How To Be Strategic — Part III

This is a multi-part series on how to teach yourself to think strategically. If you haven’t checked out Parts I and II yet, I suggest reading those first.

Strategy = Hard Choices

In my last few posts in this series on strategic thinking, we’ve debunked the mysticism and bullshit that typically accompanies the word “strategy.” We also introduced a three-part framework from author/professor Richard Rumelt that makes it easy to tackle just about any situation a little more strategically.

We’ve talked about the first step to thinking more strategically and what makes a good strategic diagnosis — a short but rigorous rundown of what’s going on paired with a clear stance on which problem most needs solving.

Now comes the tricky part. The part that rises up to meet you after your diagnosis is complete, and after you’ve clarified that most important problem.

Now you have to choose.

More specifically, you have to choose what Mr. Rumelt calls a “guiding policy.” Here’s his definition from his book, Good Strategy, Bad Strategy:

“The guiding policy outlines an overall approach for overcoming the obstacles highlighted by the diagnosis. It is “guiding” because it channels action in certain directions without defining exactly what shall be done.”

A guiding policy is similar to a concept my military friends call “commander’s intent.” It’s the destination we should head towards, minus the turn-by-turn directions. Basically, it’s the answer to the question: What should we do about that problem?

Once you’ve established what’s going on and ID’d your #1 problem, it’s time to choose what to do about it.

Here’s a secret: If you’ve effectively diagnosed the real problem, you almost can’t help but start dreaming about all the ways to tackle the thing. But admiring the problem and brainstorming a long list of solutions is easy. It’s choosing the right solution that’s hard.

It’s also the most important part of thinking strategically.

During my time at Bain & Co., we used to say that “strategy is about making hard choices.” So what makes this choosing thing so hard? Well, to start, good strategy is a special flavor of excavation. It involves digging just deep enough to unearth your problems and your options, and then making a call, using limited information, about where to dig deeper — choosing to focus your time, talent, and energy on this instead of that , before you can be sure you’re making the right choice.

So how do you know where to focus?

How do you weigh the merits of doing this instead of that?

And how do you learn how to choose better?

Gaps, Value Creation Plans, and How To Over-Complicate it

Well, sometimes the choosing isn’t that hard.

When you’re just starting out (in a new job or with a new team) you’re undoubtedly going to find a ton of stuff that’s just missing. Maybe your sales team doesn’t have the pitch deck or talk tracks or enablement material they need. Maybe your engineering team’s roadmap exists only in people’s heads. Maybe your finance team takes 6 weeks to close the books. You really should have these things that you imagine the grown-up version of your business having (whether they’re people, processes, or technology) and, well, you just don’t. In most companies — even big, established market leaders — the gaps are literally everywhere. They’re not hard to notice. Especially with a set of fresh eyes.

Those gaps might make you uncomfortable, but they’re actually a good thing. Finding and filling them is how you make the business better and how you make a business worth more.

Lots of PE firms out there talk about their “value creation planning” process. Just saying it that way makes it sound like some kind of alchemy — like the sort of complicated corporate orchestration that only an over-confident ivy-leaguer could dream up. But in my experience, the more detailed the value creation plan, the lower its chances of success. A plan constructed with rows and rows of Gantt charts and 8-point microscopic font doesn’t clarify the problem — it actually distracts from it.

Often, a better value creation strategy looks more like this:

• Find the gap.
• Fill the gap.
• Move on.

It’s nice when you can improve things by filling the obvious gaps. (Hint: In most new roles, you can get off to a great start by simply focusing here for your first ~6 months.) But life isn’t always this simple.

Oftentimes, your gap-finding expedition ends in a more complex situation. Let’s use an example from my world of software investing. Let’s say after analyzing your end-of-quarter sales data, you find that new bookings have declined, and you and your team start to wonder why. Someone asks you to look into it. You examine your starting pipeline coverage, how many opportunities you created, your win-rate, and the reasons you won and lost deals. After analyzing all this data, you uncover an insight. You find that you’re losing more deals this quarter to customers that make “no decision” — in other words, rather than choosing a competitor over you, the prospect doesn’t make a choice at all. They just kind of fade away, lose interest, or outright disappear. It’s not so much that they don’t buy your product, they don’t buy any product.

So there’s your diagnosis. There’s a lot going on, but our #1 problem is that we’re losing too many deals to no decision. Now what do you do about that? The list of potential solutions is long. You could drop prices, offer more attractive promotional terms, equip the team with a tool that helps them close more deals, start doing customer interviews, hire a consulting team, acqui-hire a new product team, build some new features, exit the market completely and close up shop…The options are endless.

Some of those options you can nix right away. We’re not dissolving the company because our win-rate dipped a few points, and we probably don’t need to rethink our entire product roadmap either. But even after eliminating the extreme options, you’re left with a long list of potentially good ideas.

This is about the time when most people — even seasoned executives — start to feel a little overwhelmed; a little paralyzed. Not because they can’t brainstorm solutions. Anyone can build a to-do list. They get overwhelmed because they’ve never been given a framework that helps them take their list of solutions and choose which one would be best.

Let’s fix that, shall we?

How To Pare Down Your List

Whether you’re filling a simple gap or addressing a more complex problem, the best first move is almost always the same: Build your list of potential solutions, and then pare your list down using a series of strategic filters.

Here are the strategic filters that work best for me — the simple tests that can help you take a long list of options and neck it down to one powerful choice. A choice you can commit to, and get other people to rally around.

The C.I.F. Filter

C.I.F. stands for “controllable / impactful / finish-able.” In other words, can you actually control it, would changing it for the better make a difference, and does it have a clear definition of done. To my earlier point on execution, simply picking things that you both (i) can do and (ii) will do can save you a lot of heartache. Often the most clarifying thing you can do with a long list of options is to reflect on which option seems the most balanced: Which of your potential moves seems to have the healthiest balance between something you can control, something that provides impact, and is something you can put a date against? Often, this question quickly shakes out the best answer from a list of “pretty good” initial options. Pay particular attention to the “F” in C.I.F. Many of the new-world management schools out there (e.g., Agile, EOS, etc.) put huge emphasis on finish-ability. That’s not an accident. If you can’t put a due date on it, you likely haven’t defined the deliverable clearly enough — and it’ll be impossible to objectively assess how things are going later on.

I heard someone say once that “Good strategy should devolve almost immediately into hard work.” Passing the C.I.F. test is the best way to ensure you choose the shortest path between the thinking part of strategy and the doing part. The shorter you can make those cycles, the better you typically do.

The Strategic Harmony Filter

A while back, one of my favorite management thinkers, Niko Canner, showed up as a guest on Patrick O’Shaughnessy’s podcast, Invest Like the Best. The highlight of the podcast is about thirteen minutes in, when the conversation turns to the topic of strategy.

Patrick: Do you think that a good acid test for effective strategy is that it makes choices easier?

Niko: Absolutely. It almost makes choices unconscious if you do it really well.

The implication on strategy here is two-fold. First, Niko tells us that a good strategy shouldn’t be thought of just as a declaration of corporate intent — it should be thought of as a tool for individual decision-making. Strategy is there to help you make quicker, easier calls on what to do next — calls that mutually reinforce the direction the company wants to head and the advantage it is seeking to create.

Second, Niko tells us that we should be actively looking for opportunities to use that tool as a decision-making shortcut. Sometimes all that’s needed is to consider a potential call against your company’s stated strategy and ask “which choice fits the most with where we’re already trying to go?” This idea of strategic harmony is at the center of Mr. Rumelt’s definition of what makes a good guiding policy:

“[It] tackles the obstacles identified in the diagnosis by creating or drawing upon sources of advantage.”

So, if your company has some kind of strategy written down somewhere, then use it! Ask your manager or the CEO about how you should employ whatever strategy you’ve defined as you make decisions. How do they suggest that you use the strategy they’ve already defined as a tie-breaker? Even if your strategy is a bit fluffy at this point, it can still provide a valuable filter that helps weed out options that don’t jive with what you’re already trying to do. (And if you haven’t decided on your strategy yet, this is a great excuse to lock yourself in a room and give it a shot. It’s easier and faster than you think.)

The Cultural Consistency Filter

Your team’s core values can also provide a helpful tie-breaker when trying to sort out a strategic choice. If you choose a direction that’s congruent with your culture, the chances are greater that your team will simultaneously (i) get on board with it and (ii) get the message that you’re serious about the culture you’re trying to create. As I’ve written about before, a real company culture reveals itself only after you examine what you’re already like when you’re at your best. So it follows that making decisions with your “best team self” in mind is a sneaky way of drawing on your natural strengths. It’s a way to ensure that the choice you’re making is not only the smart choice, it’s the authentic choice.

So ask yourself: Of your potential choices, which of them feels most like you? Which one ties back to one of your core values? Which expresses what you and your team are all about? While this shouldn’t be your only decision-making filter, too many teams skip over it. It can reveal a lot — and maybe most importantly, it creates a natural opportunity to “start with why” and link your choices with your culture when explaining them to your team.

Final Thoughts

There’s this Confucius quote I love — it goes:

“The man who chases two rabbits catches neither.”

The essence of good strategy is choosing one rabbit — the right rabbit — to chase.

What nobody tells you is that this gets harder the more experienced you get.

Let me explain. The longer you work, the easier it is to notice the things that need fixing. Once you develop a taste for quality and a sense for what good looks like, your managerial palate is never the same. That palate — that sense of taste — is both a gift and a curse. On the one hand, you now have two of the most valuable qualities in business: High standards and the means to detect if they’re being met. But with those qualities comes a level of baseline mental chatter that is often more distracting than helpful. You can now see, in high-def 4K vision, exactly what your business looks like — both at its best and at its worst.

And you don’t just notice all the little gaps between the two. You feel them.

All these improvement opportunities can look like they’re worth your time. In other words, you now see a lot of rabbits that all seem like they’re worth chasing. The natural impulse is to try and corral all of them all at once. But in doing so, the same thing always happens. You spread yourself thin and dilute the impact you set out to make. The impact you were hired to make.

The hard part — the necessary part, the agonizingly difficult part — is choosing just one rabbit to chase, and then getting after it with everything you’ve got.

Don’t forget to enjoy the pursuit.

In the next installment of my How To Be Strategic series, we’ll explore how to take your chosen direction and turn it into a “make it happen” plan.

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