Strategy Killers : Playing it Safe
I was reading a business mag recently when I came across an article featuring the CEO of a beleaguered technology company. (Disclaimer, it is not based in Canada) He was outlining his business strategy for turning around declining share, slow R&D and stock prices that were falling off a cliff.
All very logical. All very measured. All very much by the numbers.
Besides the high likelihood the company may become another footnote in the business history books, there wasn’t any risk in the strategy. No attempt to radically alter the company trajectory besides the obligatory lay-offs that seem to be the default action of struggling companies.
Perhaps an isolated view but I’m convinced that business strategy needs to include an element of risk if you can even consider it a decent strategy.
Strategies without risk are invariably the output of a committee. Committees staffed by people fearful of being wrong instead of being more concerned with being bland, uninspiring wallpaper. Strategies without risk stem from organizations unwilling to make choices preferring instead to do a little bit of everything. Cover all bases just in case. Strategies without risk are emblematic of companies unable to define the core issues and opportunities in their category and take steps to pounce on them.
When Lou Gerstner said that IBM was going to move out of the building of hardware and move into becoming a “solutions” and consulting company, you can imagine the initial reaction – and the internal resistance. The thing being IBM was fast becoming a marginal player in categories it had previously owned. Popular wisdom was to split the company up. Gerstner chose to make a more aggressive, “risky” strategic move. One that paid off in spades.
Steve Job’s biography details his maniacal (at least based on conventional wisdom at the time) pruning of Apple’s product line when he moved back to the company. No more peripherals. No more printers. 15 laptop models down to 1. Granted he had little choice inheriting an almost bankrupt company but you could just imagine the league of “play it safe” advisors who would’ve counselled him to stay diversified, cover all the bases. His “risky” strategy of uber-specialization versus mass appeal laid the foundation for singular products that have disrupted the music, mobile and tablet categories.
By comparison I wonder how many years of safe strategies were responsible for the recent fortunes of companies like Kodak, Sears, Nokia, General Motors?
I get the market is skitterish. Investors and boards want stability after a pretty sphincter-tightening roller-coaster in the last few years. Here’s what I’m not suggesting; some wild and reckless Hail Mary, bet-the-farm silliness here. I’m suggesting that the best strategies need to make someone within the organization go “How the heck are we going to do that?”, get people out of their conservative, complacent approach. Risk, and its companion fear, can be tremendous motivators and catalysts for change.
I’d go so far as to say that companies who don’t build braver, more audacious strategies are going to find it increasingly hard to compete globally. Playing it safe will be the death knell of many companies in the coming decades IMHO.
Are you building risk into your business strategy? Or are you convinced that safe is the only way to grow? Has the market conditioned you to play it safe?
I’d be real interested in your thoughts.