One of the first things that I look at when designing a strategic conversation is the horizon in which our decisions will have to produce results.
Sometimes (remember 2008…), the horizon is as short as 3 months.
Sometimes (remember the times before 2008…), the horizon is as long as 5 years.
WHAT DETERMINES YOUR STRATEGIC HORIZON
How do you tell what your strategic horizon should be? I look at 2 factors
- How substantial and dependable are the resources we’ll have? The more of a war chest we have to work with, the less we need to worry about short-term needs, and the more we can focus on long-term goals. If we don’t have a war chest, then how confident are we that we’ll be profitable into the future.
- How healthy is the business model? Are we generating a good profit? If not, that’s a sign that we may not be delivering what the market values, or something internally is not working as needed. And it suggests that we’ll need to use resources to fix things before we can use them for building things.
WHAT DIFFERENT STRATEGIC HORIZONS LOOK LIKE
Once I’ve done that assessment, I know whether we need a short-term, medium-term, or long-term discussion.
- Short-term = 0-6 month horizon: tactical initiatives that can capitalize on existing assets, or address existing problems, with the goal of generating revenue or cutting costs. For example, cross-selling to existing customers, or consolidating 2 internal departments whose work has changed.
- Medium-term = 6-18 month horizon: evolutionary initiatives that capitalize on adjacent opportunities and needs – things that are new but close to what we’re already doing. For example, selling an existing product into a new (similar) market, or upgrading an antiquated order-management system.
- Long-term = 18-36 month horizon: transformational initiatives driven by a strong internal or external driver but with major work to be done. For example, launching a new product that needs technical development, or expanding the strategic role of a department (we’re seeing this a lot in IT departments that are being asked to drive digital transformation).
For most small businesses, most of the time, the strategic horizon is 1-2 years. But the horizon can vary from quarter to quarter. So, as you prepare to talk with your leadership team, take into account the resources you have and the health of your business as you outline the agenda for your strategy meeting.
One of the precepts of the EOS program is, “The answer is in the room.” It’s a phrase that’s used to emphasize the importance of discussion in addressing important issues, and I am a full supporter of that idea.
The problem is, the phrase itself is not quite right.
WELL…SOME KIND OF ANSWER IS IN THE ROOM
A more accurate phrase would be, “An answer is in the room.”
And it’s the job of the CEO to know whether it’s the answer or an answer that is in the room – whether your team has the right stuff to understand and evaluate the issue and the options for solving it…or not. Because if they don’t, but they think they do, then you are wading into dangerous territory.
It’s not that dangerous if the issue is minor. But if it’s a major strategic decision…having the wrong answer is a big problem.
EVALUATING THE QUALITY OF YOUR TEAM’S ANSWER
So, how do you gauge whether you are getting an answer (a poor or bad decision) or the answer (a good decision)? Here are some questions you can ask:
- Have we seen this situation before? Or something similar? Or has someone on our team?
- Can we come up with a list of risks that would make our banker (or some other knowledgeable skeptic) proud for how pessimistic the list makes us appear?
- Can we come up with 3 strong options for handling the situation?
- Is there more than one person who is worried that the answer may not be in the room?
A CAUTIONARY TALE
Let me talk more about that last one. The biggest business mistake that I have witnessed was when a client decided that the answer was not in the room for them. They hired me to write a plan for a new initiative, discussed and agreed to the plan as a team…and then 2 weeks later the CEO came up with an alternative “short cut” approach.
That short cut ended up costing the company between $2MM and $10MM, depending on how much you count the indirect impact that decision had. At the time the leadership team was discussing the short cut, there were 3 members of the team who said, “We just paid for a plan, and we all said we liked the plan – why are we not following the plan? Why do we think we have a better answer than the plan now?” (Which is another way of saying, “The answer is not in the room.”)
HOW THEY GOT IT WRONG
Why did most of the team change their minds? Because the CEO had a long history of running and building the business, and the majority of the leadership team said, “If you think this is the right thing to do, we trust you.” What they missed was that the CEO had not pursued a strategy like this before – it was a new area for him, and it was more complicated than anything he’d worked on before.
The team needed to listen to the skeptics more – and there’s a lesson there for you, dear CEO, if you find yourself in a similar situation.
YOU BE THE JUDGE
If you’re a CEO listening to your team debate a topic, you have another role you need to play – you need to raise yourself above the discussion, and look down on it, and critique whether the sophistication of the discussion matches the complexity of the issue and the quantity of the resources you’re going to commit to the answer.
In my work as a fractional CMO, I am often helping small businesses navigate the transition from sales-driven revenue to marketing-driven revenue. This is no small feat, because of the time and investment it takes.
I just had lunch with the managing partner of a $5MM services firm. He was telling me how hard it was to ask his partners to spend money on marketing – and he was talking about $20K, which was a fraction of what they would need to really become a marketing-driven company. Why were his partners dubious? Because the ROI was not going to be fast or definite enough.
Compare that with a strategy meeting I was in last week for a $10MM services firm in which a partner – who was one of the biggest skeptics of marketing 2 years ago – said, “If we hadn’t invested in marketing over the last 2 years, I’m not sure we’d still be here today.” (To his credit, he was a skeptic, but an open-minded one.)
Let me tell you something that marketing agencies have a hard time telling you: the ROI of marketing almost assuredly looks terrible for the first 12 months you’re doing it. And may look terrible the second 12 months.
But if you’ve made the right investments in that time, you almost assuredly will be reaping the rewards of your marketing machine by your third year. And they are rewards that are beyond the scope of anything you could have generated with a sales-driven strategy. In other words, marketing can get your business to the next level – but it’s going to cost you.
It’s not easy for leaders to invest in something that is unproven and takes 12-24 months to start paying off – especially given the “black art” nature of marketing, which means that you can never really “arrive” at a marketing strategy that you can lock in and forget about. Each company’s marketing recipe is different. There are generalizations you can start from, but at least 1/3 of those generalizations will be wrong.
Why “waste” all that money marketing, then? Because building a marketing machine is like driving a car instead of pedaling a bike. If you’re happy biking and it takes you where you want to go…great. Stick with your sales-driven approach, and don’t bother building a marketing machine. But if your market is getting more competitive, or your customers are more price sensitive, or your buying cycle is getting longer…that bike probably isn’t going to be enough anymore.