How we strategize like steers (and how to avoid doing so).
March 18, 2016
Steers start life miserably. They are born, castrated, de-horned and branded.
Then things improve. They eat.
The eating part isn’t so bad for a steer and at this point they may see their lives as having turned a corner. They have food, drink, the company of other steers - no cows but then they aren’t in to that sort of thing anyway.
Imagine a particularly bright steer with access to Excel and a data warehouse conducting an assessment of the steers' life. The herd might even form a strategic committee to plan for the future. These analysts could easily come to the conclusion that life would be improving.
In fact after a year or so the feed improves, they grow a bit fatter and the steer analysts would confirm with increasing confidence that the herd’s fortunes were good and the future bright.
Then, one day, a truck arrives with a picture of a steak on the side to haul them all away.
So much for statistics.
Running a business is like the life of a steer. It is hard to get going, if it survives the business receives some positive feedback, realizes some success, and plans for a bright future. Strategy sessions often confirm the good positioning and increasing potential through extrapolating past successes far into the coming years. Large businesses in particular can spend a lot of time on extrapolating from the past.
But, the slaughter is just around the corner.
Yesterday’s success gives the false impression of a solid footing for tomorrow. But, tomorrow, next month and next year will be different and success in the past guarantees no advantage. In fact a successful past can compromise the future: it attracts new entrants and competitors who will change the game and drive incumbents out of business.
No business is immune: size, financial position and market share do not prevent failure. Continued success requires a future focus that starts with breaking from the past through:
Identifying trends: Specifically external trends. These are developments in the socio-economic environment within which a business operates, the technological changes that have the potential to disrupt the business and changes in consumer behavior. Some are easy to find: globalization for example. But understanding consumer behavior or nascent, industry specific, trends will require research - which is a much better use of analyst time than analyzing past performance.
Identifying uncertainties: While trends paint a picture of where the world is going, uncertainties highlight the variability. There is a trend towards automation but the speed and ubiquity of adoption is uncertain. The climate is changing but the social and economic consequences are uncertain. Thinking through the uncertainties and possible outcomes helps clarify the scope of trends and provide a broad picture of the future.
Cluster trends and uncertainties to create Futurecasts and Scenarios: While trends and uncertainties are interesting on their own, bringing them together is key to understanding their impact. Driverless cars may seem irrelevant to a company like Starbucks until they are combined with electric cars and urban planning. New city designs could eliminate some retail strategies while creating new ones. Futurecasting and scenarios provide a future perspective that is useful in assessing opportunities, risks and future business models.
Even the steer analysts would benefit from a future focus. They might notice disappearing herds, question the role of the rancher and interrogate the reliability of their food supply eventually drawing the conclusion that something is just not right.
Steers, however, aren’t that bright. And they don’t have strategy teams to help them avoid the slaughter. This is where businesses have the advantage, they can improve their odds through reframing their positioning, developing a future focus and preparing for what will come.
Those businesses able to do so will have much better odds at survival - those that don’t, well, they should look out for trucks.