Great Parents, Bad Strategy Professors

Try as I might, it is really difficult to look at my upbringing and complain. I grew up with loving parents, who prioritized and supported education, in a stable home in a safe neighborhood, with more than adequate nutrition and a robust network of family, supporters, mentors, and friends. Throw in the fact that I was born an American in the back half of the 20th century and – yes – a white male – and it’s clear that I had a series of tailwinds that 99% of the world’s people simply don’t enjoy.

But, having turned 50, I’ve now officially hit the “curmudgeon” stage of personal development.  (My personal genetic testing indicates that – for me – this will be the stage in between “exasperated parent” and “Cable News”.)  So complain I must.

Here’s my beef. Like most kids, I played lots of sports growing up – none particularly well, and all with a too-zealous competitive spirit. My mom and late father tried to teach me not only the rules and elements of success of any particular sport, but also the conduct expected of me. Principal among these was the idea of “play fair” (and, when gloves hit the ice in youth hockey, “fight fair”).   

This obviously vital lesson from youth sports usually contains two distinct ideas: following agreed rules of engagement and ensuring equitable treatment of players. Both of these are great principles for youth sports and, frankly, most activities in civic life. (Most societies – ours included – can do with a lot more rule following and equitable treatment.) But they aren’t both valid for all domains. And one of the critical exceptions is a place where I’ve made my living as an adult – business leadership and strategy. 

Of course, the “following rules” part is exceptionally important in business. But, in leading teams, businesses and companies – and in counseling other CEOs -- I’ve learned to stress that the single most important job of a strategist is to avoid fair fights. Our primary task as leaders-- in choosing where to play, how to win, what capabilities to build, and where to invest -- is to pick unfair fights. To select those situations where our resource base makes us a prohibitive favorite to win decisively and repeatedly.

Picking unfair fights requires a few disciplines:

First, recognize that market size and growth can be important long term, but are mostly irrelevant short term. In the near term, winning often requires defining a market that you can dominate given a real source of advantage (brand, relationships, data, technology, process capital, etc.). Unfortunately, pretty much every business plan I’ve ever read over-indexes on market size and growth. It’s the business equivalent of sitting down with the local parent who is coaching Pop Warner football, and hearing – “Bryant-Denny Stadium in Tuscaloosa seats more than 100,000 people and the SEC on CBS generates huge ratings, so I’m going to schedule Alabama this season.” Big market, nice growth, bad idea.

Second, apply rigor, humility, and precision to defining your competitive advantage in any market. Some branch of numerology seems to stress that any slide featuring discussion of “strengths” must have six items. This seems to be based more on what looks good on a power point slide and less on what is actually distinctive about the strategy and resources being deployed. The best strategists focus only on those that are uniquely distinctive and uniquely relevant in the market. I’ve seen three patterns that cause teams to overestimate their advantages. First teams and leaders tend to let pride get in the way of cold-eyed realism (“my child is the prettiest baby ever”), which can lead to muddy thinking and unrealistic positioning.  Second, we use historical areas of strength that have become less relevant through competitor advances. Finally, and ironically, a spirit of collaboration and teamwork can get in the way of realism. Believe it or not, I’ve actually sat in meetings where some fool said, “don’t forget to mention (technology or marketing or sales or product management) because that team will be hurt not to be on the page”.  (See footnote below for proper citation of this quote.)   

Finally, select, or better yet, create competitive situations which render your advantage even more powerful. Find those markets, customers, and situations where what you do matters hugely. My former CEB colleagues brilliantly articulated how commercial strategies can do this in their landmark books around the Challenger strategy. 

Focusing on comparative advantage isn’t new of course. David Ricardo first described the concept (as applied to sovereign nations) in 1817 and Michael Porter created concrete business strategy ideas around it. But -- based on the thousands of business plans I've read -- intense focus on this element of a business plan is often crowded out by other areas of focus. 

Am I perfect at applying these criteria? Of course not. As a leader, I’ve been particularly vulnerable to appeals that highlighted the size of the prize and the quality of the team taking on the challenge. (Strategist Tom at his worst: huge market, big growth, A+ team = ka-ching!) And as a result, I've been part of leadership teams that have squandered spectacular effort where we had no particular right to win. Our team may have played fair and well – and sometimes even won – but their efforts would have been much more successful in situations in which they could run up the score. 

Sorry mom, but I no longer always aspire to fair play.

(Footnote: that fool was usually me.)