Sometimes, Ignoring Best Practice Is Best Practice

I often hear about companies that want to use a process of “best practices” in their planning work.?This may seem like a logical place to start, however, in my mind, the best practice — especially when it comes to developing strategy for an organization — is to?not?use “best practices” at all.

Consider one now classic example, that of retailing genius Ron Johnson, creator of the Apple store,?who was brought in to turn around an ailing JC Penney. At the time, a significant majority of revenues at JCP came from items on sale or through coupons. But Johnson took a page from the best practice in discount retailing at the time: Walmart’s “everyday low pricing” (EDLP). He decided to take JCP in that direction and created a similarly structured “square deal” campaign. It backfired dramatically.

Why? First, Walmart’s EDLP strategy was built upon extensive elements that were deeply embedded in its operating philosophy and corporate culture; a systemic methodology that is not easily adopted. From its approach to shipping and logistics, procurement and product planning, and instore operational elements,?Walmart’s EDLP is more than just a pricing scheme — it is an entire operational philosophy.

Also, importantly, consumer perception of JCP had been of a store with generally high prices but generous sales promotions. After the change, perceptions were of a store that?still?had generally high prices (consumer perceptions change slowly) but now, the sales promotions had vanished.

In short order, same-store sales dropped by 25% and the company valuation dropped even more.?In fairness, Johnson did have one “best of” while at JCP: No other retail CEO in history generated?such a significant loss in such a short period of time.

Even within manufacturing or operational settings, where one might assume that efficiency is critically important and that following the lead of others makes perfect sense,?it’s easy to miss the important role played by cultural elements.

For example, back in the 1950’s,?Toyota?famously encouraged its workers to shut down the production line?any time anyone noticed a defect, thereby ensuring that quality remained paramount. Their approach and steps to follow up were embedded in the operating culture; workers felt completely safe to stop the line for any problem, no matter how small.

But if what?really?matters in your organization is productivity above all else, and shutting down the line for anything less than a major problem is met with a negative response from top management, workers will be reluctant to act and the approach will not be successful.?Failure to understand the culture and processes behind Toyota’s “Jidoka” concept have kept many others from successfully using it.?Ironically, this process has made Toyota?more?productive than its competitors.

Reflections

There are no safe shortcuts for developing strategy.

Emulating the practices of another organization — even one considered to be best in class — is fraught with challenges, as there are often elements behind the scenes, both functional and cultural, that are hard to observe from the outside, but that are critical to the effective execution of a given approach.

Yes, there is value to studying what others do as part of your planning process. But that is useful as context, not as a blueprint for guiding your own future plans.

Strategy is fundamentally about having a point (or points) of differentiation — something special or unique that helps you stand out from others in your field.You won’t find that in the shadow of another organization.

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