Distillations in this newsletter: Strategy KPIs: avoiding the tyranny of measurement; Lessons for strategy from Pixar’s 22 rules for storytelling; Further lessons on strategy from the Beatles.
STRATEGY DISTILLED:
A monthly concoction of insight, learning and things you might have missed for anyone who works on strategy, works with strategy or just loves strategy.
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This month …
- Strategy KPIs: avoiding the tyranny of measurement.
- Lessons for strategy from Pixar’s 22 rules for storytelling.
- Snippets related to strategy you may have missed: on strategic decision-making and lessons on strategy from the Beatles.
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Strategy KPIs: avoiding the tyranny of measurement
It is the season to look ahead, to decide on priorities and to set aspirations. And, of course, if we are doing all that, we mustn’t forget to set the metrics by which our endeavours will be judged a success or not.
Setting success metrics for strategy is hard. The outcome that the strategy is designed to achieve may be years in the future (in which case you might be better thinking about process accountability rather than outcome accountability as I discussed in the August 2021 Strategy Distilled Newsletter). That outcome may also be hugely dependent not just on your own success but also on circumstances you have no control over (e.g. achieving market leadership in your sector will depend on the performance of your competitors).
The tyranny of measurement is an idea used by some to argue against the use of KPIs at all. In fact, it is an eloquent cautionary warning against the poor use of KPIs. The Ford Pinto is the classic case study for the tyranny of measurement. Launched in 1971 in response to the success of imported small cars from outside the USA, the Pinto was designed to weigh less than 2,000 lbs and cost less that $2,000. These success metrics, combined with a hurried development timescale meant that the Pinto launched with a known safety hazard. Its fuel tank ruptured causing serious fire risk in the event of a rear-end collision. One such Pinto accident, which had fatal consequences, resulted in the largest ever jury settlement of $128M being made against Ford in a court case in 1978.
The secret to avoiding the tyranny of measurement is to stress-test your strategy KPIs. How could your KPIs be fully met yet your strategy still be a failure? Usually, such a stress-test will lead you to specify additional KPIs to mitigate risks not covered by the original KPIs. In the Ford Pinto’s case, maybe industry-standard safety compliance should have been added to the weight and price (although research completed long after the above court case suggested it was compact cars in general that were a lot more risky than the larger cars Americans were used to. The Pinto was as safe as several of its direct competitors).
In practice, stress-testing KPIs can often be done in a dedicated workshop with a diverse range of specialists from across the organisation. It is a ‘what-could-go-wrong’ session. It opens with a review and explanation of the chosen KPIs for the new strategy. Working groups then explore scenarios where the KPIs are met but the strategy is still considered to have failed. The workshop concludes with a list of ‘strategy failure modes’ which the proposed KPIs failed to avoid, and follow-up actions can be delegated to revise the strategy KPIs accordingly.
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Lessons for strategy from Pixar’s 22 rules for storytelling
What’s not to like? The magic of Pixar distilled into rules for storytelling. And if that’s not enough, here’s a handful of them with powerful lessons for strategy as well.
Rule #2 You gotta keep in mind what’s interesting to you as an audience, not what’s fun to do as a writer. They can be very different.
Lesson for strategy: For strategy, think of beneficiary rather than audience. Who is going to be the primary beneficiary of your strategy? It is likely to be your customers, although it could be your suppliers or partners. The benefits to your own organisation and their shareholders ought to be secondary to the primary beneficiary. As you are actually writing the strategy, you do also need to consider its audience – who will be reading it? What do they know and what are they thinking before they start reading it? And what do you want them to do when they are finished reading it?
Rule #4 Once upon a time there was ___. Every day, ___. One day ___. Because of that, ___. Because of that, ___. Until finally ___.
Lesson for strategy: Strategy, like storytelling, is a cascade of consequences. Small things done by a few people combine together to make up bigger consequences for more people. Then ultimately, strategic success affects a whole lot of people in profound ways. Telling the story of a strategy sets out that cascade of consequences.
Rule #5 Simplify. Focus. Combine characters. Hop over detours. You’ll feel like you’re losing valuable stuff but it sets you free.
Lesson for strategy: How hard is it to get rid of good stuff? Really hard! But if by getting rid of good stuff your force yourself to find even better stuff, the hardship is all worthwhile. And since the best strategies (like the best stories) usually hinge upon a few brilliant ideas, casting off ideas that are ‘merely’ good may be the price of success.
Rule #7 Come up with your ending before you figure out your middle. Seriously. Endings are hard, get yours working up front.
Lesson for strategy: True destination-thinking doesn’t come naturally to many leaders. Many are method-thinkers – how are we going to get there, rather than where are we trying to get to. Others think in terms of destination-proxies (a proxy is a substitute for something of true value). So, picking up on the example I used at the start of this newsletter, market leadership is a destination proxy. It doesn’t explain what type of organisation we need to become in order to attain (and earn) that leadership.
Rule #16 What are the stakes? Give us reason to root for the character. What happens if they don’t succeed? Stack the odds against.
Lesson for strategy: Great stories really matter to their audience. The hero’s triumph elates me; their loss saddens me. Strategy too, needs to matter to those on whose efforts it depends. So, strategy needs to define more than just a destination. It needs to persuade all stakeholders in the strategy that this destination matters and failing to reach it will be everyone’s loss, not just the CEO’s.
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Snippets related to strategy you may have missed
Strategic decision-making
Related to Pixar’s rule #16 above, I love this quote from Thomas Sowell: “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong”. The lesson for strategy – always make sure that decision-makers across the entire organisation have skin-in-the-game for the strategic decisions they make.
What the Beatles can teach us about strategy
When Peter Jackson’s remarkable documentary on the Beatles was launched, I guess The Economist needed to reach for the business angle, however much of a stretch that was. A couple of their ‘lessons’ are worth re-casting in terms of strategy. Firstly, Ringo’s role as conflict-resolver and bridge-builder exemplifies how the performance of groups (including teams working on strategy) is not correlated with their intelligence, but rather their sensitivity to the views of other team-members and how good they are at giving everyone time to speak. Another ‘lesson’ is to listen to others outside your organisation and use the learnings to drive innovation. For the Beatles, it was the arrival of pianist Billy Preston that made the recording session really start to click.
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Goal Atlas runs workshops and sprints to help your strategy work better across your organisation. Get in touch if you think we might be able to help.
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If you enjoy reading this newsletter, don’t forget to forward it to friends or colleagues who might also find it of interest.
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