Distillations in this newsletter: Strategy Healthcheck; the perils of hedging strategy; loss aversion; Net Promoter Score 3.0; strategic innovation lessons from LEGO.


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 Healthcheck: a new tool from Goal Atlas for you to try.
  • The perils of hedging strategy.
  • A lesson from behavioural economics: Loss aversion.
  • Snippets related to strategy you might have missed: Net Promoter Score 3.0; Lessons on strategic innovation from Lego.

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A new strategy tool from Goal Atlas…

Strategy Healthcheck

I am excited to introduce Goal Atlas’s new Strategy Healthcheck tool that gives you a snapshot of how well your strategy is performing across six key areas in less than 20 minutes. Designed by me to be a challenging and thought-provoking self-drive process, the Strategy Healthcheck has been developed from my many years of strategy consultancy across industries including technology, higher education, finance and pharma.

Strategy Healthcheck helps you frame your strategic thinking and gives you practical, best-practice guidance on key aspects of strategy in your organisation. Recently launched online, the Healthcheck is currently free for you to use and enables you to prioritise actions and improve your strategy where it is under-performing using advice and models provided by Goal Atlas.

Start your Strategy Healthcheck now. I would love to hear what you think of it – please send your feedback to mike@goalatlas.com.


The perils of hedging strategy

The word ‘hedge’ comes from the Old English word ‘hecg’ meaning fence. In financial markets, the process of hedging involves acquiring a financial interest in two different (and usually opposing) market outcomes. So, for example, a producer commits to making a specific product for sale in a year’s time. If the price for this product rises over the coming months, the producer will make a substantial profit. But what if the price collapses? To hedge that risk (have a position on both sides of the fence) they might enter into a forward contract to supply their product at a fixed price at a specified time in the future.

To hedge a strategy means adopting a position on both sides of the fence rather than deciding upon a clear commitment to one or other course of action. Here are some common examples.

We are going to hugely expand our marketing reach whilst maintaining our current levels of marketing performance’. This is often unrealistic. Big increases in marketing reach can mean:

  1. Reaching out to prospects with a less immediate need for your product and who will be harder to engage;
  2. Reaching out using channels or tactics less tailored to your target audience, making your marketing messages less relevant;
  3. Encroaching into market spaces currently dominated by competitors who are currently better resourced or skilled in engaging prospects in those spaces.

A better strategy would be to:

  1. Expand marketing reach whilst acknowledging the consequences of doing so in terms of reduced marketing performance;
  2. Maintain or possibly enhance marketing performance whilst acknowledging that marketing reach will only expand modestly.

We will maximise efficiency in our operations whilst maintaining resilience.’ As I wrote about several months ago on LinkedIn, increases in efficiency will, at some stage, bring about reductions in resilience. Imagine a sales process. You refine and hone your sales messaging. You keep adjusting and adapting your sales assets. You fine tune your sales pitch to suit the needs of different types of customer. You drill your entire sales team on perfecting the script and listening for the signals that trigger a move to the next step in the sales process. Your sales efficiency is gradually driven upwards. Then a new competitor enters the market. They sell in a completely different way and you have nothing to respond with. All your refinements made your sales process brittle. Efficiency’s gain was resilience’s loss.

A better strategy would be to identify aspects of our operations where our primary focus needs to be maintaining resilience and other aspect of operations where we can drive efficiency gains. The balance between efficiency and resilience needs to be carefully planned, well executed and rigorously performance managed.


A lessons from behavioural economics

Loss aversion

What is it? Loss aversion is one of the founding principles of behavioural economics. It means that ‘the pain of losing is psychologically about twice as powerful as the pleasure of gaining’ (Behavioural Economics Mini Encyclopedia).

Why does it matter for strategy? The implication of loss aversion for strategy is that strategy ought not to be just about exciting new things to be gained but also about painful things to be avoided. Richard Rumelt made a big issue of this in his classic book Good Strategy Bad Strategy. “A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge’, he claimed (p41). He went on ‘If you fail to identify and analyse the obstacles, you don’t have a strategy. Instead, you have either a stretch goal, a budget or a list of things you wish would happen” (pp42-43).


Snippets related to strategy you may have missed …

Net Promoter Score 3.0

In this month’s Harvard Business Review, Fred Reichheld is back with a new update to Net Promoter Score (NPS). NPS gives a score for customer satisfaction based on how customers answer a single question – “How likely are you to recommend my product / service to a friend?” Developed almost 20 years ago, the NPS is used by two-thirds of Fortune 1,000 companies and is often a key measure of strategic success for organisations with customer-centric strategies. Despite this remarkable success, critics still contend that NPS is a ‘soft measure’. It indicates how much customers say they will promote your organisation, not how much they actually do; nor how much revenue or profit is derived from those promotions. Hence this latest update to Net Promoter 3.0 which introduces the concept of ‘earned growth’.

The earned growth rate of an organisation is the amount of growth that comes from returning customers or their referrals. It requires sales teams to ask all new customers the much more factual question, “were you referred from an existing customer?”, rather than asking the more hypothetical question “how likely are you to recommend my product / service to a friend?” Specifically, the earned growth rate of an organisation is the amount of growth due to orders by returning customers or from people who were referred by existing customers. Earned Growth Ratio is the ratio of earned growth to total growth.


Lessons on strategic innovation from Lego

Lego’s journey from its origin in the 1930’s took it to near bankruptcy in 2003 before recovering and enjoying even greater success than ever before. In their book Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry, Bill Breen and David Robertson identify three key lessons for mature organisations seeking to innovate:

  1. Respect what made you great. In order to fit in to a new digital world, LEGO learned that customers wanted digital experiences that complemented core offerings, rather than replaced them. This meant continuing with brick-based construction but wrapping new stories, games, and experiences (e.g. their highly successful Bionicle product line) around that experience.
  2. Maintain a customer-centric development process. LEGO regularly engages children in the process of character development, storytelling and providing feedback on new playset ideas. They have a saying about this work: “Kids will never lie to you about whether something’s fun or not.”
  3. Be innovative about how you innovate. LEGO uses a range of different approaches for innovation depending on business goals and context. They also try to build families of complementary innovations to distinguish themselves from competitors. As Robertson says, “You need to learn how to play chords, not keys, on the innovation ‘piano’ [… it’s much better to pursue] multiple, complementary innovations that harmonize…”

According to Robertson, “Centering innovation around the brick-based construction experience through new stories, games, and experiences… is what drove customers back to the LEGO brand and returned the company to profitability.”

“You try to understand who your customer is, what they care about — that’s the way we should think about innovation,” Robertson said. “You need to be dating your customer, not fighting your competitor.”

Bill Breen & David Robertson, 2014. Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry.
Summarised by Beth Stackpole, 2021. Innovating in existing markets: 3 lessons from LEGO. MIT Sloan Review.


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.


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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