What’s wrong with how most companies create a business strategy?
C-suites spend a lot of time focusing on execution. The problem is they may not be executing on a full strategy. Too often, a strategic plan is a static document. We have a meeting and write it up, including objectives, goals, time lines and accountability. But then it’s fixed in time until the next time we have a strategic planning session and come up with a new one. We need to make the strategic plan alive in the minds of our people.
If you ask somebody, “What’s your strategic plan?” we don’t want them to say, “Just a minute. I’ll find it on my computer.” That means they’re not living it.
Traditional strategy focuses on scenario planning. “If this happens, we’ll do that.” But people fail to realize there are two types of trends: hard and soft. Hard trends will happen. Soft trends might happen.
What’s a hard trend?
A hard trend is going to happen whether you like it or not. There are three prime drivers of hard trends: technology, demographics and government regulation. When there’s a law passed, pay attention. It’s loaded with hard trends that give you amazing opportunities if you pay attention. Will we be able to use cell phones and tablets to tap into a Watson-like supercomputer? Yes. Will we be able to use mobile devices to tap into logistics and supply chain systems? Yes. So why are you waiting?
What’s a soft trend?
Soft trends are ones you can change. Seventy-eight million baby boomers are getting older and their healthcare needs are going to increase. Hard trends. Meanwhile, over the last 10 years in the United States, there has been a decreasing number of people becoming doctors and nurses. That’s soft. You can change it. As a business leader, you can see a collision course, then change. That’s strategic planning.
What happens if you fail to distinguish between hard and soft trends?
In the year 2000, the federal government forecasted a trillion-dollar budget surplus. How could they be so wrong? They were looking at good numbers but treating soft trends as if they were hard trends. As if they would happen for sure. Elvis Presley died in 1977. Every year after for 10 years, there were more Elvis impersonators. Back then, I projected those numbers out and found that by the year 2000, one in three Americans would be Elvis impersonators. That conclusion ignored other trends and treated a soft trend-that Elvis impersonators were increasing-as a hard trend, something that would definitely happen. That’s the exact same thing the federal government did.
If we make a mistake on a hard trend versus a soft trend, it can take a company down. Why did Motorola, which was dominant in the 1980s with cell phones, lose out? They treated digital as a soft trend and lost. Digital was happening whether they liked it or not, but they stayed with analog too long. Polaroid and Kodak thought digital was a fad, too. Look at Blockbuster versus Netflix. Why are we making mistakes? We’re not correctly separating the soft trends and hard trends. Part of that is also because most people protect and defend the status quo.
What’s wrong with a strategy centered on sales and profits?
Most strategic plans are financial plans in disguise. Money is not the whole ball game, but most people treat it that way. This year, 70 percent of Apple’s profits are coming from products that were impossible to make four years ago. Consider four years from now. Will at least half your profits come from things you’re not even doing today?
To get there, you need more than a financial plan. You need a plan that encompasses trends-correctly identified-that you can respond to and that you can redirect in your favor.