I. Strategy and wishful thinking are not the same

To start with, can you please take your time, apply some efforts and read those 3 corporate strategies from 3 multinationals. To give you a bit more perspective the first one is gigantic with the revenue around 70–80 bln USD, the second one is 10 times smaller (revenue is around 3–4bln USD) and the third one is even smaller with the revenue around 2bln EURO.

1. Our integrated strategy is the foundation for strong balanced growth and value creation for the near and long term — to focus and strengthen our portfolio in daily use categories where performance drives brand choice; to establish and extend the superiority of our brands across product, packaging, communication, retail execution and value; to make productivity as integral to our culture as innovation; to lead constructive disruption across the value chain; and to improve organization focus, agility and accountability. These are not independent strategic choices. They reinforce and build on each other, and when executed well, lead to balanced top- and bottom-line growth and value creation.

2. Alcohol Responsibility: Actively creating a responsible drinking culture where we reduce alcohol-related harm, promote responsible consumption, and practice responsible marketing.

Diversity & Inclusion: Creating an environment where leveraging diversity and inclusion occurs naturally, giving us a sustainable marketplace advantage.

Community: Enriching life in our communities through charitable contributions and employee engagement activities.

Environmental Sustainability: Responsibly growing our brands and company, while protecting and enriching the natural environment on which we depend.

3. Goal to deliver sustainable profitable growth rests on a two-pillared strategy: strengthen current leadership positions in its three Divisions, and expand into new businesses and geographies in core categories.

I hope you read it and took some time to digest. Now let’s put is aside and try to answer what strategy is about in a very simple terms, basically how it is seen not from the top of food chain of the company but somewhere from the middle or from the bottom. Of course the most often people mess up Strategy, Mission and Goals.

Mission or Company’s Values are perfectly (and in a very simple way) described by the “Golden circle” by Simon Sinek. Here I may just echo what he is saying: Most companies use marketing to communicate what they do. What products they sell, what services they offer (so called “What” outbound circle). Some organizations go a step further and talk about how they do what they do. What differentiates them from their competitors (“How” inner circle). But a company with a really good marketing strategy goes right to the center of the circle to address why they do what they do. In other words, they talk about their company values. (“Why” inner core). So the “Why” core is in essence the messaging about what you believe in or are trying to achieve speaking to your limbic system, that deal with emotions and memory and responsible for decision-making.

Few missions statements which are more or less successful:

· Tesla’s mission is to accelerate the world’s transition to sustainable energy. Not just “selling electrical cars and solar panels”

· Ted: Spread ideas. Not just “we do presentations”

· LinkedIn: To connect the world’s professionals to make them more productive and successful. Not just “social net for professionals”

· Nike: Bring inspiration and innovation to every athlete in the world.* *If you have a body, you are an athlete. Not just “selling sport shoes and clothes”

· Procter & Gamble: We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. Not just “we sell fast moving consumer goods”

· Brown-Forman: We enrich the experience of life, in our own way, by responsibly building beverage alcohol brands that thrive and endure for generations. Not just “we sell alcohol”

· Ontex: To contribute to a world where everybody has access to affordable personal hygiene products, all the while developing our people, delivering sustainable value to our shareholders, partners, customers and suppliers, and making a positive impact on the communities around us. Not just “we sell hygienic paper products for all generations”.

Let me do very obvious statement here: Mission (Values) it’s NOT a Strategy. Your mission is the reason WHY your employees will love your Company and WHY consumers will love your Brands. By the way I see no issues if different parts of some company would develop their own sub-Missions. I can imagine the company operating in different continents in different environment and in different categories. While been in Ontex our Emerging Markets division has a bit standing along mission: we grew local heroes — Brands, Private Labels, Local teams, People and Partners. Honestly yes, sometime companies are mixing mission and strategy, but not too often. The real issue is with Goal and Vision.

In a very simplistic way Goal or Vision is where we want to be long term. “To be in the top 5 players on the Market by 2030”, “Achieve 5 mln EURO revenue by 2023”, “Get market leadership in 10 key markets in the next 5 years”, “Become a N1 in sales at T-Mall by 2025”, “Grow double digits both top and bottom line every single year”, “Double the business every 5 years” — all these are Goals. In another words it’s all our wishes (very often the wishes of exec team only). And you can’t imagine how many time asking different people about the Strategy they pursue I heard: “our strategy is to grow our market share by 5% by the end of the year” or “our strategy is to grow our revenue profitably”. This is NOT the strategy, this is wishful thinking. They strategy is NOT WHAT do you want or WHAT do you stand for. Strategy is WHERE and HOW you move.

It was always my dream to see Zambezi. We flew from Harare to Lusaka and first time I saw Zambezi from the plane. Absolutely clear sky because of the dry season. Good half an hour before passing by Zambezi river one may notice the earth beneath is full of roads — light climbing stripes. You can’t be sure indeed, you just guessing these are the roads. But no, something is wrong with the roads, there are more and more of them, they begin to curl quite bizarrely, becoming wider and wider with some islands in the middle — it’s clear now that these are not roads at all but many rivers flowing among the mountains and hills. Yellowish water with sand, or could be no water at all — after all, there is drought — so only sandy channels visible from the plane. Then this bunch of yellow rivers is merging and falling into a really big gigantic Zambezi. And we immediately beginning our descend.

Life was good in Zambia in 2008. EURO costed around 5 Zambian Kwachas, not 25 like it is now. The price for copper (and you may remember that Copper Belt is the main source of the country’s well-being) was at its high 4USD per pound not 2–3 as it is now. In Lusaka, an enormous number of Chinese and Japanese were building hotels and roads. I even took a picture of the huge street poster — “Japan helps Zambia to build the roads”. Our Sub-Distributor there was a small company owned by the very nice South African couple. They had a very good office, warehouse, sales team and the VANs . The issue was they were not selling. Simply they perfectly knew where do they want to come — numbers of Numeric Distribution, Sales Targets they want to achieve — all was perfect. But nothing was happening. I spent only few days on the ground, went to see stores, markets and showing me around the couple was constantly asking me again and again: “are we moving in right direction?”. “Yes, yes, of course… right direction” — was my response again and again but finally by the end of my trip I exploded a bit and threw to them: “guys, your direction is perfectly RIGHT, the issues is YOUR ARE NOT MOVING”.

Now from this perspective let’s look at the Corporate Strategies quoted in the beginning of the chapter. Not bad strategies actually, belongs to the great companies, many beautiful minds where working on them, I’m pretty sure. Still, I’m missing this “HOW TO WIN” component and very often “WHERE TO PLAY” is also quite blurred. The typical trap of the companies (the bigger the company the bigger the trap) is to PLAY everywhere and WIN somehow. Another trap is to replace Strategy with the Goal. Both traps are not helpful at all. As a result the more down to the organization we go the more disoriented action plans are and finally inevitably Company is ending up with no focus thus no choice and resources been spread all around. For quite a while Company may not feel any danger here: sales are doing reasonably well, cash flow is healthy, account receivables are good. Short term all is fine. What is at real danger is the future of the Company. With no choices and no strategical focus you start to miss the pace of innovations. Simply you may spend significant amount of money for R&D but it will be spread all around with no focus on the “right” innovations. We will definitely come back to innovations lately down the road. Apart from Innovations the Manufacturing efficiency is at danger. In principle Manufacturing as a function is quite conservative and have a tendency toward marginal improvements every day. It’s not really common for Manufacturing to come with breakthrough ideas to move the plant to another location with the less expensive workforce or to introduce new process allowing to cut 20% of employee. Thus, if there is no Strategy or weak Strategy you will inevitably face competition placing their plants with the modern machines in the duty free zones in the countries with less expensive labor cost while you are still producing in Belgium and Germany.

It was in 2003 when the very first time I came to Brussels (and fell in love with this city). We attended a training in Brussels. “We” means six Russians: Igor, Vadim, Sergey, Andrey, Natasha and me. Training ended up on Friday morning and we decided: yes, we go to Amsterdam! Vadim rented a mini-VAN, really “mini” — it was just enough space for six of us. And we took off. It was 2003 with no Internet and for some reasons not even navigator was available. So we had only common sense and road signs with us and our drive went to be insanely fun. Just imagine six people all freshly promoted P&G-ers with a hypertrophied egos and leadership in one car trying to lead and give directions. Every 10 minutes someone started grabbing the wheel (and Vadim was behind it holding the wheel strong) and yelling aggressively: “where are you going, here we go to the right/left/straight/back!”. The others were immediately jumping on and creating the total chaos with controversial directions (shouted loudly) and trying to take the wheel. Vadim yelled at everyone and drove wherever he wanted, which, incidentally, happened to be the most reasonable direction. We drove for four hours instead of two and finally (you wouldn’t believe in it) we ended up not in Paris but still in Amsterdam.

Somehow my mindset was that Peter the Great copied St. Petersburg from Amsterdam. Of course I expected to find wide canals, solemn palace houses, some kind of cold and imperial type of architecture. So you can imagine how I was surprised when Amsterdam turned out to be just as cozy, as if I really got home.

It was very late evening but the really brutal fun just started. We parked next to the central train station and started to look for a place to sleep. Something went wrong with the booking.com and the place we booked were cancelled. So we were walking from one hotel to another. Since that night the phrase “do you have rooms available?” got stuck in my mind forever. In the end, hurray!, we found a room with six beds !!! 30 euro per person. But we didn’t care! We felt asleep immediately.

So, sometimes with the leadership multiplied by six and going over the roof you can achieve your goal despite the fact you do not have any good strategy, just an idea of Amsterdam and a small VAN

Talking strategy I can’t resist and avoid reflecting on “after-strategy life”. Everything has it’s beginning and the end including strategy. But what happens after we exhausted some strategy, or we have to change it for whatever reason? What does it take to change the strategy? Of course the changes is too heavy topic and one day it may be a matter of another book. Here let’s look at the evolutionary or rather revolutionary changes of the strategy in a business and beyond.

My favourite business case would be IBM and the way they managed to change the strategy in the course of more than 100 years. The story of IBM stars in 1911 with Computing-Tabulating-Recording (CTR) Company (though the roots can be tracked back to the 1880s, tracing from its predecessor companies) manufacturing a wide range of products, including employee time-keeping systems, weighing scales, automatic meat slicers, and punched card equipment. CTR was renamed International Business Machines (IBM) in 1924 and keeps producing pretty much similar range, evolving with time and expanding geographically and also constantly adopting innovations. Thus in 1931 IBM introduced so called Super Computing Machine New York World newspaper wrote back date then to describe the Columbia Difference Tabulator, a one-of-a-kind special purpose tabulator-based machine made for the Columbia Statistical Bureau, a machine so massive it was nicknamed Packard. So, we see that for a long period of time the strategy of IBM was drifting organically been based on the changing market conditions and constant innovations in the specific field. They even produced Browning Automatic Rifle and the M1 Carbine during WW2 in the support of US government.

The golden era of IBM starts in 1944 when IBM co-develops (with Harvard University) its first computer. Since that time IBM goes from one record and innovation to another one. In 1970s IBM VNET (international computer networking system) deployed providing email and file-transfer for IBM. In 1975 IBM introduces first ever portable (just beyond 22kg of weight) computer that put computer capabilities at the fingertips of the users. In 1976 the first vehicle in the U.S. Space Shuttle program carries IBM computers. In 1979 first multi-functional Copier and Printer is launched. In 1980 IBM signed a deal with Microsoft to put the Microsoft operating system on IBM computers. And so on and so on… During the 1980s due to heavy investments in research and innovations IBM even “produced” four Nobel Prize winners in physics.

Looking backwards retrospectively we may think that the first bell “rings” in 1980–82, when IBM failed to recognised the importance of Instruction Set Technology (RISC) introduced by one the IBM own researchers. RISC technology went to Sun Microsystems. Since that time we may noticed that IBM is continuously loosing the lead in commercialising it’s own “forward thinking”. You may be really chocked to know how many things were invented by IBM researches in mid-80s: online home banking, microprocessors, disk drives, network technologies, software applications, online commerce. All of this set the stage for the emergence of the connected world a decade later, but surprisingly IBM never benefited out of it been focused on supporting existing mainstream business and thus by 1990 was clearly in trouble. It was heavy organization (with around 400’000 employees) invested in low margin, transactional, commodity businesses and its cost structure couldn’t compete with smaller, less diversified competitors. IBM woke up and discovered Intel in microprocessors, Microsoft in desktop software, Novell in networking, HP in printers, Seagate in disk drives, Oracle in database software, Compaq and Dell in personal computers. And then the “PC revolution” came and dramatically affected the IBM’s core mainframe business.

In the next few years IBM is doing desperate attempts to survive splitting the company and selling piece by piece typewriter, keyboard, and printer businesses. All the efforts failed though and on January 19, 1993, IBM announced a US$8.10 billion loss for the 1992 financial year, which was then the largest single-year corporate loss in U.S. history. Under other circumstances I would say that the story ends up here. But it was not the case for IBM. With the changes of CEO the new strategy emerged which proved to be winning. The business model has been changed with the clear prioritisation of high-margin opportunities IBM took as a leading technology integrator (IBM even acquired respective division of PricewaterhouseCoopers), also investing heavily in software (like Lotus) focused on middleware — the vital software that connects operating systems to applications; IBM also regained the lead in supercomputing with high-end machines. And finally these 3 pillars’ strategy were topped up with the successful IBM brand equity re-engineering.

Today if you go to IBM site (IBM.com) and click “products and services” link the first you will see is: The essentials — Explore the IBM hybrid cloud and Artificial intelligence solutions you need to modernize your business. You may realise that IBM doesn’t make consumer products these days at all and the strategy of the company is: “to lead clients in their next chapter of transformation, as they build agile organizations fuelled by data, guided by AI insight and able to work in any cloud environment. Next, quantum computing will become part of the journey to the Cognitive Enterprise.” Looking at the IBM business deeper we may see few corner stones of it. Firstly its IBM Cloud: while representing 4% of revenue in 2013 now it’s $21.2 billion business representing 27% of company and and growing rapidly. Than Data and AI follow, Blockchain solutions, IBM infrastructure services, IBM Systems and in the end of the list recently introduced Quantum 53-qubit quantum computer, the largest universal quantum computing system available for commercial use.

This is IBM story. Looking at it I perfectly understand why IBM failed back in 1990–93. It’s quite a typical story with the large heavy organization, conservative management and missed opportunities. I wonder what helped IBM to survive and come back. Why so radical change in the strategy didn’t kill IBM? I never worked for IBM, I do not have any friends there, so I have zero insights. I just try to think logically having in mind facts and my experience. I see that from 1990 till 2000 everything in IBM has changed starting from leadership, than culture, strategy, products, many people — all changed with the exception of one thing. This one constant is an IBM approach to Research and Innovations. Probably this is the answer than. IBM keeps doing research and innovating and when new management came for some part of organization it was clear where to go and what to do to prosper.

What can we put here as a conclusion? Probably first thing — Strategy is different from Vision and Mission and we should not mixed it up. Good strategy always answers “WHERE and HOW you move” questions. And the IBM story teaches us that if your strategy collapsed one day, you still have a chance to survive if you have this “bridge” from the smart people with the deep expertise, understanding of what is happening and knowing what to do. So, never burn the bridge!

I like to travel and you will notice soon in this book I often refer to the cities as an inspiration. You can look at amy city from the perspective of execution, see it as a project, you can see them as a matrix or quintessence of diversity. Let’s look at one of my favourite cities from strategy perspective.

The Dutch colony at the Cape, established in the seventeenth century, was at the time the only viable South African port for ships making the journey from Europe to the European colonies in the East Indies. This is exactly why back in 1795 Dutch Cape Colony was attacked by British military expedition, colony went under Brutish governance and following this move in 1836 mass migrations of Boers known as the Great Trek started. It was pointless for them to go north — there are deserts of Namibia over there. It was also not any fun to go east — there are the lands of Xhosa, and then the kingdom of Zulu. So the few waves of Voortrekkers went north-east, crossed the Orange River, the semi-desert, and eventually reached modern Zimbabwe. The Boers were farmers and cattle breeders and they were mostly looking for a land suitable for farming. So by the beginning of 188o’s the territory of Witwatersrand were covered with the farms of different size.

People are still disputing who and on which farm managed to find a gold first. Official record tells us it was Jan Gerrit Bantjes in June 1884, on the farm Vogelstruisfontein. However the amount was so insignificant that credit for gold discovery usually goes to George Harrison from Langlaagte farm. Whatever was the reality the gold rush started in 1886 and thus Johannesburg, a small village was established. Joburg grew rapidly and by 1928 became a city, the largest city in South Africa. The way how Joburg has been designed and built shows us a clear strategy. From the beginning, the idea was to settle it as a city serving gold rush. If you look at the city plan you see line of sand dumps — former gold mines. To the south from mines there are townships of miners (finally SoWeTo was established there). To the north from mines you find business part of Joburg down-town, following by residential part and finally further north there is a Park Town with the luxury villas of the wealthy people. Not too often you can see the city with such a distinct unique strategy. Most of the European cities had a very common strategy at the beginning — Market Square, Municipality, Church, Private houses, Workshops and the Wall around. Amarican cities been relatively new has different logic — Down town plus suburbs from the private houses around (New York is an exception of course, it’s much more complicated). If we look at Joburg from that angle its construction is outstanding and I really enjoy reading the books about it and looking at the map investigating the details of the logic of the founders and developers.

The gold rush ended, apartheid came to an end also and Park town, Joburg CBD and the southern suburbs all went their own ways. Downtown was occupied by large group of immigrants and deteriorated big time in 90s-00s and now going through the renaissance. Big plots of land in Parktown almost all have been cut by smaller plots and sold out to host standing along houses or compounds. In the south Soweto (South West Township) raised to be a biggest township in Africa with more than 5 mln inhabitants, famous for its movement of resistance to apartheid which started here. So we still can see the frame of the previous strategy and the people with the new paradigm in mind living in this frame.

1. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets Hardcover — April 16, 2004, by Nassim Nicholas Taleb

2. Start with Why: How Great Leaders Inspire Everyone To Take Action — 1 January 2011, by Sinek Simon