Brief Summary
This video features Roger Martin discussing strategic choices and tradecraft in business. He emphasizes the importance of making real choices, focusing on winning aspirations, narrowing where to play, and developing a network of capabilities. Martin also critiques common pitfalls in strategy, such as relying on strategic planning, cost-based thinking, and self-referential frameworks.
- Strategy is choice, and real choices have viable opposites.
- Winning aspirations are crucial for successful investments.
- Narrowing where to play leads to more coherent competitive advantages.
- A network of capabilities is more sustainable than a single killer capability.
- Management systems should reinforce the building and maintaining of key capabilities.
Introduction
The annual intellectual upgrade begins with an introduction highlighting Roger Martin's return to discuss the cascade of choices and strategic decisions. The focus is on re-establishing growth momentum by making choices on acquisitions and defining where to play and how to compete. This year's discussions emphasize lateral drivers, challenging industry leaders, and examining momentum bets. The goal is to enhance partners' thinking and decision-making abilities, with Martin sharing observations, progress insights, and novel concepts in strategy development and execution.
Trade Craft: Strategy as Choice
Roger Martin focuses on the trade craft behind strategy, emphasizing that strategy is fundamentally about choice. He introduces a test to determine if a choice is real: the opposite of the choice should not be obviously stupid and should be a viable option that someone else is successfully pursuing. Using Vanguard and Fidelity as examples, he illustrates how real choices create diversity and serve customers well. Martin cautions against jealousy of competitors' choices and underscores the importance of focusing on winning in a chosen area.
The Five Choices: Winning Aspiration
Martin stresses the importance of addressing the five strategic choices: winning aspiration, where to play, how to win, capabilities, and management systems. He emphasizes that investments made to "play" or catch up often disappoint, while a winning strategy provides a superior value equation. He illustrates this with the transformation of Tennis Canada, which shifted from merely participating to aspiring to win, leading to significant changes in their approach and ultimately producing top players.
Where to Play: Narrowing Focus
Martin argues that a wide array of where to play choices indicates a lack of confidence. He suggests that Deloitte Australia would benefit from narrowing its where to play focus, as trying to be everywhere reflects a pre-competitive market mindset. In competitive markets, firms need to bring winning assets to bear and develop real capabilities in specific areas. He warns against broad where to play strategies, using the U.S. airline industry as an example of how a lack of focus can lead to a miserable customer experience and poor financial results.
How to Win: Revisiting Where to Play
Martin reinforces the interconnectedness of the five strategic choices, particularly where to play and how to win. He advises against locking in where to play before considering how to win, suggesting that these two should be considered in pairs. He reiterates that there are only two ways to win: creating more value or producing at a lower cost. Low price is not a strategy; low cost is. He encourages businesses to find a way to win, even if it takes time, and emphasizes that it is better to exit a business than to remain in one without a winning strategy.
Capabilities: Building a Network
Martin argues that having one killer capability is not enough for sustained advantage. He suggests building a network of capabilities that reinforce each other. He uses the tech industry to illustrate the problem with relying on a single technological breakthrough. While Microsoft has sustained its advantage due to a number of capabilities, Procter & Gamble is a good example of a company that has a network of capabilities. He also touches on the topic of outsourcing, saying that companies have to be much more precise about what they do and what they don't do.
Management Systems: Building and Maintaining Capabilities
Martin emphasizes the importance of management systems in building and maintaining key capabilities. He explains that Procter & Gamble took a long time to develop management systems that ensured the building and maintaining of their core capabilities. He highlights the importance of understanding how scale works and having systems to measure and monitor key capabilities.
Why Firms Don't Do Strategy: Traps and Frameworks
Martin identifies three reasons why firms avoid doing strategy: preferring strategic planning over strategy, cost-based thinking, and using self-referential frameworks. He critiques strategic plans as often being a list of initiatives without coherence and argues that cost-based thinking leads to a futile exercise in revenue planning. He also critiques the misuse of emergent strategy and the resource-based view of the firm as excuses for not making choices.
Q&A: Alliances and Professional Services
During the Q&A, Martin discusses alliances in professional service firms, noting that they often exist between individuals rather than firms. He suggests that managing alliances requires understanding diffusion theory. He also touches on the capabilities Deloitte should build, such as digital, data, and design, and emphasizes the importance of collaboration and embedding processes that facilitate client adoption of designs.
Q&A: Generational Change and Embedding Knowledge
Martin discusses how to get the most out of the next generation by making their jobs exciting and empowering them to make choices. He suggests that senior leaders should structure choices rather than simply dictating execution. He also touches on the importance of distinguishing between leadership and management and creating a culture where partners want to build something greater than themselves.
Q&A: Revenue Planning and Accountability
Martin addresses the question of how to maintain accountability without revenue planning. He suggests that firms should observe what happens when they fall behind on revenues and recognize the destructive activities they engage in to meet targets. He proposes that instead of trying to manage revenue up, firms should revisit their strategy and focus on understanding why things didn't work out as planned.
