November 17, 1990

Today’s Strategy Realities

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If you’re straining against the limitations of Strategy 2.0, then you need to understand how Strategy 3.0 differs from it. The new strategy reflects a separate set of realities out there in the world and inside our own organizations. Here are eight major contrasts between the two strategy paradigms at a glance:

Strategy 2.0 Strategy 3.0
Choices were limited. Choices are countless.
Competition was evident. Competition is veiled.
Information was safeguarded. Information is free and accessible.
Predictability was reliable. Predictability is uncertain.
The users of strategy were big companies. The users of strategy are everybody.
The approach to strategy was systematic reverse-engineering. The approach to strategy is agile pivoting.
The speed of strategy was slow. The speed of strategy is fast.
The style of strategy was methodical. The style of strategy is adaptive.

Let’s look at each of these strategy realities more closely.

Strategy reality #1: Choices

• Strategy 2.0: Choices were limited.
• Strategy 3.0: Choices are countless.

Years ago, when you were ordering a cup of coffee, your choices were basically regular or decaf. Now your nearby Starbucks offers caffè misto, cinnamon dolce latte, espresso con panna, and many more hot and cold coffee drinks, adjusted skinnywise or otherwise according to your preference. And in fact, you might not even want to go to a national chain like Starbucks. With all the local coffee joints opening up, you might prefer to take your bean-water business to one of the many shops with roots in your own backyard. Each has its own multiplicity of offerings.
Not a coffee drinker? Then let’s take toothpaste.
Either Crest or Colgate—just one variety of each—used to wind up on almost every toothbrush in America. Now there are more than ninety varieties of toothpaste for sale, including whitening toothpastes, tartar-killing toothpastes, gingivitis-preventing toothpastes, herbal toothpastes, and toothpastes offering the assurance that no animals were harmed in their manufacture.
The number of products of all types on supermarket shelves has gone up 500 percent since the 1970s.1
Even the number of nonprofit organizations—offering their own “services and products” to attract your charitable dollars—has increased by 25 percent just since 2001.
In short, today the customer has grown accustomed to having a wide array of choices, often including free stuff.2 Your strategic plans have to take into account all the alternatives you could offer and make the right decisions about what you will offer.

Strategy reality #2: Competition

• Strategy 2.0: Competition was evident.
• Strategy 3.0: Competition is veiled.

It used to be obvious who the competition was. Pepsi was trying to take the fizz out of Coca-Cola. Hewlett-Packard wanted to push Delete on Big Blue. Nike was just doing it to Reebok.
But today competition can appear out of nowhere and take on surprising forms. Blockbuster wasn’t ready for the advent of Netflix and Redbox. When the iPad appeared, people selling products as diverse as computers, e-readers, and game consoles all found they had an unexpected source of competition. Who would have thought the big-box retailers would be looking over their shoulder at the B2C online shopping monster Amazon as their biggest threat?
The drivers of unforeseen competition can include the emergence of new technology, mergers or alliances among companies, innovations in ordering systems or distribution channels, the discovery of new ways to cut costs and prices, and changes in consumer demographics. A competitor could be a hyper-ambitious overreacher totally outside your space (in your mind), or it could be someone in your vertical who has painted the bull’s-eye on your back.
Your strategy has to be flexible enough to permit your organization to react effectively at the first appearance of new competition. Or perhaps to make you the competition someone else never saw coming.

Strategy reality #3: Information

• Strategy 2.0: Information was safeguarded.
• Strategy 3.0: Information is free and accessible.

Once upon a time, companies jealously guarded information about their best practices, market penetration, software coding, and much more. What we know that nobody else knows is what gives us the edge…or so the thinking went.
But proprietary information is no longer the competitive advantage it used to be. That’s because there hardly is any proprietary information anymore.
In the mid 1980s Stewart Brand famously declared, “Information wants to be free,” and since then, that particular bit of prophecy has largely been fulfilled. Knowledge of just about any matter is available online if you know the right keyword to type into a search engine. Although I have known for years now that we live in a search society, I am still astounded at how easy it is to find specific and useful information to fast-track my learning curve.
For example, do you want some ideas about setting up your distribution centers? Get a fast start by settling down with your laptop and reading up on the way that the giants such as Wal-Mart and Amazon have done it. Or keep searching till you find a company that’s doing it well in your own backyard, and go to their plant to take a look for yourself.
Or do you want to know how to goose the creativity inside your organization? Google Google to find out how it’s done in Cupertino.
And if you think you can control the information that others find out about you, good luck with that. It’s not just the government that struggles to keep its internal information internal. Your own customers are going to be posting reviews about your products up and down the star range, whether you want them to or not.
Information is a bird that has flown the cage. Nowadays, you have to account for the availability of information when you’re choosing your strategy.

Strategy reality #4: Predictability

• Strategy 2.0 Predictability was reliable.
• Strategy 3.0 Predictability is uncertain.

Predictability is a quality that strategists have always prized. It gives them confidence in their ability to make plans that will position their organization to take advantage of the opportunities around the next corner and further down the road.
The problem is, predictability has slipped away. And it has taken strategic confidence away with it.
“The future is never defined, organized, boundaried, or anchored,” writes Grant McCracken, getting poetical in a Harvard Business Review blog. “Really, it’s all just hints and whispers. Fragile melody, no refrain.”3
Some of the causes driving these changes include the appearance of new high-tech tools, shifts in social networks, increased globalization, and ever-quicker changes in consumer attitudes and preferences. These changes, if they don’t exactly make predictions and forecasts obsolete, certainly make them less trustworthy than they used to be.
That’s why Roger Martin, speaking at the Skoll World Forum, said, “Every model is wrong and every strategy is wrong. Strategy in a way helps you learn what is ‘righter.’ People think you can prove a strategy in advance. You can’t.”4
Today’s strategists have to abandon their rigid focus on predictions, learn to rely more on insights than on analytical models, expect surprising outcomes, and stand ready to react swiftly to events as they unfold, prototyping and experimenting their way to success. Predictability is no longer probable.

Strategy reality #5: Users of strategy

• Strategy 2.0: The users of strategy were big companies.
• Strategy 3.0: The users of strategy are everybody.

The 1950s, when Strategy 2.0 was born, was the great age of corporations and of what was then termed “the corporate man.” The ones leading the way in strategy were execs at large corporations such as Boston Consulting Group (Bill Henderson), Bain & Co. (Bill Bain), and McKinsey & Co. (Fred Gluck).5 It took an army of a company to implement the military-like strategies that were then being promulgated.
The picture today is radically changed.
It’s not just big companies that are using strategy; small to medium-sized companies are discovering the importance of intentional reaching toward the future. And in fact these smaller companies may be the ones who are best suited for the agile, innovative style of strategy that works today.
Furthermore, it’s not even just for-profit companies that employ strategy anymore. Nonprofit organizations, government agencies, political parties, sports teams, universities, churches, and other organizations are using strategy.
Even individuals are learning to use strategy for themselves. Sole proprietors, such as dentists and plumbers, are trying to get a line of sight on the future and some sense of where to direct resources and accept risk. People talk about their parenting strategies, investing strategies, and strategies of many other kinds.
The idea of strategy has permeated the globe.
If you have any doubts about whether you or your organization should bother with strategy, banish them now.

Strategy reality #6: The approach to strategy

• Strategy 2.0: The approach to strategy was systematic reverse-engineering.
• Strategy 3.0: The approach to strategy is agile pivoting.

In the 1950s and 1960s, five-year corporate planning documents were the hot new thing in strategy. Leaders would decide where they wanted their organization to be in five years, then systematically work backward to come up with plans for getting there. It was even rumored that in the old days FedEx operated from a one-hundred-year strategic planning document!
As late as 1989, when Stephen Covey wrote The Seven Habits of Highly Effective People, he identified Habit 2 as “Begin with the end in mind.” That’s reverse-engineering in a nutshell.
And this approach made sense when social and business conditions were more stable than they are today. But systematic reverse-engineering doesn’t work so well when conditions five years from now are barely imaginable, with unforeseen technologies, interests, and consumption patterns sure to pop up.
Having a reverse-engineered plan now feels like being chained to a strategy that could quickly become outdated. What’s needed instead of long-range planning is an ability to pivot when conditions change and new opportunities suddenly appear.
In a recent IBM survey of more than 1,500 CEOs, the respondents identified creativity as the most important leadership quality. “Creative leaders,” summarized the survey report, “are comfortable with ambiguity and experiment to create new business models. They invite disruptive innovation, encourage others to drop outdated approaches and take balanced risks.”6
A big part of being creative is fostering a culture of entrepreneurship that’s ready to try new things and take risks. Over and over again.
Groupon is an example of a company that learned to pivot. The company was birthed on an online activism platform. When that iteration went nowhere, the founders started a blog and experimented with their insight that coupon redemption could lead to group action. Starting with a promotion for a pizzeria in their own building, they quickly grew into a billion-dollar business. No five-year reverse-engineering plan would ever have envisioned that.
Leaders have to make sure that those in their organization are thinking about strategy differently. When conditions change or you have a new insight about how to do your work better, you have to be ready to turn on a dime.

Strategy reality #7: Speed

• Strategy 2.0: The speed of strategy was slow.
• Strategy 3.0: The speed of strategy is fast.

In 1989, pioneering computer scientist Alan Kay declared that it takes at least ten years for an innovation to get from the lab or the drawing board into everyday life. That may have been true at the time. But no longer. To take just one example, Instagram was launched in October 2010 and registered its 100 millionth user just eighteen months later.
One article on business strategy said this: “The world has become a more turbulent place, where anyone with a new idea can put it into action before you can say ‘startup’ and launch widespread movements with a single Tweet.”7
Slow loses.
Fast wins. Or at least it has a chance to.
Nearly every successful company today is a “fast company,” as the magazine of that name puts it.
The telecom company Vodafone, with hundreds of millions of customers in India and other countries, has made speed a hallmark of its strategy. “In this industry, an organization that is sluggish will not be successful,” says chief executive Vittorio Colao. “There is quite fearsome competition, and you have to be very flexible and nimble.”8
It isn’t just a matter of speeding up production or distribution processes, although that may help. Strategy itself has to speed up. We have to go from development of ideas, to the execution of them, to the evaluation of the results in a shorter period of time than ever before.
If Aesop lived today, he’d be telling the fable of the tortoise and the hare with a different ending.

Strategy reality #8: Style

• Strategy 2.0: The style of strategy was methodical.
• Strategy 3.0: The style of strategy is adaptive.

The mantra of strategy used to be “plan the work and work the plan.” It was all about progress by stepwise motion. Consistency would win the day.
But what happens when change taking place in our competition space intervenes to render the plan irrelevant? To continue the method then would be madness.
You can’t plod anymore. Nowadays, you have to learn to dance.
Cisco became the world leader in selling routers and networking equipment with a traditional hierarchical structure and methodical business practices. After the dotcom bust of the 1990s, however, it had to reinvent itself. It did this by creating cross-functional teams to help the company move with greater agility into diverse markets around the world.
Ikea is basically a home goods retailer. But when leaders in the company noticed that real estate values would shoot up in the vicinity of each store they opened in Russia, they came up with a plan to develop shopping malls around their stores. The company now makes more profit in Russia from these malls than it does by selling Swedish design for the masses. That’s adapting to seize an opportunity.9
One reason Facebook overcame MySpace so quickly for leadership in social media was its early decision to open its social network platform to outside developers. At first tens of thousands, and then hundreds of thousands, of apps appeared on Facebook. “By creating a flexible and popular platform,” commented Martin Reeves, “the company actively shaped the business environment to its own advantage rather than merely staking out a position in an existing market or reacting to changes, however quickly, after they’d occurred.”10 In other words, it was adaptive.
If you want to have effective strategies these days, you need to be really good at learning how to do new things and how to do old things in new ways. It takes being alert to signals of change from your environment. It takes a willingness to keep your planning cycles short and to experiment over and over again. And it takes a tolerance for failure, combined with a determination to keep on trying until you get it right.
Today, an effective strategy is one that is light on its feet.

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