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ROGER MARTIN: This thing
called planning has been around
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for a long, long time.
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People would plan
out the activities
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they're going to engage in.
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More recently, has been a
discipline called strategy.
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People have put those two
things together to call
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something strategic planning.
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Unfortunately, those things
are not the same, strategy
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and planning.
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So just putting them
together and calling it
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strategic planning doesn't help.
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What most strategic planning
is in the world of business
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has nothing to do with strategy.
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It's got the word, but it's not.
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It's a set of activities
that the company
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says it's going to do.
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We're going to improve
customer experience.
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We're going to open
this new plant.
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We're going to start a new
talent development program.
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A whole list of them,
and they all sound good,
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but the results of
all of those are not
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going to make the company
happy because they
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didn't have a strategy.
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[MUSIC PLAYING]
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So what's a strategy?
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A strategy is an
integrative set of choices
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that positions you on a playing
field of your choice in a way
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that you win.
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So there's a theory.
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Strategy has a theory.
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Here's why we should be
on this playing field,
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not this other one, and here's
how, on that playing field,
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we're going to be
better than anybody else
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at serving the customers
on that playing field.
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That theory has to be coherent.
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It has to be doable.
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You have to be able to translate
that into actions for it
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to be a great strategy.
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Planning does not have to
have any such coherence,
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and it typically is what
people in manufacturing want--
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the few things they want,
to build a new plant,
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and the marketing people
want to launch a new brand,
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and the talent people
want to hire more people--
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that tends to be a list that
has no internal coherence to it
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and no specification
of a way that that
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is going to accomplish
collectively
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some goal for the company.
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See, planning is
quite comforting.
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Plans typically have to do
with the resources you're
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going to spend.
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So we're going to build a plan.
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We're going to hire some people.
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We're going to
launch a new product.
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Those are all things that are
on the cost side of businesses.
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Who controls your costs?
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Who's the customer
of your costs?
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The answer is, you are.
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You decide how many
square feet to lease,
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how many raw materials to
buy, how many people to hire.
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Those are more comfortable
because you control them.
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A strategy, on the other
hand, specifies an outcome,
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a competitive outcome
that you wish to achieve,
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which involves customers
wanting your product or service
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enough that they
will buy enough of it
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to make the profitability
that you'd like to make.
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The tricky thing about that is
that you don't control them.
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You might wish you
could, but you can't.
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They decide, not you.
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That's a harder trick.
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So that means putting
yourself out and saying,
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here's what we
believe will happen.
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We can't prove it in advance,
we can't guarantee it,
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but this is what we
want to have happen
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and that we believe will happen.
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It's much easier to say,
I'll build a factory,
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I will hire more
people, et cetera,
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than I will have customers end
up liking our offering more
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than those of competitors.
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The tricky thing about planning
is that while you're planning,
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chances are at
least one competitor
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is figuring out how to win.
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When US air carriers were busily
planning what routes to fly
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and da-da-da, there
was this little company
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in Texas called Southwest that
had a strategy for winning.
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And at first, that
looked largely irrelevant
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because it was tiny.
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What Southwest Airlines was
aiming for was an outcome.
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What they wanted to
be is a substitute
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for Greyhound, a way
more convenient way
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to get around at a price that
wasn't extraordinarily much
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greater than a Greyhound bus.
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Southwest said, everybody
else is flying hub and spoke.
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They have hubs, and
they fly hub and spoke.
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We're going to fly point to
point so that we don't have
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aircraft waiting on the ground
because you only make money
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when you're in the air.
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We're going to only fly
737s, one kind of aircraft,
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so that our gates
are set up for those,
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our systems are set up
for those, our training,
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our simulations are set up.
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We're not going to offer
meals on the flights
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because we're going to
specialize in short flights.
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We're not going to book
through travel agents.
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We're going to encourage
people to book online
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because that's less
expensive for everybody
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and more convenient.
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So their strategy ended up
having a substantially lower
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cost than any of the
major carriers so
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that they could offer
substantially lower prices.
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Because it had a
way of winning, it
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got bigger and then bigger and
then bigger and then bigger
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and bigger and bigger
and bigger until it
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flies the most passenger
seat miles in America.
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The major carriers
were not trying
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to win against one another.
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They were all playing
to play, as I say.
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They were playing to
participate, maybe buy
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more planes, get more
gates, maybe grow some,
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not having a theory of
here's how we could be better
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than our competitors.
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And that was fine until
somebody came along and said,
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here's a way to be
better than everybody
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else for this segment.
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And so that segment then goes.
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It's gone [FAST-MOVING SOUND].
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And the main playing
to play players
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have to share a
smaller pie that's
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left over after Southwest
takes whatever share it wants.
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[MUSIC PLAYING]
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If you're trying to escape this
planning trap, this comfort
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trap of doing something
that's comfortable but not
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good for you, how do you start?
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The most important
thing to recognize
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is that strategy will have
angst associated with it.
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It'll make you feel somewhat
nervous because as a manager,
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chances are you've been
taught you should do things
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that you can prove in advance.
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You can't prove in advance that
your strategy will succeed.
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You can look at a plan and
say, well, all of these things
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are doable.
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Let's just do those because
they're within our control.
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But they won't add up to much.
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In strategy, you have
to say, if our theory
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is right about what we can do
and how the market will react,
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this will position us
in an excellent way.
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Just accept the fact that
you can't be perfect on that,
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and you can't know for sure.
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And that is not
being a bad manager.
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That is being a great
leader because you're
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giving your organization the
chance to do something great.
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The second thing I
do is say, lay out
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the logic of your
strategy clearly.
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What would have to be true about
ourselves, about the industry,
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about competition, about
customers for this strategy
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to work?
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Why do you do that?
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It's because you can then
watch the world unfold.
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And if something that you
say is in the logic that
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would have to be
true for this to work
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is not working out
quite the way you hoped,
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it'll allow you to
tweak your strategy.
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And strategy is a
journey, what you
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want to have as a mechanism
for tweaking it, honing
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it, and refining it so it
gets better and better as you
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go along.
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Another thing that
helps with strategy
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is not letting it
get overcomplicated.
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It's great if you can write
your strategy on a single page.
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Here's where we're
choosing to play.
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Here's how we're
choosing to win.
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Here are the capabilities
we need to have in place.
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Here are the management systems.
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And that's why it's going
to achieve this goal,
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this aspiration that we have.
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Then you lay out
the logic, what must
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be true for that all to
work out the way we hope.
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Go do it, and watch and
tweak as you go along.
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That may feel somewhat more
worry-making, angst-making
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than planning, but I would
tell you that if you plan,
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that's a way to
guarantee losing.
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If you do strategy, it gives
you the best possible chance
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of winning.
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