Elevate

Rich Horwath: Oftentimes, when managers are working day in and day out, one of the challenges they find themselves in is that they get too low into the tactical weeds of the business. They're so caught up in the day-to-day activity, and activity for activity's sake, that sometimes they fail to step back or elevate their thinking out of the tactical weeds to a higher place, so that they can really challenge the assumptions that they're working by, and really take a step back and ask themselves, "Are we doing everything that's really helping us be as effective as possible, or are we still doing some things that don't really add value to our customers?"

So, the title "Elevate" is really a reminder for leaders at all levels that they sometimes need to pull out of those tactical weeds of the business and really take a higher plain view of what they're doing.

Rachel Salaman: And this is a book about strategy and strategic thinking, so let's get some definitions. What's your definition of strategy in this context?

Rich Horwath: So, strategy is really the plan that you have to achieve your goals and objectives, and when we have a plan of any sort really what we're asking ourselves is how are we going to allocate our limited resources, our time, our talent, and our budget to effectively achieve our goals and objectives.

So, strategy is simply how are you going to reach the goals and objectives that you set as an organization, and strategy, as we know, can be developed at many different levels, and again it's really about how are we using our resources, our time, our talent, and our budget to effectively reach the goals and objectives that we have.

Rachel Salaman: And what about strategic thinking – what do you mean by that?

Rich Horwath: It's funny Rachel: very few people have a common definition of strategic thinking because it's an abstract concept – it's like leadership or love. So we can't reach out and touch it, and I think because of that it tends to assume a lot of different definitions, but really when we're talking about strategic thinking, we're talking about a manager's ability to generate new insights or new ideas on a regular basis that leads to advantage for their firm, and when we talk about generating new ideas or insights, we're really talking about the manager's ability to come up with unique ways to deliver value to their customer, and again that in turn leads to advantage.

So, as opposed to critical thinking, which is really the ability to solve a problem, strategic thinking, since we have the word strategic in there, really means that the end goal is to achieve some type of advantage through the thought process that we have.

Rachel Salaman: What kinds of situations do you envisage leaders will be in when they use the ideas in your book? For example, are these tips for everyday business-as-usual type of leadership, or are they more for people who are leading major change?

Rich Horwath: It's a wonderful question, because in a lot of organizations, strategy tends to be an event. It tends to be that two-to-three-or-four week planning cycle towards the end of a year where managers at all levels get together, they put together their ideas, they come up with a PowerPoint deck, they present that strategy or their plan, and unfortunately in a lot of cases that plan is then not really used throughout the rest of the year.

So, strategic thinking – what we're really driving for is the ability for managers to do and think strategically on a regular basis, not just once a year but to really flex those strategic muscles on a regular basis, meaning continually looking at the work that they're doing and understanding what's valuable here to our end customer, and how are we most importantly creating new or unique value for that customer.

Today, too often organizations are simply doing the same things in the same ways as other organizations, and sooner or later that's not going to allow them to successfully drive their business moving forward, so we really need to ask what's the new or unique value that we can bring to the customer, and that's what strategic thinking does on a regular basis. It helps us drive new ideas on how to create that value.

Rachel Salaman: You've identified the top ten strategy challenges facing managers, and you outline these in the book. Which are the most common in your experience?

Rich Horwath: By far the most common strategy challenge is time, and when I speak with leaders around the world about what they're doing on a regular basis, the great challenge that many say is we really don't have time to think strategically, or we don't have time to really look at our strategy on a regular basis, and that's a shame because what we've seen from research is that the number one driver of revenue growth in organizations is the reallocation of resources throughout the year from underperforming projects or initiatives to ones that have higher potential.

So, we need to be thinking strategically on a regular basis, but most folks say we don't have the time to do it, and what I would challenge people with is, I do believe we have the time. What we don't generally have is the discipline to use our time effectively: we spend a few hours here and a few hours there doing things that potentially other people should be doing in the organization or we're spending time on tasks that aren't really directly related to the value that we're trying to provide the customers.

So, when we say that we don't have time, I would challenge everyone to ask themselves is it that we don't have any time, or is it that we're not necessarily having the discipline to use our time effectively?

If we can even pull back two hours a week that's not being spent productively and turn that into productive time, all of a sudden we've gained 100 hours roughly a year in more productive time, so we need to really think about how are we allocating our time. And what I'd recommend is people spend a week with a journal and identify in 30-minute blocks how they are actually spending their time, and at the end of the week take a good look at that and really ask yourself, "Are all of the things I'm spending time on productive?"

Rachel Salaman: What's another top strategy challenge that you've come across?

Rich Horwath: The second one I tend to come across is the ability to gain commitment or buy-in for the strategies. Oftentimes, leaders will say we've created a good strategy, we've communicated the strategy, but we're simply not getting the commitment or the buy-in from the other levels or the other functional levels of the organization, and the reason people don't tend to get a high level of commitment or buy-in to strategy is because oftentimes they don't share the why behind the strategy – they simply pass out the strategy like it's the Ten Commandments and say, "Go forth and strategize and our PowerPoint deck."

But, the reality is people need to understand the why. They want to understand the because, and if you give people the reason why, the level of commitment and buy-in increases exponentially, so we need to make sure as leaders that we're not so busy developing and communicating strategy that we're not actually helping people translate what the strategy means to them, and why the strategy is what it is, and if we do that, if we take that extra time and care in that communication, then we're going to find the level of commitment and buy-in to increase dramatically.

Rachel Salaman: So, tell us about the GOST framework that appears in your book: goals, objectives, strategy, and tactics.

Rich Horwath: Well Rachel, as we know, goals, objectives, strategy, and tactics have been around for a long time. The challenge is they are often interchanged and confused with one another, so that we're spending a lot of time inefficiently trying to get on that proverbial same page as to what these terms are.

So, what I try to do in the book is to really lay out a simple framework that distinguishes each term from one another, and really what we can say is that goals and objectives are what we're trying to achieve, and strategy and tactics are how we're going to get there.

So, if we just look at a general example, we might say the goal is to reach the peak of the mountain – that's what we're trying to achieve.

The objective then is also what we're trying to achieve: we're simply quantifying it and adding a timeframe, so in this case the objective might be to ascend 2000 feet each day for five days till we hit the 10,000 foot of the summit, so that would be the objective.

The strategy then is, what is our general approach? How are we going to get there? So, are we going to go straight up? Do we need to zigzag? Are we going to go round the other side? How exactly are we going to get there?

And then the tactics are simply the tangible specific ways that we're going to get there. So, we might need hiking boots, pickaxes, ropes – maybe we need a boat to go round the other side.

So again I think if we can keep that simple rule of thumb in mind, goals, and objectives are what we're trying to achieve, strategy and tactics are how we're going to get there, and that really simplifies things for people.

Rachel Salaman: In a previous book, you outlined the three disciplines of basic strategic thinking, which you identified as acumen, allocation, and action.

I think it would be useful to be reminded of these now before you tell us more about the three disciplines of advanced strategic thinking, which is the focus of your new book. So, why is it useful for a leader to think in terms of acumen, allocation, and action?

Rich Horwath: So the three As again: when we talk about strategy, it often is an event, and we're trying to make people think on their key business issues on a regular basis. So the simple framework acumen, allocation, action is really designed to embed in people's thinking, so as they work through their day, the first A, acumen: what's the insight? What's my takeaway? What's my learning?

Every interaction that we're involved in we should be asking ourselves, whether it's a teleconference, a meeting, a customer visit: the first thing we should be asking is, what's our takeaway here? What's our learning? What's our insight? Because insight is what drives that new value or that innovation that's going to be valuable for the company and for customers.

Once we have that insight, the second A then is allocation, and that really asks us how are we going to make tradeoffs and focus our time, our talent, our budget, our resources in the areas that are going to bring the most value to our customers. So, we've got to make those tough decisions; we've got to be able to allocate our resources effectively through tradeoffs.

And then that third A is action. So, once we've developed the strategy – once we've decided how we're going to allocate our resources – then we need to have the discipline to stay committed to what's important to the business, and not get distracted by the urgent things that are popping up on email and voicemail, and that really tend to take us off-task.

So that third A, action, is really about how are we staying on focus on what's important to the business and not getting distracted by simply the urgent things.

Rachel Salaman: So those are the three disciplines of basic strategic thinking. Let's move onto the three disciplines of advanced strategic thinking: coalesce, compete, and champion – three Cs. By coalesce, you mean bringing things together – what exactly?

Rich Horwath: Well, as leaders, one of the things that we're always challenged with is how do we create that new value, and I think too often as leaders we feel we have to have all the answers. But the reality is the great leaders are the ones that are able to harness their people's thinking, and the way that we first begin to do that as a leader is we need to coalesce the people and their insights together.

And so, really to take your point Rachel, what we're doing is we're bringing people together in order to generate their best ideas, their best thinking, and then once we have those ideas and thinking, now what we're doing is we're capturing those insights, and we're asking, so what? How do we now transform those into an action plan that's going to drive our business?

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Rachel Salaman: In your book you talk about a strategy spectrum that consists of six questions: what, who, why, where, when, and how. So what exactly should leaders do with those questions in practical terms to develop their strategic thinking?

Rich Horwath: One of the challenges that we see – and the research has shown that only 25 percent of managers believe that their companies do a good job with both strategy and innovation – and I think that's because too often strategy and innovation are approached separately. They're not approached together, and so the strategy spectrum is really a tool to bring both strategy and innovation together. And to your point Rachel, the six questions are really designed to give leaders a way to fully examine the entire spectrum of what they potentially could be offering, could be doing, and asking them really, are we maximizing the resources that we have and fully exploring all the options at our disposal?

And so, when we look at the who, the what, the how, the why, the where, the when, what we're really doing is we're challenging the way that we do business today, and the reason oftentimes that companies find themselves trailing their competition or falling behind the competition is because the competition – a new entrant – has found new value or a new way to do things. What we're asking with the strategy spectrum is we're actually asking managers to put themselves in the shoes of a competitor, and asking, if you were the competitor how would you be approaching in new ways the market that we're in?

So what we're doing is we're giving ourselves an advantage by thinking through what the competitors would think through, and actually positioning ourselves to be ahead of the curve by exploring new ways to bring value. And, those new ways to bring value might be in the types of customers that we're targeting – the who – it might be in what types of things we're bringing to the marketplace – the what – it might be in how we're doing it – we might find different channels, different distribution means, different ways that we can deliver our products, our services to customers.

So the strategy spectrum's really a way for us to pre-empt the competition in discovering new ways to add value to the customers that we're serving.

Rachel Salaman: And that links to your second discipline of advanced strategic thinking which is compete, and you say that businesses are either leaders, challengers, or spectators in the marketplace. Could you just tell us how you see those positions as different?

Rich Horwath: Well, when we look at marketplace, what we often see is the first mover advantage, so we see companies coming in who are starting a market, and they tend to assume that leadership position, and then what happens is the market proves itself to be worthwhile from a profit perspective, and we see other companies coming in, and those tend to be challengers.

So challengers would be organizations that are coming in but don't have majority of the mind share or market share from customers, so the leader is the one who really has the majority of mind share – meaning they're positioned in the mind of the customer, so when the customer is thinking about getting a certain type of work done, a product or a service, they think of the leader generally first.

The challenger is trying to create more mind share for themselves, and in the same token, then create that market share where they're generating more revenue and more profit for themselves.

The spectator in most marketplaces – we've got spectators, who are the companies that are existing in the marketplace; they're earning some revenue but they're not really looking to generate that new or unique value that would propel them to be one of the key considerations for customers to choose when they're looking to make their selection.

And so the spectators are really the ones that aren't doing a lot of new thinking; they're not really generating a lot of new value, and they're the ones that are at the most risk for not being around in a year or two years, because, as we've seen with a lot of the bankruptcies in the last few years of very large organizations, that there is no one that's guaranteed a future. Even very large companies today are having difficulty if they're doing the same things in the same ways as everyone else, so the spectators really have to make sure that they're looking for new ways to move up into those other ranks.

Rachel Salaman: And in your view, should businesses all aspire to be leaders?

Rich Horwath: Well, I think again leadership doesn't necessarily mean you have to be the biggest, because we've seen plenty of examples of companies trying to become bigger and bigger and bigger, and then all of a sudden they're not profitable any longer and all of a sudden, boom – they're in bankruptcy.

So, to your point, leadership isn't necessarily about being the biggest, but really leadership oftentimes is being able to own or to create a new space: a new niche in the market that really has a loyal following of customers or clients: people that are really enamored with the products, the services, and couldn't do without the products and services of that company.

So, to your point, Rachel, and I think it's a good distinction, a leader isn't necessarily the biggest, they're simply the ones who are bringing the most value within a certain niche. So it might not even be a huge niche, but it's profitable for them, and they're also able to provide superior value to customers.

Rachel Salaman: If we're thinking from the point of view of a business competing in a marketplace, you categorize the competition into indirect competitors, intangible competitors, and others. So, how important do you think it is for a business to name its competitors and put them into categories like that?

Rich Horwath: Well, it's very important for leaders to be aware of the different types of competitors, because sometimes we only are concerned with the other companies in the marketplace, but again, when we look at competition from a bigger, higher level, we know that competition is not just company A versus company B, it's really about competing for profits within the marketplace. And so, when we look at indirect competitors, we're really looking at who else in our ecosystem competes for the profits, and so we would look at our customers, we would look at our suppliers, we would look at substitutes – so people that aren't necessarily in our marketplace today but could provide a similar type of solution that would substitute for what we're offering.

So we need to be certainly aware of those indirect competitors, and then the intangible competitors are sometimes the most dangerous competitors, because now we're talking about things like the status quo. So if we've got a new product or a new service, and we're breaking into a market, oftentimes it's not another company that's the biggest challenge, it's the status quo – it's people not wanting to change how they think about a product, how they buy a product, how they use a product.

So what we're trying to do in that case then, is we're trying to change people's habits, and as we know, changing habits can be very difficult. So, as a leader it's very short-sighted if we're only thinking about the other companies as competitors, we need to also be thinking about both the indirect competitors as well as the intangible competitors.

Rachel Salaman: Moving onto your third discipline, which is champion, this is about leading others to think and act strategically, and here you talk about using time strategically. You touched on this a little earlier. What are some of your tips?

Rich Horwath: One of the things we need to think about when we're championing a strategy is not only our time, but as a leader we need to think about our people's time as well. And so, one tip would be as a leader you need to be able to filter the things that are going to your people from a task and a project perspective. So everything that comes the leader's way shouldn't necessarily get cascaded down to their people, because a good leader values their people's time just as much as their time, and if people feel overwhelmed with too many things on their plate, then all of a sudden a great sense of frustration sets in because they're spread too thin, and they're simply not able to deliver as much value as they know they can, because they're trying to do too many things at once.

So one of the tips for leaders is really look at how are you filtering the things that go to your people, so that you're not tasking them with a lot of busy work that's not really adding value to the company, or to the customers that they're working with. So I think that would certainly be the first thing.

Then the second thing would be as a leader, how are you carving out think time for yourself and for your people? One of the things we found through research is that only nine percent of leaders are completely satisfied with how they spend their time. As people rise up through the ranks of an organization, oftentimes the other things that take place, the meetings, the teleconferences, all of the other work tends to use their time – and they don't really have time to be strategic. So the second tip would be as a leader, you've got to be able to carve out time individually, for yourself to think, and then you've also got to carve out time for your team to have an opportunity to talk with one another and to think aloud, so that you're able to harness people's best ideas and insights.

Rachel Salaman: And you say that leaders can gain a greater level of commitment to strategy by using what you call "social proof." Can you explain what you mean by that term?

Rich Horwath: Sure. Social proof is oftentimes seen in the social sciences, when we look at other folks or testimonials from other people and we say, "Oh, there's verification that people like this thing or something is working."

Oftentimes we see social proof in now social media, whether it's Twitter, or Facebook, or Google+, or any of those other areas where we see recommendations or we see five stars. So we see that social proof, and what I'm saying in the book is that leaders can also use social proof in championing their strategy, so being able to pilot a strategy in a certain market or a certain geography and then use the success and the results there as social proof with other groups in the organization to say, "Here's the situation they were in, here's what they did strategically and here are the great results that they were able to achieve."

And so, by presenting that mini business case to other people in the organization, they can use that as a form of social proof – that "Look, this strategy, this idea that I'm trying to champion does have merit and it does have social proof, so let's give this our full commitment and our full buy-in."

Rachel Salaman: Also in this part of the book, you say that strategy conversations consist of two types of exchanges: dialog and discussion. So, what's the difference between those two types, and how does it help to recognize that difference?

Rich Horwath: It's a great point Rachel, because oftentimes when we have strategic planning sessions people tend to go right to discussion, and the difference is between dialog and discussion, dialog is really an open exchange of ideas and thoughts. There is really no vetting, or there's no critical assumption with dialog, we're simply opening up the floodgates of our thinking – we're talking in a very open way.

So when we first talk about strategy, it's important to start with dialog. We don't want to limit our options; we don't want to limit our potential pathways or alternatives too quickly, but oftentimes, as I said, people begin with discussion, and discussion is different from dialog is really the narrowing of ideas, so that we get to a decision, and too often we start with discussion when we haven't fully explored through dialog all of the different options. And so, by starting with discussion, we really go to a very limited window of ideas, and oftentimes those are ideas that we've done in the past that don't bring a lot of new value to our customers. So we want to be aware that dialog is what we should begin with, which is that open exploration of ideas, and then discussion is the way to get from dialog to really winnowing down our ideas into a decision that's going to drive the strategy that we choose.

Rachel Salaman: Tell me about the strategy scaffold, which you outline towards the end of your book. What does that look like, and how does it help?

Rich Horwath: When we think of a scaffold from a building perspective, we're really thinking about a way to get to a higher level or to work at a higher level. So, whether it's an artist, whether it's somebody building a structure, we're simply looking for a way to get to a higher level, and so the strategy scaffold is simply a way for leaders to get to a higher level of thinking about the business.

And it is really a couple of components. The first is really simply understanding the purpose. So, what is our purpose as an organization and purpose really boils down to three things: its mission, which is our current purpose; its vision, which is our future purpose; and then its values, which are the things that guide our everyday activities and decisions.

So, we really need to have a good purpose understood, and so once we've got the purpose, then we want to understand what's business model, and a business model is really simply three things: it's how are we going to create, how are we going to deliver, and how are we going to capture value? And so, we need to understand each of those things: how we create, how we deliver, how we capture value.

And then the third piece of the scaffold is really the plan. How are we going to reach the goals, the objectives, the mission, the vision that we've set and what are we going to do to make that happen? And then, what are the metrics that we're going to use to do so? So the scaffold really just gives leaders a very simple framework to look at their business at the highest level, which is purpose, business model, and then plan.

Rachel Salaman: So, bearing all these things in mind, what do you think are the most important things for a leader or manager to focus on if they want to improve their strategic thinking?

Rich Horwath: I would say the number one thing that leaders need to focus on is their tradeoffs. The reality is today we're flooded with information; we're flooded with data; we're tethered to each other 24/7 electronically, through our phones and whatnot. So the key to a great leader is the ability to make tradeoffs: what are you going to choose to do? But, just as importantly, what are you going to choose not to do? Where are you not going to invest your time? Where are you not going to invest your budget? What are the things that you're not going to do?

And the leaders that are crystal clear with their people, as far as what they're not going to do, are the ones that are going to have the greatest level of success. So, if a leader can make good tradeoffs and really focus their resources in the one or two areas that bring the most value, that's probably going to give them the best chance to be successful in the long run.

Rachel Salaman: Rich Horwath, thanks very much for joining us.

Rich Horwath: Thank you Rachel.

Rachel Salaman: The name of Rich's book again is "Elevate: The Three Disciplines of Advanced Strategic Thinking."

You can find out more about him and his work at www.strategyskills.com.

I'll be back in a few weeks with another Expert Interview. Until then, goodbye.