125th Anniversary

The Business We Are All In Management strategies can seem like something only executives with ‘chief’ at the front of their title need to think about. In fact, strategy is something every employee needs to be a part of.
Business today

It’s a little contradictory, but it seems there are two opposing yet equally true statements we can make about work today. The first is that there are, in the classic Mad Men sense of the 1960s, very few ‘real’ executives remaining in the business world today. The second statement is that virtually every employee is an executive today, in some sense.

We’re evolved, most of us, from being ‘cogs in the machine’ to becoming self-contained, self-responsible entities who work together in collaborative collectives we call ‘teams’ in order to achieve results we refer to as ‘goals’. We’re expected to manage ourselves, to understand and pursue the objectives of the business, and to provide feedback on how the business is faring.

This is, as the duality of the proposition suggests, something of a two-way street. It is a huge advantage to most businesses that people who work there no longer yearn to be told exactly what to do, when to do it and how it should be done. The responsibility for success has devolved from the heady heights of the C-suite to the people who meet the customers, make the sales calls or build the product on the line.

Equally, though, just as the people who work in a business don’t need to be told what to do, they also won’t accept being told what to think. For today’s employees to engage with the goals of a business, they need to understand those goals. Communicating the sense behind business goals is the role that strategy takes. But communicating strategy effectively to all employees can be very difficult. Most of us have been subjected to explanations of complex strategies, replete with charts, diagrams and drawings of pyramids. All of which has led us to conclude, despite the best efforts of the strategists, that management simply didn’t really know what it is doing. And many times, sadly, we were probably right.

Strategy fundamentals

Our proposition is very simple: if you build a strategy that is straightforward and can be clearly communicated in clear and simple terms, it has a better chance of being a good strategy that works in the long-run. To get to that, we need to look back to the fundamentals of strategy. The person most responsible for the birth of business strategy is the American business thinker Peter F Drucker, who revolutionised the field in the early 1960s. In his 1964 classic Managing for Results, Drucker laid out the goals of a strategy in very simple terms:

  • The present business must be made effective
  • Its potential must be identified and realised
  • It must be made into a different business for a different future

What business are you in?

Simple goals as Drucker stated them. But how do you even get started trying to reach them? One place to begin is with the question posed by another business thinker from the 1960s, Theodore Levitt. In what became one of the most cited business articles ever written, Levitt published a story titled ‘Marketing Myopia’ in the July 1960 edition of the Harvard Business Review. He wrote, in part:

‘The railroads are in trouble today not because that need was filled by others…but because that need was not filled by the railroads themselves…The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented…’ Ask most hardware retailers what business they are in and they’ll reply, a little puzzled, “Well I, uh, sell hardware” – wondering if the nine-metre-high ‘Hardware’ sign outside is somehow too subtle. But these retailers are wrong. From their own perspective, they sell hardware. From the perspective of the customer, they provide solutions. In the classic language of this type of thinking, the retailer sells drills and drill bits, but what the customer buys is holes.

Selling holes

The customer wandering down the aisle of drill bits isn’t excited by the tungsten-carbide diamond-tipped bits. They are excited by the project they are engaged in, which needs a hole to thread cable for a television through or to put a hook in to hang a picture of their grandmother on the wall of their daughter’s bedroom. How do you sell a hole? You don’t. What you sell, really, is the knowledge of how you create a hole to which the drill bit is important, but incidental. The truth is that, at a fundamental level, you aren’t in the drill bit business. You’re in the knowledge business. Drucker wrote about the role of knowledge in the same work cited earlier:

‘It is only in respect to knowledge that a business can be distinct, can therefore produce something that has a value in the marketplace… Indeed, business can be defined as a process that converts an outside resource, namely knowledge, into outside results, namely economic values…’

Knowledge and competition

The good news, as we will discuss in more detail in a future article, is that competing on the basis of knowledge levels the playing field in the hardware retail industry. If you run a small store, you will never be able to compete directly on the basis of price and product selection. But every store everywhere in Australia can effectively compete with anyone on the basis of knowledge, not only what is known, but how that knowledge gets communicated to the customer.

If you can move beyond glib and ridiculous strategic statements and seek out the roots of your business, you can be rewarded with genuine gains and a genuine, communicable sense of direction.