The headline has a double meaning. First, this article will revisit the idea of the most important choices. Secondly, leaders must revisit and reiterate those choices with their followers on a regular basis. The fundamental premise is that there are almost always a very small set of choices that have the greatest impact. Everything else flows from them. You have to make the right choices, align all around those choices, and follow through to ensure they are executed well.
Make the right choices
Michael Porter taught us that strategy is choosing what not to do. If the other choice doesn’t make any sense, you’re not really making a choice. Going one step further, as my partner, Harry Kangis, used to say, “Choosing not to do something that’s a bad idea is easy. The hard thing is choosing not to do something that’s a good idea for someone else – but not for you.”
On the one hand, growing revenue and cutting costs seems like they should always work. On the other hand, some companies have done really really well shrinking overall revenue to focus on the most profitable customers. Other companies have done really really well increasing costs to allow them to over-deliver to a small set of customers willing to pay for a higher level of quality.
Porter’s Monitor group said the essence of strategy was choosing where to play and how to win. It’s about focus and differentiation.
Years ago, I ran an imperative workshop with one leadership team. We spent two hours getting the wording of their strategies to where they wanted them. When we were done, we had this conversation.
I asked, “Do you all agree these are the right strategies?”
“Yes.”
“So you know, if we walk out of here with those as your strategies, I’m going to sell your stock short first thing tomorrow morning.”
“Why?”
“Because you’re going to lose.”
“Why?”
“Which of these strategies are things your main competitor could not do?”
“None. They could do all of them.”
We spent another two hours and came up with strategies that would work.
And the right choices are different at different times. Jack Welch built GE’s value over twenty years partly by taking the lesson from the automobile industry’s profit pools. While the vast majority of revenue in automobiles was in sales and service, the real profits were in financing and warranties. Welch applied that to all of GE’s markets and put in place GE Capital to finance customers’ purchases of jet engines and the like. Ultimately, GE Capital accounted for about half of GE’s total profits.
The trouble was that meant GE was regulated like it was a bank and restricted other things it could do. So, Welch’s successor, Jeff Immelt, dismantled GE Capital. But he stumbled on replacing the profits with massive failures in acquiring Enron’s Wind Business and then Alstrom Power. Immelt was out of central casting as CEO: Dartmouth, Harvard Business School, Procter & Gamble and then years at GE. Still, his choices destroyed a tremendous amount of value.
Align all around the choices
There’s a relatively simple exercise to run with your leadership team. Ask each member to write down what they think are the organization’s top three priorities. Ideally, they’d each write down the same three things. The more different ideas come out, the less the team is aligned.
Follow through to execute well
Winning strategies pass the napkin test by being simple enough that you can lay them out on a napkin. This is really a measure of clarity and ease of comprehension. It’s import goes well beyond being a bar trick. Executing well requires everyone involved to understand what they need to do and how that fits with what everyone else is doing – clarity and ease of comprehension.
As a leader, you’re going to get tired of revisiting and repeating your message and your core choices well before everyone else understands them. Get over it. It’s a key part of your job.
Choose. Align. Execute.
It is actually that simple – and that hard. It’s easier to make lots of little choices. But they’ll have little impact. It’s easier to rely on your direct reports to drive alignment through the organization. But things get lost in translation. It’s easier to assume people will do their jobs. But winners follow through.
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