ROGER MARTIN: This thing called planning has been around
for a long, long time.
People would plan out the activities
they're going to engage in.
More recently, has been a discipline called strategy.
People have put those two things together to call
something strategic planning.
Unfortunately, those things are not the same, strategy
and planning.
So just putting them together and calling it
strategic planning doesn't help.
What most strategic planning is in the world of business
has nothing to do with strategy.
It's got the word, but it's not.
It's a set of activities that the company
says it's going to do.
We're going to improve customer experience.
We're going to open this new plant.
We're going to start a new talent development program.
A whole list of them, and they all sound good,
but the results of all of those are not
going to make the company happy because they
didn't have a strategy.
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So what's a strategy?
A strategy is an integrative set of choices
that positions you on a playing field of your choice in a way
that you win.
So there's a theory.
Strategy has a theory.
Here's why we should be on this playing field,
not this other one, and here's how, on that playing field,
we're going to be better than anybody else
at serving the customers on that playing field.
That theory has to be coherent.
It has to be doable.
You have to be able to translate that into actions for it
to be a great strategy.
Planning does not have to have any such coherence,
and it typically is what people in manufacturing want--
the few things they want, to build a new plant,
and the marketing people want to launch a new brand,
and the talent people want to hire more people--
that tends to be a list that has no internal coherence to it
and no specification of a way that that
is going to accomplish collectively
some goal for the company.
See, planning is quite comforting.
Plans typically have to do with the resources you're
going to spend.
So we're going to build a plan.
We're going to hire some people.
We're going to launch a new product.
Those are all things that are on the cost side of businesses.
Who controls your costs?
Who's the customer of your costs?
The answer is, you are.
You decide how many square feet to lease,
how many raw materials to buy, how many people to hire.
Those are more comfortable because you control them.
A strategy, on the other hand, specifies an outcome,
a competitive outcome that you wish to achieve,
which involves customers wanting your product or service
enough that they will buy enough of it
to make the profitability that you'd like to make.
The tricky thing about that is that you don't control them.
You might wish you could, but you can't.
They decide, not you.
That's a harder trick.
So that means putting yourself out and saying,
here's what we believe will happen.
We can't prove it in advance, we can't guarantee it,
but this is what we want to have happen
and that we believe will happen.
It's much easier to say, I'll build a factory,
I will hire more people, et cetera,
than I will have customers end up liking our offering more
than those of competitors.
The tricky thing about planning is that while you're planning,
chances are at least one competitor
is figuring out how to win.
When US air carriers were busily planning what routes to fly
and da-da-da, there was this little company
in Texas called Southwest that had a strategy for winning.
And at first, that looked largely irrelevant
because it was tiny.
What Southwest Airlines was aiming for was an outcome.
What they wanted to be is a substitute
for Greyhound, a way more convenient way
to get around at a price that wasn't extraordinarily much
greater than a Greyhound bus.
Southwest said, everybody else is flying hub and spoke.
They have hubs, and they fly hub and spoke.
We're going to fly point to point so that we don't have
aircraft waiting on the ground because you only make money
when you're in the air.
We're going to only fly 737s, one kind of aircraft,
so that our gates are set up for those,
our systems are set up for those, our training,
our simulations are set up.
We're not going to offer meals on the flights
because we're going to specialize in short flights.
We're not going to book through travel agents.
We're going to encourage people to book online
because that's less expensive for everybody
and more convenient.
So their strategy ended up having a substantially lower
cost than any of the major carriers so
that they could offer substantially lower prices.
Because it had a way of winning, it
got bigger and then bigger and then bigger and then bigger
and bigger and bigger and bigger until it
flies the most passenger seat miles in America.
The major carriers were not trying
to win against one another.
They were all playing to play, as I say.
They were playing to participate, maybe buy
more planes, get more gates, maybe grow some,
not having a theory of here's how we could be better
than our competitors.
And that was fine until somebody came along and said,
here's a way to be better than everybody
else for this segment.
And so that segment then goes.
It's gone [FAST-MOVING SOUND].
And the main playing to play players
have to share a smaller pie that's
left over after Southwest takes whatever share it wants.
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If you're trying to escape this planning trap, this comfort
trap of doing something that's comfortable but not
good for you, how do you start?
The most important thing to recognize
is that strategy will have angst associated with it.
It'll make you feel somewhat nervous because as a manager,
chances are you've been taught you should do things
that you can prove in advance.
You can't prove in advance that your strategy will succeed.
You can look at a plan and say, well, all of these things
are doable.
Let's just do those because they're within our control.
But they won't add up to much.
In strategy, you have to say, if our theory
is right about what we can do and how the market will react,
this will position us in an excellent way.
Just accept the fact that you can't be perfect on that,
and you can't know for sure.
And that is not being a bad manager.
That is being a great leader because you're
giving your organization the chance to do something great.
The second thing I do is say, lay out
the logic of your strategy clearly.
What would have to be true about ourselves, about the industry,
about competition, about customers for this strategy
to work?
Why do you do that?
It's because you can then watch the world unfold.
And if something that you say is in the logic that
would have to be true for this to work
is not working out quite the way you hoped,
it'll allow you to tweak your strategy.
And strategy is a journey, what you
want to have as a mechanism for tweaking it, honing
it, and refining it so it gets better and better as you
go along.
Another thing that helps with strategy
is not letting it get overcomplicated.
It's great if you can write your strategy on a single page.
Here's where we're choosing to play.
Here's how we're choosing to win.
Here are the capabilities we need to have in place.
Here are the management systems.
And that's why it's going to achieve this goal,
this aspiration that we have.
Then you lay out the logic, what must
be true for that all to work out the way we hope.
Go do it, and watch and tweak as you go along.
That may feel somewhat more worry-making, angst-making
than planning, but I would tell you that if you plan,
that's a way to guarantee losing.
If you do strategy, it gives you the best possible chance
of winning.