The Wall Street Journal suggests Exxon’s once perfect machine is running dry. It got strategic timing wrong, investing too much too soon in capacity-building. It’s yet one more lesson on the critical importance of getting the timing right between implementing revenue-generating programs and building capabilities.
Strategy is about the creation and allocation of resources to the right place in the right way at the right time over time. It’s about choices. It’s about accepting failure as an option and asking “what if?” Most understand that the “right place” where to play choice is every bit as important as the “right way” how to win choice. Many get the “right time over time” choice wrong. This is what has gotten Exxon into trouble.
Moving from your current reality to a new, desired destination requires projects and programs that actually move you in that direction supported by the capabilities needed to deliver those projects and programs.
Here’s the rub. If you focus too much on running the projects and programs (path I below,) you get ahead of your capabilities and can’t deliver them. If you focus too much on building capabilities (path III below,) you run out of cash. The art of strategic timing is stepping up your capabilities ahead of program delivery requirements – but not too far ahead.
This is what Exxon got wrong. Their big bets on finding new oil didn’t pay off on their expected timing.
The bad news is there is no one formula for success here. You have to make your own risk-reward tradeoffs.
The risk in leading with revenue-generating projects and programs is that you may sell ahead of your ability to deliver. On the one hand this generally feels good at first as you test your capacity. But the pain comes with missed opportunities that you can sell but not service, and also with customers that you win and then disappoint. They’re generally gone for good.
The risk in leading with capability building is that you have to spend ahead of revenue. When the revenue comes in, you’ll be ready to deliver. But, if the revenue comes in later than expected – and you should expect revenue to come in later than expected – you’re going to stress your cash reserves and investor and creditor patience.
Our prescription is to follow the basic steps of strategic planning and pay particular attention to timing choices:
- Strategic planning begins with the aspirational destination that is drawn from the vision and mission.
- Analyze the current reality by using the 5Cs approach and complete a SWOT.
- Create strategy options to guide actions, overcome barriers, and bridge gaps.
- Get key stakeholder input into options and assumptions and then their agreement on which overarching strategy and strategic priorities to pursue when.
- Develop a business plan with strategic, operational, and organizational actions that are needed to implement each selected option.
- Act, measure, adjust, and repeat.
It’s not enough to decide which options you’re going to pursue. You must clarify and align around which you’re going to pursue when and the implications of those timing choices on your other priorities.
These are going to play out differently with different fundamental strategies.
- Design-centric organizations’ whole existence is one big bet that they can stay ahead of their competition. They must own their own design and invention capabilities and must make them pay off.
- Production-focused systems should be in control. There’s no excuse for adding incremental capabilities until they know how and when they are going to be deployed.
- Delivery-focused enterprises are interdependent by definition. If you’re one of them, think in terms of total system capabilities more than just your own. You should be able to step your way into capability expansion by leveraging allies and partners capabilities on the way.
- Experience-focused enterprises have the toughest trade-offs of all. They have to deliver superior customer or guest experience every time. It’s more important to stay ahead of customers’ expectations than to stay ahead of competition.