy. When planning and executing strategy, companies must grapple with uncertainty. There’s no avoiding it. Executives must recognize what they don’t know, and make assumptions to fill the gaps. That requires a remarkable blend of intelligence, prescience, confidence, and courage. No wonder strategy development scares the bleep out of people. “Our current engineering, supply chain operations, and product planning are based on our expectation that 25 years from now, there will be a robust global market for long-range jetliners. Please pass the Maalox.”

Strategy is defined as a plan of action or policy designed to achieve a major or overall aim. Companies should develop strategies whenever any crucial resource or result is constrained or difficult to achieve. For most companies, that includes securing capital, innovating new products or services, hiring human talent, or capturing revenue. Similarly, strategies are instrumental for achieving objectives such as high customer satisfaction, customer success, and market share percentage. Stuff that every company wants, and there simply isn’t enough to go around. None of these outcomes can be left to chance, assuming, of course, that your goal is longevity.

Without strategy, the central mission of an organization – finding and capitalizing on opportunities – would depend on happenstance. A company without a strategy is like an untethered ship at sea without power, steering, or means for navigation. Unable to harness the forces of wind, tide, or other locomotion to go anywhere, the vessel just bobs around. Many businesses operate the same way, abdicating their outcomes to vicissitude. Que será, será. This is the mantra under which many companies operate, though it’s never used as braggadocio.

But how much does strategy matter? The Evergreen Project, conducted between 1986 and 1996, asked that question, and the study revealed that companies with a strategy performed better than those without. That seems obvious, but the study offered another insight by revealing the magnitude of benefits over time:

“Financially successful companies all had a clearly defined and well-articulated strategy. No exceptions. These companies outperformed the losing companies by a 945% to 62% margin in total return to shareholders, had a 415% to 83% advantage in sales, a 358% to 97% advantage in assets, a 326% to 22% advantage in operating income and a 5.45% to -8.52% advantage in return on invested capital,” wrote Rich Horwath in an article, Does Strategy Matter? 

“While many companies have been able to survive without a clearly defined strategy in written form, a question looms: How much better could they be doing with a strategy? The 22% gain last year might seem impressive, unless of course it could have been a 65% gain with a solid strategy behind it.” Of course, Horwath can’t posit the answer, other than “A company or product or service can certainly survive without strategy, but it will never thrive.”

I agree. But even for companies that envision and execute strategy, there’s no such thing as certain survival. More Maalox.

When I taught an undergraduate class, Strategic Uses of IT, I used case studies, and asked my students questions to pique their strategic thinking. “What did [Company X] trade off when its executives decided to implement [name of project]” Many students were able to go well beyond connecting the dots. But some delivered a common response: “they traded off money.” While that’s technically correct, I was looking for deeper insight.

I followed the first question with, “when company X implemented this project, what didn’t – or couldn’t – they do as a direct consequence of that decision?” Examples: Providing customers high-touch luxury experiences trades off low-price leadership. Generating large profit margins sacrifices high inventory turnover. Offering extensive point-to-point airline routes precludes maintaining hub-and-spoke operations.

Over time, I learned that this strategy exercise can be vexing for students and seasoned executives alike. I also learned that when executives are vested in their strategy, the common response changes to “I don’t think we’re trading off anything.” Early-stage strategy ossification, happening before our eyes.

The trade-off concept is key to understanding strategy. When you can parse the answer into more than one outcome or consequence, you’re thinking strategically.

Before undertaking strategic planning, understand its characteristics:  

  • Strategies are based on assumptions – e.g. existence of a customer need, economic forecast, availability of key operational or technological capability, continuation of a trend or trends
  • Every strategy involves making trade-offs – “instead of pursuing [X], we will pursue [Y]”
  • Strategies create potential weaknesses –Effective strategies provide strength, but choices not taken present future vulnerabilities. It’s important to recognize what they are.
  • Strategies contain inherent risks and opportunities – By definition, the purpose of strategy is to capitalize on opportunities, and achieving them carries inherent risks.
  • Strategic execution requires committing and consuming resources – including time, money, and/or physical and mental energy

 

While understanding the characteristics of strategy is an important first step for success, I’ve discovered through practice that effective strategies tend to . . .

  • identify and address consequential matters. Start by asking the right questions. One client told me that they wanted to direct their strategy toward “providing every user in the agency a suite of desktop applications software.” That vision didn’t overcome the “so what?” test. I recommended the organization ask a different question about the results they wanted, and focus effort on a more meaningful outcome.
  • use sound assumptions. A frequent trap. Many strategies are based on outsized or unrealistic estimates, or tenuous predictions.
  • be clear and unambiguous. An example of one that’s not: Customer Obsession is an Employee Engagement Strategy, Too.
  • be difficult to replicate. FedEx, Amazon, Zappos. These companies have been endlessly analyzed, and their strategies are well-known to competitors. But they are also complex, involving the entire company for execution, not just a department or two.
  • be grounded in what’s possible. The Fyre Festival was logistically doomed from the start. Any bets that SpaceX will successfully complete a Mars mission by 2022?
  • minimize potential conflicts of interest. This one just came across my desk: A company developed a strategy that rewards Sales for capturing revenue, but penalizes Operations for failing to meet customer demand. I forecast intense infighting until the strategy is scrapped.

Ethics and strategy – it’s complicated, but I’d be remiss if I didn’t address it. For society, business strategies can produce outcomes that are beneficial. The credo for Conscious Capitalism provides both inspiration and guidance:

“We believe that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity.”

Contrast that lofty ideal with Theranos, a once high-flying startup which used strategy for nefarious purposes. Stakeholders were harmed. People likely died as a direct result of the company’s activities. For a time, the company’s strategy was considered effective, but now Theranos is defunct, leaving destruction and pain in its wake. Never assume an effective strategy is also kind and benevolent.

Ethics problems start when strategies are revenue- and profit-focused, to the exclusion of all other outcomes. Every year, I call out a new list of offenders in the Sales Ethics Hall of Shame award – a showcase for executives who believe the revenue-profit ends justify the means to achieve them.

Ethical strategies don’t occur by prescribing rules or steps, but by asking questions:

  1. Is the premise of the strategy good? This is a central question behind the ethics and efficacy of for-profit prisons. Does a business model that that depends on the incarceration of people for revenue and profit help society as much as it rewards the owners and investors of the company?
  2. Are the intentions of the strategy honest? Strategies that depend on factual obfuscation and deceit are not ethical.
  3. Does the strategy protect stakeholder interests? Ethical strategies include mechanisms for ensuring bad ethics and dishonesty don’t metastasize and harm employees, vendors, customers, and investors.
  4. Does the strategy reward – or penalize – employees who exercise sound moral judgment? Every company inducted into the Sales Ethics Hall of Shame has failed this question.

If we’ve learned anything from the Wells Fargo and VW scandals, protecting companies from calamitous risks requires answering these questions not just in the C-Suite, but by corporate boards. Especially by corporate boards.

Strategies are a progression, a continual work-in-progress. On November 8th, 2018, The Wall Street Journal reported these artifacts:

  • “Ford is getting into the electric scooter business.”
  • “Vice Media plans to shrink its workforce by as much as 15%.”
  • “Google is gearing up for an expansion of its New York City real estate that could add space for more than 12,000 new workers.”

Each, representative that the companies have set their sights on goals necessary for survival or growth. And these objectives will evolve into new ones. With strategy, there is no “final triumph.” There are also no superlatives, rules, or immutable truths to ascribe. Is Vice Media’s plan to shrink its workforce the best strategy? It’s impossible to say. In the strategic analysis, all we can do is judge is whether it was effective at achieving the intended goal – and move on.