In the January issue of HBR, Roger Martin lays out some rules for avoiding common mistakes in strategy development. As he writes in “The Big Lie of Strategic Planning”, the first rule is “keep the strategy statement simple”. Rather than a long and often vague document, the business strategy should summarize the chosen target customers and the value proposition on one page.
I couldn’t agree more. In my consulting work, I take this idea even further by asking my clients to summarize their strategy in less than 15 words. This statement should identify the target customer, the value proposition, and how the value proposition meets two requirements:
- Focus: what you want to offer the target customer and what you don’t want to offer;
- Difference: Why your value proposition differs from competing alternatives.
It sounds simple. But it’s harder than it looks. The 15 word constraint is a test that often reveals a profound lack of alignment among managers. In a 100-page strategy document, you can spell out anything you want, making everyone comfortable in the organization. The trouble is that managers then interpret the 100 pages according to their vision and aspiration of the company’s strategy. The result: one planning document, many different strategies.
All of the great business strategies can be summed up in one short headline. Easy to understand and communicate, they bring clarity internally and externally to the client. Clarity is so important to good strategies that companies should make an effort to understand what it means and how to achieve it.
Neuroscience can help us in this endeavor. Clarity, as several studies demonstrate, depends a lot on the principle of contrast. We understand something better when we see it in comparison to something else than in isolation.
To understand the power of comparison, let me tell this famous old advertising story. One day, an advertiser and a colleague were having lunch in Central Park in New York. On the way back, they saw a blind man begging for money. He had a donation cup and a sign said, “I’m blind.” Passers-by ignored him. The executive stopped and offered to change the wording on their sign to increase donations. He took out a marker and jotted down four words. Passers-by started to stop, and soon the money poured in. What did he add? The sign now said, “It’s springtime and I’m blind.
IKEA is a company that exemplifies the power of strategic clarity. Many people believe that its success is rooted in its business model; others emphasize the service experience. For me, IKEA’s success is mainly due to the clarity of its strategy. Most companies try to build their market around what they offer. What’s fascinating about IKEA is that it has consciously designed its value proposition and brand identity around contrasts: a set of negatives (things they don’t offer) and a few positives (things they offer).
Initially, specialty furniture retailers thought IKEA’s value proposition was absurd. It offered minimal variety. The stores were designed to propel customers through labyrinthine spaces without a sales support. No delivery, no assembly. Not even the promise of sustainability. What IKEA has done is replace the warehouse atmosphere associated with most discount furniture retailers with a cheerful and innovative look and feel, wrapping its stripped-down offerings with a fun set of attributes. It offered items other than furniture (housewares, unique toys) and customers could drop off the children at a brightly designed, company-run daycare.
IKEA’s value proposition is focused (clearly spelling out the dos and don’ts) and different (diverging from alternative offerings). For the consumer, IKEA has a clear positioning in its mind and contrasts sharply with other values. This case and other great business strategies underscore how essential this is. Keeping a 15 word limit can help you achieve that kind of clarity and avoid the confusion and misalignment so easily hidden in a 100 page document. Practice it in your next strategy workshop and see what happens.