Rich Horwath is a New York Times, Wall Street Journal, and USA Today bestselling author on strategy. As the CEO of the Strategic Thinking Institute, Rich leads executive teams through the strategy process and has helped more than 50,000 managers around the world develop their strategic thinking skills. A former Chief Strategy Officer and professor of strategy, he brings both real-world experience and practical expertise to help leaders build their team’s strategic capabilities.
He and his work have appeared on ABC, CBS, CNBC, CNN, NBC and FOX TV. He is recognized in a textbook, Strategy in the 21st Century, as one of the key contributors in the history of strategic management for his thought leadership in the field of strategic thinking. A highly sought-after keynote speaker, Rich has spoken to leaders at world-class companies including Google, Intel and FedEx and has been ranked the #1 speaker on strategy & innovation at national conferences.
Rich is the author of six books, including, Elevate: The Three Disciplines of Advanced Strategic Thinking, which a leader at Intel proclaimed: “If you only read one book on strategy, this has to be that book!” His book, Deep Dive: The Proven Method for Building Strategy, has been described by the Director of Worldwide Operations for McDonalds as “…the most valuable book ever written on strategic thinking.” And Strategy for You: Building a Bridge to the Life You Want, helps people apply the principles of business strategy to their overall life.
* * *
Morris: Before discussing Elevate, a few general questions. First, who and what have had the greatest influence on your thoughts about strategy? Please explain.
Horwath: The concept of strategy originated in the military arena beginning thousands of years ago with the writings of Sun Tzu and Lao Tzu. Key military strategists such as Carl von Clausewitz, Napoleon, BH Liddell Hart, and others set the tone of strategy’s intent to achieve goals and defeat others. From a business perspective, Michael Porter’s work in the late ’70s through the ’90s established a foundation for thinking about competition in a methodical manner. Studying the successes and failures of organizations and their leaders has also played a prominent role in better understanding the nature of strategy and its composition of both art and science.
Morris: The title of one of Marshall Goldsmith’s more recent books suggests that “what you here won’t get you there.” My own opinion is that what got you here won’t even allow you to remain here, wherever that may be.
What are your own thoughts about all this?
Horwath: I believe that new growth comes from new thinking. Most people and organizations never come close to realizing their true potential because they allow themselves to be anchored in the past. Whether it was past success or past failure, very few people open their minds up to future possibilities.
Morris: Decades ago, I concluded that strategies are “hammers” that drive tactics, “nails.” However, I also realized that if all one has is a hammer, every problem looks like a nail.
In Elevate, you make brilliant use of metaphors including the helicopter. In your opinion, why do so many people seem to have problems with using metaphors effectively when communicating with others?
Horwath: Busy. We’re all too busy to stop and think. Activity has become the addictive analgesic of choice, numbing us to the gaps, disappointments and shortcomings of our careers, our work and our personal lives.
Morris: What to do if a strategy doesn’t seem to be working? Where to begin? Who should be involved?
Horwath: You’ll never really know if a strategy is working unless you build milestones into your objectives. Too many managers have yearly goals and at the end of the year, they either achieved them or failed. This is moronic. Every goal should have a corresponding objective with periodic milestones to indicate progress or a lack thereof. If you have failed to hit three or more consecutive milestones, it’s time to revisit the strategy. The people that should be involved are the ones who develop, communicate and execute the strategy, especially those who are customer-facing.
Morris: Percentages vary but all recent research studies seem to agree that, on average, fewer than half of an organization’s managers know what its strategy is. Do you agree? Whatever the percentage, what do you make of that?
Horwath: I’d say it’s closer to 100% than 50%. First off, the majority of managers can’t define what a strategy is. Then you add in the complication of different business units, functional areas and levels, and it’s easy to see how complex it can be to have everyone understanding and executing a consistent strategy.
Morris: Who should be involved in an organization’s strategy? Why? Who should not be involved? Why not?
Horwath: Strategy needs to move from an annual event to an ongoing dialogue about the key business issues. If we look at strategy as dialogue, then everyone should be involved to some extent. If you have people in your organization that you don’t believe can contribute any ideas on ways to create new value, then why are they working for you? New value can be internal or external, but leaders need to create regular forums for strategy conversations at all levels.
Morris: Now please shift your attention to Elevate. When and why did you decide to write it?
Horwath: I was facilitating a CEO Symposium where 25 CEOs from different organizations were gathered. I asked the group to write down on a 3×5 notecard their business model and strategy. I collected the cards and read them to the group. Very quickly, the room realized they did not have a good handle on what exactly their business model was and how it related to their strategy. I then asked the group how they brought together all the key elements of their business–core competency, capabilities, competitive advantage, strategy, business model, etc., and was met with blank stares. It was then I realized that the individual leader did not have a roadmap for crystalizing the foundational elements of their business. Elevate is that roadmap.
Morris: Were there any head-snapping revelations while writing it? Please explain.
Horwath: The most shocking revelation, or confirmation, was that nearly every manager (96%) believes they simply don’t have time to do strategy except for once a year. And then they don’t think about it for the next eleven months until planning season rolls around.
Morris: As I indicate in my review of the book for various Amazon websites, there are dozens of passages throughout your narrative that caught my eye. For those who have not as yet read the book, please suggest what you view as the most important point or key take-away in each of several passages.
First, Top 10 Strategy Challenges (Pages 5-11): Which seems to be the most difficult? Why?
Horwath: While time is the most common, I believe commitment is the most difficult. If people don’t buy into the strategy, it won’t be successfully implemented. Because managers are so busy, they don’t take the time to translate the strategy to what it means to people’s daily work. And they don’t include people in the strategy conversations. Research in the social sciences shows that if you don’t give people the ‘why,’ they won’t commit to your request.
Morris: The GOST Framework (12-14)
Horwath: Many plans mistakenly interchange goals, objectives, strategies and tactics. If people don’t begin with the proper understanding of these foundational terms, it’s like building a house on a pile of sand.
Morris: The Three Disciplines of Advanced Strategic Thinking (19-20): Which seems to be the most difficult to master? Why?
Horwath: Coalesce–bringing people and their insights together on a regular basis. It takes great discipline to ignore the fire drills and carve out “think time.”
Morris: Three Phase Business Model (40-52): Which phase seems to be the most difficult to complete? Why?
Horwath: The Create Phase. This phase demands clarity of thinking around your core competency, capabilities and value proposition. This in turn requires time to think individually and collectively to generate the insights that lead to the unique value your business can provide to customers. Most take the path of least effort by simply doing what their competitors are doing.
Morris: Strategy and Innovation (59-66): To what extent (if any) are they [begin italics] interdependent [end italics]? Please explain.
Horwath: Strategy without innovation is a tactic in lipstick. Innovation without strategy is a cocktail party with flipcharts. For some reason, these two critical business drivers are most often discussed and approached separately. But at both of their cores lies the common denominator of insight.
Morris: Competitive Advantage: Eight Key Determinations (84-88): What are the most important do’s and don’ts to keep in mind while making them?
Horwath: Competitive advantage often becomes nothing more than a discussion of how “we’re better than they are.” But in reality, competitive advantage isn’t about winning or losing. It’s about the ability to provide superior value to customers. Focus on the value proposition and how to leverage your core competency and capabilities to deliver it is the key.
Morris: Competitive Intelligence (88-91)
Horwath: Understanding the competitor’s product specs aren’t competitive intelligence. How many of your managers understand the competitor’s strategic approach to the market and how they’re allocating their resources to win business? That’s the true mark of competitive intelligence.
Morris: Using Time Strategically (106-109)
Horwath: The first step in using time more strategically is to understand where it’s currently being spent. Most leaders I counsel are shocked when they actually log their time for a week and then compare it to their goals. If your investment of time doesn’t match up precisely with your goals, then you’re wasting an awful lot of time on the urgent, but unimportant.
Morris: Influencing Strategy Commitment (112-115): How best to [begin italics] sustain [end italics] this commitment?
Horwath: Influence is defined as “the power to change or affect someone or something; the power to cause changes without directly forcing them to happen; a person or thing that affects someone or something in an important way.” When we attempt to influence, we’re trying to connect our goals to other’s interests in the hopes that they’ll act or behave in a way that we desire. Simply giving someone an order or command to do something without taking the time to connect it to their self-interests may yield results in the short term, but lacks the power of skilled influence in the long term. People tend to accept inner responsibility for their actions when they believe they’ve had a say in the process and the actions are aligned with some part of their interests. Lacking the ability to con- tribute input or being unaware of how the task relates to their goals won’t generate the necessary level of commitment. The result is a plan that dies a slow death because people weren’t afforded the opportunity to provide input into the strategy in the first place.
Morris: Three Practice Principles to Guide Instruction (126-129)
Horwath: The key principle to practicing strategic thinking is to break the whole into pieces. New behaviors are most effectively mastered when they are broken into their individual components. Once in the individual components, each piece can then be practiced slowly and repeatedly until that circuit has built up more bandwidth. An Olympic diver masters each chunk of the dive and then puts them together during the competition so that they flow together automatically. By mastering each piece separately and adding myelin to the corresponding neural circuit, the diver can begin a dive by activating the first skill circuit, which leads into the next, and the next. Once a manager has a goal to practice, the next step is to break that behavior into its individual pieces. The example on the behavior of resource allocation illustrates the steps that one can take to break it down into its individual components and then work to master each step. Mastery is then demonstrated when the manager can seamlessly weave together the individual elements of the behavior into its whole. To assist in the process, use a visual flow chart to plot the separate pieces and show the manager how each part fits into the sum of the behavior.
Morris: When to Change Strategy (147-149)
Horwath: The ability to modify strategy at the right time can literally save or destroy a business. One of the key moments to revaluate strategy is when you identify an evolution in customer needs. The endgame of business strategy is to serve customers’ needs in a more profitable way than the competition. But, as the makers of the Polaroid camera, hardcover encyclopedias, and pagers will tell you, customer needs evolve. The leaders skilled in strategic thinking are able to continually generate new insights into the emerging needs of key customers. They can then shape their group’s current or future offerings to best meet those evolving needs.
Morris: What are the most important do’s and don’ts to keep in mind when attempting to think strategically?
Horwath: Do’s: Literally schedule time in the calendar; identify several questions or tools to stimulate thinking; write down your insights or learning’s and make time to review them on a periodic basis. Don’ts: Succumb to the “activity = achievement” mindset; react to the competition; let fire drills dictate your daily activity.
Morris: You have much of value to say about three quite different conditions in which most (if not all) companies find themselves at one time or another. What are the defining characteristics of each? First, a Leader
Horwath: As a leader, when a new challenger enters the market, the temptation is to immediately react with a flurry of tactics or completely ignore the new player altogether. But, before either of these approaches should even be considered, a thoughtful assessment of the new entrant will provide a range of available options to strategically manage the situation. There are generally two goals for the leader: retain customers and slow the rate of customer defection. In determining their strategies, leaders look to leverage their strengths and neutralize rivals.
Morris: Next, a Challenger
Horwath: A challenger may be a new entrant into the market or one that has maintained a secondary or tertiary position for various reasons. The challenger is often following a first-mover into a market and may face the hurdles of limited brand awareness and fewer resources with which to compete. One of the reasons failure rates for newly launched products are as high as 50 percent is that the challenger sees the market from a product perspective instead of through a customer-need lens. Companies that continually bring “me-too” products to the market not only disappoint potential customers, but also deflate the morale of their salespeople who are left with no differentiated value to sell. A challenger mindset demands the discipline to make real trade-offs and focus one’s resources with laser-like precision in only one or two areas that allow them to provide the greatest differentiated value to their targeted customers.
Morris: Finally, a Spectator
Horwath: Many products and services continue to receive time and budget each year without providing much value to customers or profit to the company. These spectators either mindlessly react to the competition’s moves, or they sit passively by and watch competitors continue to grow at their expense. A manager, by the very definition of the term, is someone who has control of and responsibility for the direction of their business. An important but often neglected part of this responsibility is to disengage from offerings, markets, and customers that are no longer providing value and profits to the organization.
Morris: The title of one of the workshops I conduct for corporate clients is “Leadership for All Seasons.” My own opinion is that the most effective leaders know which strategies are most appropriate for the given circumstances. What are your own thoughts about all this?
Horwath: I love your title because it captures the nuance of being a truly strategic leader–the ability to listen to the business. To keep an open mind, eye and ear to what’s happening in the market, with customers, competitors and under our own roof is a hallmark of a great leader.
Morris: I commend you on your brilliant use of various reader-friendly devices, notably the “1,000-Foot View.” Why is this perspective so important?
Horwath: One of the most common comments I hear from leaders is “We need to elevate our managers thinking.” People tend to get so caught up in the tactical weeds of the business, they aren’t looking for the new value to provide to customers. While a 30,000 foot view sounds good, you really can’t see anything up that high. But at 1,000 feet, you can elevate your view and still see the important details.
Morris: With all due respect to the importance of having the right strategy, I am again reminded that Thomas Edison once observed, “Vision without execution is hallucination.” Your response?
Horwath: Strategy and execution are often framed as an “either/or.” I see it as “and.” One without the other is useless.
Morris: Let’s say that a CEO has read and then (hopefully) re-read Elevate and is now determined to establish or strengthen a workplace culture within which advanced strategic thinking occurs at all levels and in all areas of operation throughout the given enterprise. Where to begin?
Horwath: First step is to assess the organization and the individuals to establish a baseline of strategic capability and identify gaps. In medicine, the adage is prescription without diagnosis equals malpractice. But in business we commit this sin all the time. We prescribe new strategies without first diagnosing our situation.
Morris: For more than 25 years, it has been my great pleasure as well as privilege to work closely with the owner/CEOs of hundreds of small companies, those with $20-million or less in annual sales. In your opinion, of all the material you provide in Elevate, which do you think will be of greatest value to leaders in small companies? Please explain.
Horwath: The Strategy Scaffold is a way for any leader to capture the essence of their business at three levels: Purpose (mission, vision, values); Business Model, and Plan.
Morris: Which question had you hoped to be asked during this interview – but weren’t – and what is your response to it?
Horwath: You are the consummate pro–you always offer wonderfully thought-provoking questions. Thank you!
* * *
Rich cordially invites you to check out resources by clicking here.