Posted by CraigBradford
Strategy is hard enough if you understand it. It’s even harder if you don’t.
If you understand it, you realize it’s made up of many moving parts. If you don’t, the best you’ll come up with is some version of operational efficiency: building more links, writing more blog posts, making more video. Those activities aren’t strategies — and if you fail to differentiate your plan, you’ll find yourself forever chasing those who started before you, or falling behind better-funded competitors.
I enjoy strategy, both on the academic and theoretical side of things and in more practical opportunities helping our clients at Distilled. Below are some of the things I’ve learned along the way that you might find useful, especially if you’re a business owner, setting up marketing strategies, or a consultant. If you’re in more of an individual contributor role, you’ll receive the background and basis you need to understand how it all fits together and create a personal development plan towards building strategy.
Read on and you’ll have a better understanding of what strategy means, what type of strategy you need and how to make good decisions. For each section, I’ve included a reading list too.
What is strategy?
Good strategies are compounds, not elements.
A good starting point for understanding strategy is an infamous article by Michael E. Porter – “What is Strategy?” It’s quite academic, but covers a lot of the key points. I recommend reading it a few times; it’s worth it.
To understand what strategy is, I like to use a chemical analogy of elements and compounds. A compound is a combination of two or more elements. In the case of a strategy, the activities would be the elements and the strategy would be the compound. I like this analogy for a few reasons:
Reverse-engineering a compound can be challenging
Many people fall into the trap of trying to copy a competitor’s strategy. This is bad for a number of reasons, but one in particular that I’d like to highlight: even if you think you know what a competitor’s strategy is from the outside, it can be very hard to copy successfully unless you know all of the individual details.
Much like a chemical reaction, different quantities of the same elements combined in different ways can produce very different results. Often, when people try to copy a strategy, they’re really just copying an element or activity.
Compounds are only as strong as their weakest link
Different strategies take different levels of energy to crack. In What is Strategy?, this idea is referred to as “activity systems” and “fit.” The example used is Southwest Airlines. Some people would try and describe a strategy as a slogan: “Southwest Airlines services price- and convenience-sensitive customers.” That might be true, but there’s not anything particularly advantageous about that idea. The competitive advantage comes from how they integrate:
“Through fast turnarounds at the gate of only 15 minutes, Southwest is able to keep planes flying longer hours than rivals and provide frequent departures with fewer aircraft. Southwest does not offer meals, assigned seats, interline baggage checking, or premium classes of service. Automated ticketing at the gate encourages customers to bypass travel agents, allowing Southwest to avoid their commissions. A standardized fleet of 737 aircraft boosts the efficiency of maintenance.”
This is what those individual pieces look like as part of a system:
The more stable the compound, the slower it reacts
A stable compound with lots of bonds, while strong and hard to copy, is slow to adapt if the market changes unexpectedly. Change forces managers to dismantle their existing resource systems and reassemble them in new strategic positions.
“For example, Liz Claiborne, an apparel company, relied on a positioning strategy in which production, distribution, marketing, design, presentation and sales resources were all tightly linked. But when the industry changed, the company’s relationships with department stores were disrupted. In an effort to adapt, Claiborne executives changed resources such as their “no reordering” process that had antagonized department stores. But since this process was synergistically entwined with other resources like overseas logistics and distant manufacturing locations, the “no reordering” process could not be undone without damaging system coherence. Financial performance sank precipitously. Only after Claiborne executives dismantled their existing resources and started reconnecting new ones did positive performance begin to return.”
All of the above is to say that the key to an effective and sustainable strategy is to focus on the integration of activities. Operational efficiency alone isn’t a strategy. A good way to sanity-check this is by asking why you’re doing an activity.
I like this slide from fellow Distiller Rob Ousbey, which puts some of theory into context in marketing strategy:
What type of strategy do you need?
The type of marketing strategy you use can (and should) change as the business requirements change. Two questions that are a good place to start:
- How predictable is your market?
- How malleable is the market (can you influence demand, needs, etc.)?
Based on your answers to those questions, there are choices. I like the wording from “Which Strategy When?”:
- Position (fortress) – Positional-based strategies are best when you’re trying to defend a long-term position in the market. Strategies in this space involve deepening the activities and resources that you have within a particular area. This is best in markets where there isn’t a lot of change.
- Leveraging strategy – Leveraging strategies are useful in markets where you have some influence on how the market moves and there’s less predictability. A chess analogy is a good one, since it’s not just about having the right pieces; it also requires making smart moves. A recent example that I love is the example of Google using Deepmind AI to reduce data center costs by 15%. That’s a pretty big deal.
- Opportunity (surfing) – Opportunity strategies can be compared to surfing and waves; it’s hard to predict when they’ll come or how long they’ll last. Timing is important, and occasionally you get a good one. Being set up in a way that allows you to capitalize on opportunities as they arise is crucial.
It’s possible, probably recommended, to have some mix of all three. I like the graph that our R&D team use to explain this, shown below. The idea is that there are always trade-offs between the chance of success and reward.
Picking a strategy and making decisions
- The Secrets of Consulting: A Guide to Giving and Getting Advice Successfully
- Bringing Science to the Art of Strategy:
- The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business
- The Big Lie of Strategic Planning
- Creating Your Digital Strategy
Closely related to the difficulty of strategy is the necessity to make choices. Strategy forces you to make decisions and explicitly cut off options. This can be difficult for a number of reasons. I talked about this in depth in my SearchLove Boston presentation, Creating a Digital Strategy:
One of the hardest things about strategy? Resisting the urge to do it all. The most obvious way this happens is by getting distracted by competitors. In the book The Secrets of Consulting, the first chapter introduces the idea of the law of strawberry jam: “the wider you spread it, the thinner it gets,” which is a nice way of saying that you can’t do it all. Every service or feature you add to your business has a cost of some kind. Trade-offs are a critical part of making sure your strategy is sustainable, because they protect from competitors trying to straddle multiple markets.
To go back to the previous example of Southwest Airlines, someone that tried to spread it far and thick was Continental Lite. By trying to copy Southwest and offer a low-cost airline solution while still trying to compete as a full-service airline:
“The airline dubbed the new service Continental Lite. It eliminated meals and first-class service, increased departure frequency, lowered fares, and shortened turnaround time at the gate. Because Continental remained a full-service airline on other routes, it continued to use travel agents and its mixed fleet of planes and to provide baggage checking and seat assignments.”
Source: What is Strategy?
If you haven’t made some trade-offs, your position probably isn’t sustainable and is open to imitation.
“Trade-offs ultimately grounded Continental Lite. The airline lost hundreds of millions of dollars, and the CEO lost his job. Its planes were delayed leaving congested hub cities or slowed at the gate by baggage transfers. Late flights and cancellations generated a thousand complaints a day. Continental Lite could not afford to compete on price and still pay standard travel-agent commissions, but neither could it do without agents for its full-service business. The airline compromised by cutting commissions for all Continental flights across the board. Similarly, it could not afford to offer the same frequent-flier benefits to travelers paying the much lower ticket prices for Lite service. It compromised again by lowering the rewards of Continental’s entire frequent-flier program. The results: angry travel agents and full-service customers.”
Source: What is Strategy?
Other academic theories as to why copying competitors is a bad idea are covered in the Innovator’s Dilemma, which I also recommend reading.
The short version is that when competitors copy each other, the only person that wins is the customer. Over the long term, the more competitors converge, the more they look like each other and customers default to price to help choose between options. This drives prices down and squeezes margins.
To draw comparisons to the search space, I see this taking place in processes like keyword research. So many companies make a big list of keywords, then churn out average content that looks the same as every other article online about that topic. Don’t waste your time.
Advice for choosing a digital marketing strategy
Don’t turn it into an optimization problem. There’s more than one right answer in the majority of cases. I like the advice Scott McNealy gives (he was a co-founder of Sun Microsystems and its CEO for 22 years). When asked how he makes decisions, he said:
“It’s important to make good decisions. But I spend much less time and energy worrying about ‘making the right decision’ and much more time and energy ensuring that any decision I make turns out right.”
What an amazing attitude! You can see how this applies at the later stage in strategy. Once you’ve gone through all of the possible scenarios, validated the ideas, and narrowed it down to the last couple, this is the stage where analysis paralysis takes effect and people naturally want to turn strategy into planning. Just pick one and focus on making sure it turns out a success. Another way to think about this: strategy is about placing bets and shortening odds of success. Remember that you can course-correct; strategy isn’t sniping. You can take more than one shot and iterate, so don’t be afraid to change.
With that in mind, I’ll wrap it up. Hopefully this was useful to some people. For a deeper dive into this, take a look at my SearchLove presentation, Creating Your Digital Strategy, which covers all of the above and in a more practical, process-driven way.
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from Raymond Castleberry Blog http://raymondcastleberry.blogspot.com/2016/08/digital-strategy-basics-what-why-how.html