Some small businesses are founded with a strong initial intention and others are created by accident without a deliberate strategy. As a business evolves, the need to develop a conscious strategy becomes more important. This is especially true in the business of financial advice, where practitioners often use similar language to articulate their vision, mission and “unique” proposition.
Conventional wisdom recommends creating a long-term business plan for the next five years and then designing an operational or tactical plan for the near term, typically one year. The problem with this approach is that assumptions often change faster than one’s ability to execute. As with a summer suntan, a healthy glow fades away as the seasons change. Businesses require continuous planning to keep pace with changing market forces and to respond to new demands from clients and employees.
Recently I had the opportunity to listen to John Hagel, co-chairman of Deloitte’s Center for the Edge. Hagel has spent the past 25 years in Silicon Valley as a successful entrepreneur and consultant, and holds an impressive list of accomplishments.
Hagel challenged the conventional approach to strategic planning, arguing that the best-performing companies—especially in the technology arena—deploy a uniquely effective approach he refers to as “Zoom In-Zoom Out.” First, they “zoom out” to develop long-range assumptions about the forces that may impact the business over the next 10 to 20 years and to create a vision around these findings. Then they “zoom in” to focus on a very short period of time, say six to 12 months, and work on two or three initiatives that Hagel calls “needle movers.” This strategy has been found to accelerate movement toward business goals.
Hagel warned against the common pitfall of spreading skimpy resources over too many choices, thereby not impacting any one initiative. With the “Zoom In-Zoom Out” approach, investing in specific short-term objectives helps to fund the long-term plan.
At the same time, leaders must stay engaged with the status of their long-term assumptions; we all know that change is a constant in this business. Hagel explained how companies often latch onto rigid assumptions in their long-range plan, failing to alter their strategy when the market shifts. Kodak and Microsoft offer two prime examples of this mistake. Both companies once dominated their market but failed to adapt their strategy to changing times.
Hagel explained how Kodak was run by chemists who believed that the future of photography would always be in film. Oddly, they were among the first to have a patent on digital photography—but they missed the opportunity to invest in a new direction. Similarly, Microsoft accomplished its initial goal of becoming the leader in desktop computing, but then became mired in its own plan. While its original focus was successful, it was outmaneuvered in the personal technology space by the likes of Apple and Google. Kodak and Microsoft “zoomed in” to create initial success but neglected to “zoom out” to challenge assumptions, revisit their long-range vision and develop effective short-term objectives.
Further on this topic, Hagel emphasized the importance of achieving critical mass in the market before any potential competitors. Fast followers are rare and once a provider has a foothold it’s nearly impossible to topple them. Think about how you might localize this concept by creating a winning strategy other firms could not replicate easily. The strategy could revolve around a well-defined market niche, a unique solution to solve your optimal client’s biggest challenge or a recruiting program that makes your firm the employer of choice for top-performing financial advisors.