Using questions (not complex models) to create customer-centric strategies

In the early 1980s, Lou Gerster spearheaded a strategy that significantly transformed American Express Travel Related Services (AmEx TRS) fortunes. 

He altered the team’s outlook and business focus, developed a wide range of products and services, catered to ignored segments, created a more positive work environment and improved productivity.

The team implemented these measures during a period of intense competition in what was considered a mature market where the business struggled to survive.

By the end of the decade, the results were evident as the company achieved exceptional growth in net income and return on equity.

In hindsight, this was a straightforward process. I shared the above case in a Graduate Management Training Program. One participant claimed the actions were ordinary and not worthy of being called a strategy.

Last year, Jon Moeller shared the strategy Proctor and Gamble’s strategy had used to achieve excellent results over the five years despite global economic challenges.

They shifted focus to top and bottom lines, redefined market share growth, and reshaped their brand portfolio from 220 to 65 in line with their growth aspirations.

Two decades earlier, Proctor and Gamble expanded its range of products and grew its market share. In recent times, the business has not achieved the success they believed they could achieve.

They needed to do something different. They implemented a new strategy, which has now delivered results.

Four decades apart, the two companies faced common challenges: competition, mature markets, etc. Did their “recent” success stem from superior strategies? If so, success-generating strategies are simple, as one participant said.

In both cases, the companies made different choices and operated differently from recent times. What prevents other businesses from achieving sustainable success?

The challenge of crafting effective strategies:

Every business plays an infinite game and operates in a constantly evolving context (technology, demographics, regulation, etc.) that shapes the company’s fortunes.
Success depends on adapting quickly to changing conditions.

The conditions that will make your current strategy unfit for purpose are being created and evolving.

As Mintzberg rightly pointed out, “The real challenge in crafting strategy lies in detecting subtle discontinuities that may undermine a business in the future. And
for that, there is no technique, no program, just a sharp mind in touch with the situation.”

He de-emphasizes the need for templates and frameworks that have dominated strategy thinking, but have not yet yielded much results.

A simple and practical approach is required, one that helps strategists to develop “a sharp mind in touch with the situation”. It’s about learning and adaptability, not focusing on the past.

Strategy is learning and defining new realities:

Companies can learn adaptability by developing curiosity and deep empathy for the customer. Asking the right questions is the first step, requiring humility, courage, and discipline. Admitting that you don’t know and allowing others to broaden your perspective involves humility.

Leaders and strategists will need courage if they are to ask fundamental questions that puts past successes under the microscope.

Even if we develop answers today, the context keeps changing, so the solutions will not offer a sustainable advantage.

Hence leaders and strategists need the discipline to remain perpetually curious no matter the success they attain today. And they will need discipline to act on the truth that their questions reveal rather than wishing the facts away.

Strategy is a set of integrated choices:

All the above makes strategy development difficult, but the answers lie not in developing more complex models.

Learning to have empathy, stay curious, and ask better questions are the beginnings of developing a great strategy. Roger Martin offers a set of interrelated questions that guide strategy development. These are:

• What is your winning aspiration? The purpose of your enterprise, its motivating aspiration.

• Where will you play? A playing field where you can achieve that aspiration.

• How will you win?

• What capabilities must be in place?

• What management systems are required?

Strategy is developing clarity in the business context

Lots of work needs to happen before we can answer the questions above accurately.

Cynthia Montgomery puts it this way: A great strategy, in short, is not a dream or a lofty idea but rather the bridge between the economics of a market, the ideas at the core of a business, and action.

To be sound, that bridge must rest on a foundation of clarity and realism, and it also needs a real operating sensibility.

Achieving a better understanding of the economics of the market and ideas at the core of the business is critical for success.

Models like Porter’s Five Forces help us to develop a better understanding, but that is not the strategy. We must also ask some critical questions, such as the ones below:

• What change do we seek to make in customers’ lives, and what can we do today that offers value to them in a meaningful way?

• What assumptions have we made about the business and its economics, and what is the basis of these assumptions?

• What do we know to be true about the team, business and industry today, and how do we avoid being trapped in the past?

• What’s the organisation’s culture, and what are we willing to change?

Gerstner and Moeller led their teams to ask fundamental questions, and developed unique insights, which became the basis for their strategy.

They challenged assumptions about AmEx TRS and P&G’s focus. Appropriately answering the questions above can help organisations to choose where to play, how to win, and what capabilities and management systems they need.

Strategy is engaging in ongoing renewal in service to the customer

A strategy to gain market share or beat the competition is always misplaced. The object of every strategy is for the company to be of service and value to the customer.

A strategy is effective today because it uniquely positions the organisation to have a relevant point of difference for chosen customers and win in the marketplace.

Ultimately, an effective strategy must create an adaptive organisation capable of sensing and responding to changes in service to the customer.

Continually learning to make great choices that give the organisation a unique advantage when engaging with customer in the marketplace will make for an effective strategy every time.