Thursday, August 04, 2011

Strategy or Slogan?

Today, August 4, 2011, was a rotten day for the financial markets.  The Dow Jones, S&P 500 and NASDAQ indexes all fell by 4.3%, 4.8% and 5.1%, respectively, in one single day.  

That is data.  What does one do with it?  How does it affect behavior for one holding stock investments?

I got thinking about this while connecting dots between two conversations earlier in the day, neither of which had anything to do with the financial markets.

First, I talked with a senior manager I've known for a long time who leads a local manufacturing company.  The subject was "how do you know the cost of each product".  With clarity and energy, he literally used the back of one sheet of paper to describe exactly how he calculates the cost of a product.  He described how he calibrated this method, how he checks it, how he can easily and quickly compare his cost to what a customer is willing to pay and, thus decide whether or not to pursue a particular deal.  It took all of 4 minutes to explain to me.  He had taught this to his managers and used this method for the past five years.  They all knew what to do when faced with a pricing decision.  I asked him if it had worked through the vicious downturn I knew his company had endured in 2009.  He smiled and said "This was our lifeline."  

He had a strategy for product pricing.  A robust strategy.

After lunch, I spoke with another friend who works for a different local company.  Their business has picked up wonderfully in the past 6 months and they were planning for a busy fall and winter.  Yet, he seemed perplexed.  It seems they have waffled in several aspects of taking advantage of these opportunities.  They had two legitimate paths to take; yet it was unclear which of the two paths company leaders want to take.  I asked him how this was affecting him and other employees.  He described a couple of big meetings during which senior managers shared a catch phrase intended to inspire.   It was a good phrase; short, alliterative, catchy.  Yet, it did not shape behavior.  People could interpret what it meant based on their own background and interests.  

He had a slogan.  A clever slogan, but only a slogan. 

It was late in the afternoon before I even had a chance to note today's free fall in the financial markets.  I emailed a friend on the West Coast who works in the investment industry and asked him, jokingly, if he was talking people off the proverbial ledge.  He responded, marveling at what he termed a "bloodbath".  But he then commented on the advantage certain investors enjoyed if they had a well-grounded investment strategy.  "It's days like this one which show the usefulness of a strategy."  Those without a strategy, he went on to explain, don't know when to sell or when to stay in.  Those with a strategy do; in fact, those with a strategy buy or sell the mistakes of those without, to their own advantage. 

I've personally shaped a clear, written strategy for managing my investments over the past three years.  It holds up.  It told me, immediately, what to do with today's market information.  The strategy has worked in up and down markets.  I'll sleep well tonight.  

A strategy shapes behavior. 

Which brings me to my point:  Lean is a strategy.  It is a comprehensive plan which shapes behavior.  It is understandable.  It is robust.  It allows an entire team of people to know what to do in the face of a wide range of situations. 

No customer will buy a single thing from us just because we do Lean.  They will buy only if they like what we have for the price we offer.  Our strategy for delivering those products is to use Lean principles.  The customer doesn't care about our strategy, so long as we deliver.  Yet a Lean strategy is central to delivering.  

A strategy shapes behavior.  It must tell responsible people in the organization just what to do in certain situations.  It may be boring.  It may be dull.  But it is likely very effective.

Why do people resist charting a clear strategy?  Is it laziness?  Is it fear?  Is it a desire to keep all options open at all times?  I don't know.  

But I do know a strategy beats a slogan.  Any day.

Keep on learning.


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