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Why Strategy is not what they think

Why Strategy is not what they think

Mihai Ionescu - Senior Strategy Consultant, Owner Balanced Scorecard Romania, Author.

This might be déjà-vu for you ...

Anthony, the Marketing VP of Acme-Foods, a packaged food manufacturer located in West Midlands, is looking for a new visionary concept that should boost company's sales, trying, once again, to get ahead of the competition. He calls Wild-Ideas, the London advertising agency they are working with for years, and then he sends them a brief with the output from his department's last 'strategy brainstorming' retreat. The brief contains some statistical data, as well, and several new Strategy ideas that they've been thinking about, but formulated in rather generic terms.

For Wild-Ideas, clients like Acme-Foods are critically important. They cannot lose such Key Account, which brings in more than 40% of their annual revenue, with all sorts of marketing and re-branding campaigns, which have been the bloodline for agency's continuous growth, for several years in a row.

To get an ever higher profile for clients like this, William, the Wild-Ideas CEO, decided two years ago to change their positioning from 'Marketing Services Agency' to 'Marketing Strategy Agency', two notches above the 'Advertising Agency' that they have been calling themselves, years ago. William often says:

We figure out what customers want, so we tell our clients who to target and how, then we manage their brands and their market communication. What else could be called Strategy, other than that?

Why would he be wrong? On the corner of his desk there is a pile of the last issues of a specialized magazine, called 'Strategy', with a very clear punch line: 'bold vision brand new ideas'. Those guys cannot be wrong! He even decided one year ago to create a new Strategy Director role within the agency, for which he hired a young, brilliant Oxbridge graduate with innovative strategic thinking.

So, when he got the call from Acme-Foods, William promised them right away that they'll get back to them in two weeks with the pitch for a new, bold and innovative Strategy. He then rounded-up the heads of agency's departments and gave them 72 hours to come up with their draft ideas and sketches for the new Strategy that Acme-Foods is looking for.

What happened in Acme-Foods' meeting room two weeks later is what you might have seen in your company when you've been invited to an Advertising Agency's pitch or, if you didn't have such interesting opportunity, it's what you've seen in the background story of 'What Women Want' and in a ton of other similar Hollywood movies.

How could Strategy be formulated this way?

What were these guys thinking? That their Qualitative Analysts, who manage focus groups and one-to-one interviews with customers from various market segments, and their Quantitative Analysts, who manages survey campaigns, would know what Strategic Choices about how-to-win and where-to-play are available to one client company or another?

Would such Advertising Agencies have the know-how of how to analyze the Influence Factors that are anticipated to have an impact on the potential Strategic Choices, along a certain Strategic Horizon? Would they know how to manage the validity of the hypothesis or the tolerance ranges of strategically-relevant parameters used to select the best mix of Strategic Choices? Would they have the faintest idea about how to cluster the potential invalidation events into the aggregated triggers for the Strategic Scenarios?

How can these guys think that the Strategy Formulation process is limited to Strategic Positioning? That's not even an output to be used directly into the Strategic Planning process! How can someone think that the SPT (Segmenting, Positioning, Targeting) is all what defines a company's Strategy?

What visibility can these people have into the analysis of the Capabilities System and into the process of identifying the Strategic Gaps between the existing capabilities and those required to support the new or changed mix of Strategic Choices? That is one of the three main outputs from the Strategy Formulation process, fed into the Strategic Planning, not the SPT information!

If you have been in the room when an Advertising Agency's people have made their pitch for your company's Strategy, try to remember if any of the Strategy Formulation terms in the paragraphs above were part of what you've heard or seen on their boards or on the projector screen.

What they've presented instead were statistics and diagrams about market segments (at best) and a lot of 'this is what your customers want' insights, all dumped into the chef-d'oeuvre: the innovative, bold, stylish and visionary ideas and creative, eye-catching graphics that will make the customers buy from you and not from your competitors. So your company can surely bet most of the Marketing budget on that.

But that's not how the Strategy is formulated. Not even close.

The hot air bubble

That is true that on the cutting edge of the red-ocean, cut-throat competition, more and more corporations have pumped billion of dollars into the pockets of the larger and larger Advertising Agencies for ridiculously-expensive branding or re-branding campaigns, for media plans and advertising TV slots that cost millions of dollars per minute, on creative graphics priced more than a Renoir painting and on huge direct marketing campaigns that throw a handful of flyers through the mail-hole of every household door in the country, every day.

Fantastic business! But what to do with all this money? Well, the best idea that the Advertising Agencies had was to move up the value chain and claim some territory, first in the Industry-Specialized Advertising and then in the Strategy playground. Wow, quite a jump!

Don't you think that the likes of McKinsey, PwC/Strategy&, Deloitte, Bain or Roland Berger are stuffed with too many academics and theoreticians who don't or wouldn't produce down-to-earth strategies for your company and market?

Oh, but don't worry ... what can be more down-to-earth than an advertising billboard or TV spot that goes straight to the hearts and minds of your customers? So, wouldn't you want to have your Strategy designed by the innovative, wild, bold, visionary Advertising Agencies (now calling themselves Strategy Agencies or Marketing Strategy Consultancies), instead of the scrubby Strategy Consulting companies?

If you know to make the difference between the hot air bubble and the real expertise in Strategy Formulation, the answer to the question above would have to be negative.

Let the Advertising Agencies, or Marketing Agencies, or however they want to re-brand themselves, handle your Market Research, Branding Campaigns, Market Communication, Media Planning, Creative Production and even your Direct Marketing campaigns.

But leave the Strategic Analysis and the Strategy Formulation (not to speak of Strategic Planning or Strategy Execution) to those who really know how Strategy works and who have the expertise and the experience to manage those processes, or to advise you how to do that.

Finally, for those fond of things like 'Marketing Strategy' or 'Brand Strategy', or even 'IT Strategy', or 'HR Strategy' ... not to forget ... 'Digital Strategy', listen to what Prof. Michael Porter, Harvard Business School, has to say about this.