CHAPTER 2
THE DISCIPLINE OF CLARITY
“The leader must know, must know that he knows, and must be able to make it abundantly clear to those about him that he knows.”
—Clarence B. Randall
Your ability to develop absolute clarity about who you are, what you want, and the goals for your business can do more to assure your success and the success of your company than any other factor. Clarity is probably 85 percent of success, or perhaps even more. Lack of clarity is the primary reason for failure in business and personal life. People fail because they do not know who they are or what they want, or what exactly they are trying to accomplish.
The starting point of clarity as a leader is for you personally to be crystal clear about your goals—in all areas of your life. It is only when you are clear about both your personal goals and your business goals that you can focus and accomplish extraordinary things with your life.
Before you can set personal goals, you need to develop clarity about who you really are, which includes your hopes, dreams, beliefs, and personal motivations. If you are not clear about your own inner drives and motivations, you will begin to conform to and live by the wants and desires of others, which will lead inevitably to a sense of dissatisfaction and lack of fulfillment or joy in your life and work.
Determine Your Values
Your personal life is lived from the inside out. The core of your personality is made up of your innermost values and convictions, the virtues and principles that you most admire and respect both in yourself and in others. Ask yourself these questions: What are your personal values? What is it that you care about and what is important to you? What do you stand for, and what will you not stand for?
In our seminars, we ask people to identify the three to five most important values or concerns in their lives. Almost everyone begins with their family and their personal relationships. But what else is important to you? For example, do you believe in the values of integrity, courage, responsibility, spirituality, or freedom?
The next question we ask is “What would you do if you had all the money you wanted, if you were independently wealthy today?” Many people compromise their true values for a paycheck, for financial security, or to earn and keep the approval or respect of others. When you think of what you would do if you had all the money you needed, your true motivations and desires often come to the surface.
The third question we ask is, “What would you do, or how would you spend your time, if you learned today that you only had six months to live?” This question gets to the heart of ultimate “values.” When you only have a short time left to live, what is really important to you in life becomes clear. As it was said, “Nobody on their deathbed ever wished that they had spent more time in the office.”
Your values tell you what you will do and what you won’t do in the pursuit of your other goals in life.
Select Your Goals
You need several types of goals to lead a balanced, high-performance life. Any of these goals will be more or less important to you depending on your current situation and how close you are to attaining them.
You need business and career goals, family and relationship goals, and long-term financial accumulation goals. In addition, you need short-term, middle-term, and long-term goals that will help you establish an appropriate time perspective in order to maximize your potential in each area.
Start with your business and financial goals. Practice “idealization” in each area. If you could wave a magic wand and create your ideal business and career in five years, what would it look like? How would it be different from today? What kind of money would you be earning? What kind of people would you be working with and for? What kind of a company would you be working for, and what would you be doing? What would be your ideal position and responsibilities in your career if your future was perfect in every way?
You project forward and then look back to where you are in the present, which is an exercise called “back-from-the-future” thinking. By projecting forward and looking back, you develop much greater clarity about the steps you need to take, starting today, to make your future ideal a reality.
What would have to happen for you to get from where you are to where you want to go? In particular, what is the first step that you could take today to begin achieving your business and career goals of the future?
Resolve to Take the First Step
The difference between winning and losing is almost always the willingness and ability to take the first step in the direction of your goals, dreams, and ideals. It takes tremendous courage to step out into the unknown. It takes tremendous energy for you to break out of your comfort zone and begin doing something new and different. But such a step is essential if you want to achieve your full potential as a leader.
Fortunately, once you have a clear picture of your ideal future vision for yourself, you can always see the first step. You can always see one thing that you could do immediately to begin moving in that direction. And all you have to do is take the first step.
When you take the first step in the direction of any goal, three wonderful things occur. First, you immediately get feedback that enables you to self-correct and change your course. Second, you immediately get insights and ideas that you can use to move even faster and further along this path. Third, you get a surge of self-confidence and self-esteem by the very act of faith in moving toward something that is important to you.
Once you take the first step, the second step will automatically appear. It seems that you can always see one step ahead. And that’s all you need. If you have the discipline to keep moving toward your goal, one step at a time, you will eventually achieve it. On your journey, you will go through many twists and turns, mostly unexpected and different from what you had imagined, but you will ultimately achieve the goal if you are clear about what it will look like, and you take that first step.
Set Personal and Family Goals
The second type of goal is for your family and relationships, for your home life and the most important people in your world. As an exercise, project forward five years and imagine that your family, relationships, and lifestyle are all perfect in every way. What would your ideal life look like? Where would you be living? What kind of home or apartment would you have? How would you spend your time with the most important people in your life? What standard of living would you enjoy? What would you do day by day, week by week, and on vacations with your family?
Remember, you can’t hit a target that you can’t see. You cannot create a perfect future for yourself until you are crystal clear about how it would appear. Again, let your imagination flow freely. Idealize and visualize a perfect future lifestyle with the important people in your life.
Imagine that you could wave a magic wand and remove all obstacles. Imagine that you have no limitations in achieving your perfect lifestyle. When you begin to think in this way, you will begin to have all kinds of insights and ideas that will enable you to move toward your future goal, and cause your future goal to start to move toward you.
How would your future ideal be different from your current situation? And above all, what is the first step that you could take today to begin creating your perfect family life in the future? You can always see the first step.
Decide Upon Your Number
The third area of goal setting has to do with your financial future. Begin by deciding how long you want to live, to what age. You then determine when you want to retire, or when you will reach the point that you have enough money so that you never need to worry about money again.
A simple formula can help you determine your “number,” the amount that you want to accumulate in the course of your working lifetime. The first step is to determine how much it would cost for you to live for one month at your current standard of living if you had no income at all. Most people are not clear about this number.
Multiply your monthly financial “nut” by 12 to determine how much you would need to have accumulated in order to live comfortably for one year without working. Let us say that you need $10,000 per month to live comfortably. Multiply that by 12 to get $120,000 per year. Finally, multiply your annual income requirement by 20 years to determine the exact amount of money that you will need to accumulate over the course of your working lifetime. In this case, $120,000 times 20 years works out to $2.4 million that you will have to save, invest, and accumulate before you can stop working.
Most people have no idea what their number really is. When they calculate their number using a simple technique like this one, they are shocked to find out how far away they are from the goals of retirement they have set.
The good news is that the fact that you determine your number in advance increases the likelihood of your achieving that number by five or 10 times. By using a long-term perspective with regard to your number, you can begin to evaluate every part of your financial life, especially your current expenditures, against the achievement of this number at some time in the future.
Set and Achieve Any Goal
A simple seven-step exercise can help you set and achieve any personal goal. It is powerful, practical, and gets immediate results. Here it is.
1. Decide exactly what you want. Be clear and specific. Your goal should be so clear and simple that you could explain it to a six-year-old child, and the six-year-old could tell you how close you are to achieving your goal. Simplicity is the key.
2. Write it down. Only 3 percent of adults have written goals, and everyone else works for them.
3. Set a deadline. If it is a big goal, set intermediary deadlines. Your subconscious mind uses a deadline as a “forcing system,” working to bring you your goal 24 hours a day once you have programmed it into your subconscious mind.
4. Make a list of everything you can think of that you will have to do to achieve your goal. As you think of new tasks or items, add them to the list until your list is complete.
5. Organize your list both by sequence and priority. You organize your list by sequence by deciding the order that you will have to complete your tasks in. What do you have to do first? Which comes second? Which comes later?
You organize your list by priority by determining which task is more important and which activities are less important. What are the activities that can help you the most to achieve your goal the fastest?
6. Take action on your goal immediately. Do something. Do anything. But launch. Take the first step and put the entire goal-achieving process into action.
7. Do something every day to achieve your major goal. This step is important. It is very difficult to get started on a new goal. It takes a tremendous amount of energy to break out of your comfort zone. But once you get started, it is much easier to keep going. It takes less energy because you develop momentum that moves you faster and faster toward your goal, and moves your goal faster and faster toward you.
The 10 Goal Exercise
Here is an exercise for you for the short term. Take a sheet of paper and write out 10 goals that you would like to accomplish in the next year or so. Once you have written down these 10 goals, ask yourself this question: “If I could only achieve one goal on this list, which one goal would have the greatest positive impact on my life?”
Whatever your answer to that question, circle that goal on your goal sheet. That goal becomes your major definite purpose for your life right now. It becomes your focal point, your point of concentration on a day-to-day basis. Napoleon Hill once wrote, “People only begin to become great when they decide upon their major definite purpose in life.”
Set Goals for Your Business
Once you are clear about your personal goals in each of the most important areas of your life, one of your chief responsibilities as a leader is to set clear, specific goals for each area of your business. As with your personal goals, you begin with your values; your business values. Corporate life, like personal life, is lived from the inside out. Both you and your people need clear, specific, and aspirational values around which to build a successful business. In a study some years ago, researchers identified the “Fortunate 500,” the businesses in each industry that were substantially more profitable over a multi-year period than businesses that were not. What they found was that almost every business had values. But the most profitable businesses had clear, written values that everyone knew and lived by.
The less profitable businesses in the study, in the same industries, had values as well, but nobody really knew what they were, nor did they know how to operationalize those values in their daily activities.
Determine Your Business Values
What are your business values? What does your company stand for and believe in? These values tell you what you will do and what you won’t do in the pursuit of sales and profitability. Each value should be accompanied by a statement of how you will practice that value on a daily basis. What actions will you take to demonstrate that value when you must make decisions?
A successful company that I worked with some years ago had identified the five most important values that the company stood for and then had created a statement to indicate how people in the company would practice those values. It then printed these values and value statements on plasticized cards for everyone in the company to carry and refer to when making a decision of any kind. By starting with an idea and a set of clear values, within a few years this company was doing more than $150 million in sales each year and dominating its industry in every city to which it expanded. The key people in the company were absolutely convinced that the establishment of the values prior to operation was the reason it was so successful, and why its people were so happy and productive.
Create an Action Statement
If you were asked to name an action statement you could, for example, say that your value is excellent customer service. What does your statement mean? You could then write, “We believe in excellent customer service: each person in our company is dedicated to the happiness and satisfaction of our customers and we will do anything within reason to assure their satisfaction.”
This statement says it so that everyone inside and outside your business can understand, and compare their performance against it. This statement is something you can tell your customers. What are your values, and how do you carry them out in practice?
Whenever I have worked with corporations to discuss and agree upon their values, it never took less than half a day for everyone to discuss and agree on exactly what the company stood for, and in what order of priority. What was value number one? What was value number two? And so on.
Clarify Your Vision for Your Business
Once you are clear about your values, you then create a vision for the way your company will look at some time in the future. Again, you idealize and project forward five years. If your company was perfect in every way sometime in the future, what would it look like? And how would it be different from today?
Again, imagine that you have a magic wand and you could make your company perfect in every way. What would be your ideal level of sales and profitability? What kind of reputation would your company have in your marketplace for your products and services? What would customers say about your company after doing business with you? What words or phrases would they use to describe you amongst themselves and to others? What kind of leadership would you have in your company if your company was perfect in every way? What kind of people would you have, at all levels? Would your company be considered a great place to work? How would you or could you make your company into your ideal vision of it?
Agree Upon Your Mission Statement
Once you are clear about your values and your vision, you can then develop your mission statement. Your mission statement tells you and everyone else what you want to accomplish for your customers, for other people, how you will accomplish it, and how you will measure your success.
Your mission statement must have a goal—something that can be achieved or accomplished. In addition, it must have both a method and a measure. Your mission must be clear to everyone in your company, and to their spouses and children as well. It must also be clear to your customers so that they know what you are committed to doing for them.
Most mission statements are meaningless platitudes. They give no guidance or direction. They sound nice but are essentially useless in guiding and directing corporate behavior.
For example, a common type of mission statement would be “We are an innovative, high-energy company dedicated to making a difference in the communities we serve.” What do these words actually mean to a customer? What does it tell a customer who is considering doing business with that company? Here is a better example: “Our mission is to produce high-quality electronic security systems that keep our customers safe and secure 24 hours a day.”
Your mission statement should inspire and motivate your people, and should attract to you customers who want, appreciate, and are willing to pay for what you offer.
What Is Your Purpose?
Once you are clear about your values, vision, and mission, you define your purpose, which is the reason you are in this particular business; it is the reason that gets you up and gets you going in the morning.
Your purpose is the “why” of what you do. As the philosopher Nietzsche said, “A man with a big enough why can endure any what.” Your reason why is your major motivator. It is what excites you about your work. It is what you love and enjoy, and what you think about most in your business. Your mission and purpose are always defined in terms of what you want for others—for your customers and for the people you serve with your products and services.
Once you are clear about your values, vision, mission, and purpose, you can then set goals for every part of your business. Perhaps the critical skill of the leader is the ability to plan, organize, and get results. It is the ability to decide on clear, specific measurable business goals and then to achieve those goals on schedule and on budget.
The most important word in business is “results.” You must be clear. What results, exactly, are expected of you? How do you measure those results? All business activities can ultimately be described with numbers of some kind, usually financial numbers. As Harold Geneen once said, “Get the numbers, the real numbers. Numbers don’t lie.”
Decide Upon the Most Important Number
The preceding information brings us to a key concept with regard to clarity, and it is the determination of the most important number in your business. This number more accurately predicts and explains success or failure than any other number you can generate or track. Jim Collins, author of Good to Great, refers to this number as your “economic denominator.” It is the standard or benchmark by which you measure the success of your business activities. Leaders can choose from more than 30 different benchmark numbers. If you don’t choose one, or choose the wrong number, your business may never realize its full potential. It could even fail.
Most successful businesses are “numbers driven.” They measure everything. They continually compare their actual numbers with their projected numbers. They watch for trends. They focus on improving the most important numbers. Most companies choose sales as their critical number. Others choose profitability. Still other companies choose return on equity, return on investment, return on sales, or sales per square foot (retail). As an example, when I was conducting seminars and selling educational products in the back of the room, the critical number for me was the exact amount of sales per person in the room. We judged and measured the effectiveness of our seminars by the amount that attendees purchased as a result of attending the seminar.
Set Standards of Performance
Each person or department requires clear goals, measures, plans, and deadlines in order to perform at their best. One of the chief responsibilities of leaders is to articulate the vision, embody the mission, emphasize the purpose, and clarify the goals for each person and department. Everyone needs to know exactly what the company is trying to accomplish and why. People need to know what they are expected to accomplish and why, and by when, and how it is going to be measured.
The discipline of clarity requires that you take the time to think, to discuss, to write things down, and to be absolutely clear about what it is you are trying to accomplish. The greater clarity that you have, and the greater clarity you can give to each person, the faster, more efficiently, and more effectively you will accomplish your business goals.
Ask the Critical Questions
Here are some important questions to help you develop greater clarity in your business:
1. What am I trying to do?
2. How am I trying to do it?
3. How well is it working?
4. What are my assumptions?
5. Could my assumptions be wrong?
6. Could there be a better way?
7. What results are expected of me?
8. What do I do now? What is my next action?
The job of the leader is to develop absolute clarity about each goal and activity necessary for the business to succeed, and then to articulate clear goals, activities, and measures to each person whose cooperation is necessary to achieve those goals.
Everyone must know exactly why they are on the payroll, what they have been hired to do, why it is important, and how it will be measured and rewarded. This information is essential for building a high-performance organization.
Strategic Thinking
Let’s start by talking about perhaps the finest strategist that ever lived. I mentioned him previously. He was a man who started off as a “junior manager” in a large organization and worked his way up. His name is Alex. Alex’s father was the head of the organization, and Alex admired his father, learned a lot from the man, and studied hard as he was growing up. He had great dreams and aspirations of building a big organization, far bigger than that of his father.
The Alex I’m talking about is Alexander of Macedon, who came to be known as Alexander the Great. When Alexander was 20 years old his father was assassinated. Alexander immediately became the king of Macedonia. The Macedonians were a tribe in northern Greece, a tough, hardy, militaristic race. They eventually conquered and ruled all of Greece.
Within Alexander’s household, in his army and the army of his father, and within the other tribes of Greece, an enormous number of enemies competed for Alexander’s position. When Alexander became king, he discovered numerous plots and conspiracies being organized to kill him and free the city states of Greece from Macedonian rule.
Take Command
Alexander immediately took command, as a new leader does. He quickly put down disloyal elements in his own army. He reorganized his kingdom, putting his own people in key positions, and defeated the armies sent against him. He became the recognized and accepted master of all of Greece at the young age of 20.
Then he set off on his mission. Alexander, like all good leaders, had a strategic plan, a mission for his organization. He wanted to bring Greek culture to all the world. He had an aggressive merger-and-acquisition plan in mind.
At the age of 15, the Delphic Oracle had told him that he could have a long life full of peace or a short life full of glory. He chose a short life full of glory. The high priestess at Delphi then told him that he could rule all the lands that he could look upon with his own eyes.
Start in Smaller Markets
So he took 20,000 men, put them on ships, and set out to fulfill his personal destiny—to rule the world. He began by invading Asia Minor, present-day Turkey. Alexander was a brilliant planner, and he had skilled generals under him. His troops were extremely well trained, well disciplined, and tough, and he won every single battle. As his armies moved through Asia Minor, they defeated each army that stood in their way.
In those days, when they fought with spears and swords, one did not fight and run away and live to fight another day. Fighting was rather final. The soldiers of the armies in the path of Alexander’s advance began to hear about what had happened to the previous armies. They learned that anyone who fought against Alexander lost. And if you lost with a spear through your chest, it would be enough to ruin your whole day. So the word spread that perhaps it was a good idea not to fight with Alexander.
Alexander was also quite strategic in that he did not disrupt the kingdoms that he conquered. He left them under the rule of their own people. All he required was that they pay a tribute to Greece each year. Other than that requirement, they continued functioning much the same as before the conquest. The major difference was that now, they were under the protection of the Greek empire and the Macedonians.
Have a Merger-and-Acquisition Strategy
As his armies moved further south toward present day Lebanon, Israel, and Egypt, more and more tribes came and joined him. They gave up without a fight, deciding not to go to battle with him but instead to become part of his army and his empire. It was the original merger-and-acquisition strategy.
The most powerful executive, the head of the biggest empire in the world at that time, was a man named Darius of Persia. Darius had his capital in Babylon, in what is present-day Iran. He had the biggest conglomerate (empire) the world had ever seen. His empire extended from the Indus River in Pakistan all the way to the Mediterranean, throughout the Persian Gulf, and all the way up into what are today the old southern Soviet states.
Darius began hearing of an upstart renegade who had come over from Greece with a bunch of freebooters and was picking away at the fringes of his empire. Various tribes and kingdoms in the Persian empire were beginning to question to whom they should cast their lot—Alexander the Macedonian or Darius of Persia?
Deal Effectively with Competitors
Darius was a smart man. He recognized that this Alexander was a threat to his entire enterprise. He immediately sent an army of 50,000 men to attack the 22,000 men under Alexander. He ordered them to crush the upstart once and for all.
Alexander, anticipating this battle, laid out his strategy carefully. With brilliant leadership, he demolished and routed the Persian army that was sent against him. He then routed a second army sent by Darius who, upon hearing what had happened, said, “This is serious. This is the biggest single threat to my power in my lifetime. It must be dealt with decisively or there will be challenges to my strength and to Persian rule throughout the empire.”
Darius then sent his messengers to all the tribes in his empire, ordering them to send him levies of their best troops to meet him at a place called Arbela. He sent demands for troops to many smaller kingdoms as well. These tribes sent thousands of their best troops to meet him at Arbela in present-day Iraq to fight Alexander.
Plan for Competitive Response
Alexander had acceded to the throne of Macedonia in 336. Three years later, in 333 B.C.E., he was 23 years old and had approximately 50,000 men in his army when the battle against Darius’s forces took place.
Darius had assembled his army outside Arbela at a place called Gaugamela. It was the biggest army that the world had ever seen and numbered almost a million men. In all of history, even up until WWII, an army this large had never been assembled in one place. At one time, about 400 historical accounts of this battle existed. It was considered to be one of the most important battles in human civilization and a pivotal battle in the history of the western world.
Once Darius had assembled his troops, he had them clear and level the ground so that the field would be ideal for his troops and his chariots, which were his major battle force, the equivalent of tanks in modern warfare. He then sent a messenger to Alexander with something of a dare: “If you’re so tough, why don’t you come to Gaugamela and we’ll see who’s the toughest?”
Take Aggressive Forward Action
Alexander’s army was positioned to the south and east in what is today Iraq. He immediately broke camp and crossed the Tigris River. The Persians under Darius thought it would take him seven days to get there but he arrived within 48 hours. His army consisted of 50,000 men and cavalry. Everyone in his army knew that the next day they would be fighting one of the biggest battles in history. Their very survival was at stake.
That night, the evening before the battle, Alexander called all his commanders together. He always explained to his soldiers everything they needed to know. He is quoted as saying, “It essential that the men who must fight the battle know what the plan of battle is.”
His generals asked him what he thought was going to happen the next day. Alexander told them they were going to win. They said, “Well, sire, the men have all great faith and trust in you but you realize that according to our intelligence we are up against 20:1 odds. Darius has a million men against our 50,000.”
Always Speak with Confidence
Alexander said, “Yes, I know. But I’ve thought this through carefully. Of course, it’s not possible for us with 50,000 men to defeat an army of 1 million. However, I believe that the army of Darius is not really a single army. Instead, it’s a series of perhaps 30 different armies made up of troops and levies from all over his empire.
“They have different languages, different cultures, different orders of battle, different religious rights, and different military structures. The only thing they have in common is a loyalty to Darius. I believe that if something were to happen to Darius tomorrow, the rest of the armies would divide and be more easily defeated.
“They all expect this battle to be over by lunchtime. They expect it to be a crushing defeat. So I want you to go tell all the men that we don’t have to worry about defeating this whole army because we’re not going to fight the whole army. Tomorrow we’re going to do one thing: we’re going to go out and kill Darius. Do you understand that? Tell them we’re going to kill Darius.”
And the word went out to the Macedonian army that night, passed on from man to man that the order of battle for the next day would be to follow Alexander and, “Kill Darius! Kill Darius! Kill Darius!”
Do the Unexpected
The next day the two armies lined up their troops. Darius organized his army like a massive wall—a million men to move forward to overwhelm and crush the Macedonians. But Alexander lined up his army differently, at an angle to the forces of Darius. This strategy, called the “oblique formation,” had seldom been used, before or since. Darius had no idea how to counter it.
Darius lined up his armies in deep ranks. His major attack forces were battle chariots—with hooked swords that protruded from the wheels. Razor sharp and spinning, they would cut the legs and arms and chop through the opposing troops as they passed. If you sent 300 battle chariots into an opposing force, it would cause chaos of death and confusion, demoralizing the fighting will and ability of the opposing force. This strategy had worked repeatedly for Darius over many years, and Alexander knew Darius would use this strategy once again. The reason Darius had chosen this particular ground was because he could flatten it like a massive parking lot so his chariots could maneuver most effectively.
Having lined up his men, Alexander began to move his army to the right, away from the main battlefield and onto to rougher ground where he would have an advantage. As his entire army shifted sideways, Darius became confused. In response, Darius tried to move his army sideways to maintain his front with Alexander, which only increased the uncertainty among his soldiers.
Be Prepared for Determined Competition
Finally, Darius said, “The heck with this. Send in the chariots.” The 300 battle chariots charged across the huge field between the armies, straight at the army of Alexander. But at the critical moment, Alexander had all of his men plant their shields with their spears dug into the ground. What the horses saw was a wall of shields, like a wooden wall, bristling with spears.
In battle, men will charge walls bristling with spears, but horses are different. Horses will not charge into spears or barricades. The horses and the chariots began to turn away from the wall of spears. As they turned, they began to trip each other up and cause confusion. The charioteers steered their horses away from the spears, and curved around the main body of the army and into its rear. Alexander’s men were waiting with spears, swords, and archers to attack them from all sides. The charge of the chariots, Darius’s main battle strategy, was demolished.
Meanwhile, the dust clouds kicked up by the chariots obscured his vision. All he could hear was the sounds of panic and pain coming from the chariots and the army behind the dust. In frustration, Darius demanded of his generals, gathered around him, “What on earth is going on over there? Has the attack succeeded? Have they broken through? Is it time to advance?”
Meanwhile, Alexander saw that his moment of opportunity, exactly as he had planned, had now come. He took his position in front of his troops, wearing white armor, a red flowing cloak, and a silver helmet with a white plume. He rode his huge black war horse, Bucephalus. He believed that a person who was confident would be victorious in the battle, and that confidence was demonstrated by leading an army from the front. He made such a striking figure that his army always knew where he was.
Choose the Right Moment
He turned to his “Companion cavalry,” a special force of 6,000 men on horseback, and shouted, “Follow me and let us kill Darius!” He formed his ranks, with himself at the front, and charged straight for Darius, like a spear hurled into the ranks of the Persian army. Darius, who was directing the battle, had not anticipated this situation at all. He demanded to know what was going on. They told him, “Well sire, he seems to be coming right for you.”
Darius ordered them to stop Alexander. They told him, “Well sir, we’re trying to stop him but we didn’t anticipate an attack straight into the front of our army. We are not prepared to repulse him.”
This strategy was brilliant. The only part of Darius’s entire Persian army that could fight against Alexander was the small part directly facing him. The rest of the million soldiers were of no use because they had nobody to fight against. Darius was unable to give commands to the rest of the army to move forward as long as he was facing a direct assault on his own encampment.
Again Darius shouted at his men to stop Alexander. They told him, “We’re doing everything we possibly can to stop him but he continues to advance.” Darius said, “If you don’t stop him, he’s going to break through!” None of the Persians had expected this kind of assault, and Alexander just kept cutting through the center, directly toward Darius.
A Disorderly Retreat
Darius finally said, “Well, if you cannot stop him, I must preserve my own life. You can stay here and fight with him.” He then jumped into his chariot with his battle flags waving and drove off the field of battle. All around him were his generals. They said, “If you are leaving to save your life, so are we. We’ll come with you.” They leaped onto their horses and into their chariots and fled the field, as well.
In all the dust and confusion, and shouting and sounds of battle, the rest of the army had no idea what was happening. But they soon heard rumors that Darius was fleeing. These soldiers were not geniuses. They were simple, solid fighting men, but they could put two and two together. The first “two” was that, from everything they had heard about Alexander, he never lost a battle, and that anybody who fought against Alexander was defeated and killed, which would be a terrible way to end the day.
The second “two” was that Darius was fleeing the scene of battle. Alexander never loses, and Darius is fleeing. What could that possibly add up to? They concluded fairly quickly that they must have lost. If all was lost, then they had better escape because Macedonians were merciless with opponents and prisoners.
Alexander’s analysis of the situation turned out to be correct. The units of the Persian army began to scatter and run, falling over each other to get away. At this point, Alexander, who had anticipated this reaction, began his advance. His army went through the fleeing Persians like a hay-making machine, chopping them down in huge numbers.
By the end of the day, the Persians had lost more than 400,000 men. The Macedonians under Alexander lost 1,247 men. It was one of the most lopsided and decisive battles in all of human history. With this victory, Alexander, at the age of 23, was the undisputed master of much of the known world.
The Military Principles of Strategy
Specific principles of military strategy have evolved to explain victory and defeat in warfare. These principles as developed over the centuries are taught in every military school worldwide. They are applicable to success and failure in business, as well. They are all demonstrated in the Battle of Arbela in 333 B.C.E.
The Principle of the Objective
The first strategic principle in every case is the objective. What is your objective? It requires knowing exactly what it is you want to accomplish. Alexander was clear about his objective. He wanted to be the master of the known world. He knew that the existing master of the known world was Darius. He knew that in order to be the master, he would have to defeat Darius. He never took his eyes off this goal.
The Principle of the Offensive
The second principle of military strategy is the offensive. All effective strategy is offensive, which requires that you go on the attack. No great battles in business or in life are ever won passively or defensively. The most effective strategy is called “the continuous offensive.” Once you go on the attack, you never stop until you achieve victory.
The Principle of the Mass
The third principle of military strategy is mass. All great battles are won by the general concentrating his forces at a critical point at a critical time to take a critical strategic objective. In business, it is called focus, the ability to bring all your powers to bear on a decisive goal or objective.
The Principle of Economy
The fourth principle of military strategy is economy. You achieve your strategic objectives with the lowest possible cost, with the least amount of damage to your own forces. Achieving economy requires thorough planning in advance of committing your resources to a business goal.
The Principle of Maneuver
The fifth strategic principle is maneuver. You must always maintain the ability, no matter what the enemy does, to maneuver. Maneuverability requires that you anticipate what might happen to offset your plans. You develop fallback positions, the ability to move forward and back, to move sideways. You never get locked into a single plan with no flexibility, or advance with no “Plan B.”
The Principle of Surprise
The sixth principle of military strategy is surprise. Virtually all battles are won because the attacking general did something completely unexpected, something that the defender had not anticipated. Alexander used this principle over and over to keep his opponents off balance. In product development and promotion, this principle is vital to keeping a step ahead of competitors and to achieving market dominance.
The Principle of Exploitation
The seventh strategic principle is exploitation. Once you have broken through, won the battle, achieved a dominant position, or taken a strong position in your market, you must move rapidly to exploit it. Destroy the opposing forces, and increase, establish, or entrench yourself with your new customers and new markets.
Setting Strategy
Four basic reasons explain why we set strategy in business:
1. To increase your return on equity. Strategy is defined in terms of financial results. In other words, the purpose of setting strategy is to earn a higher return on the amount of money that you have working in the company.
2. To reposition your company. You may find your company, your products and services, are under assault from competitors. You may find that you have to reposition your company with new products and new services in new markets with new technologies. Think about Apple between 1997 and today.
3. To maximize your strengths and your opportunities. Look at what it is you do extremely well and at your key opportunities in the marketplace, and then move rapidly to take advantage of them.
4. To form a basis for making action decisions now. The whole purpose of strategy is to prepare for taking action.
Strategic planning is not a passive activity. Strategic planning is the process of thinking through the action steps that you are going to take to achieve your goals and objectives. For you to be an effective strategic planner, you must always be thinking of the specific actions you are going to take to achieve your objectives.
Five Key Questions in Strategic Planning
Five key questions must be asked and answered over and over in strategic planning.
Question #1: Where are we now? What is the size of your business? What are your most important products and services? What is happening in the current market? What are your strengths? What are your weaknesses? What is your position in the market? What are your most valuable resources, and who are your competitors? What does the future look like? An accurate analysis of your current situation is the starting point of all strategy.
Question #2: How did you get to where you are today? What were the critical steps that you took? What did you do right? What did you do wrong? What lessons did you learn? What has changed since you began, recognizing that everything changes? What were the events that got you to where you are now?
Question #3: Where do you want to be in the future? In setting strategy, ask where you want to be in one year, two years, three, five, or even 10 years. Where do you want to be personally, and where do you want to be as a business? Clearly defining your future on the basis of where you are and how you got there is critical.
Question #4: How are you going to get there? Taking into consideration where you are, how you got there, and where you want to be in the future, what is your plan? This question and its answer are the essence of strategy.
Question #5: What additional skills or resources will you require to achieve your strategic objectives? Executive coach Marshall Goldsmith summarized this idea in his book, What Got You Here Won’t Get You There. Whatever your goals for increased sales and profitability in the future, they will require that you develop new capabilities, competencies, and skills that you don’t have today. What are they?
As Vince Lombardi said, when he became the head coach of the Green Bay Packers, “The key to success in football is to become brilliant on the basics.” The key to success in strategic planning or in business in general is for you and your company to become brilliant on the basics of your business as well. You achieve this goal by continuing to ask and answer the right questions.
The key to strategy is not necessarily to have all the right answers but to know the right questions and keep asking them over and over again.
The Key Players in Setting Strategy
Several people need to be involved in setting strategy for the company. The first is the chief executive officer, the number one decision maker, the person who is responsible overall for the final results of the organization. He or she must be intimately involved in strategic planning. The final decision makers, the CEO, chairman of the board, or whoever is responsible for approving the strategy, must be involved in the process of developing the strategy.
The implementers are all the key players whose cooperation and active involvement will be required for the successful implementation of the strategy. These individuals are usually the senior executives of the organization, the people in charge of the major departments and functions. The more involved they are in setting of the strategy, the more likely it is that the strategy will be implemented effectively.
The more key people who are involved in the strategic planning process, the more likely it is that the strategy will be implemented and that you will achieve your goals.
Get Some Help
Strategic planning is something you cannot do by yourself. It is like dentistry, the law, or medical work. You have to find someone who is objective, who has a wide variety of knowledge and exposure to different industries, and who has studied and is experienced in strategic planning. You need someone who can come in and be a facilitator of the strategic planning process.
A good strategic planning exercise for an organization requires approximately two to four days to decide upon a new basic strategy. You need someone to help you do it. As they say with regard to law, “A person who acts as his own lawyer has a fool for a client.” A person who acts as his own strategic planner probably has a fool for a client too.
Determine the Corporate Mission
The starting point of all strategy, a mission statement is always qualitative. It isn’t “to earn a lot of money,” or “to increase profitability.” A mission statement is always something that uplifts and inspires people. It is a statement of what you want to accomplish for your customers.
Here is General Electric’s mission statement: “General Electric is a unique, high-spirited, entrepreneurial enterprise known for its unmatched level of excellence, highly profitable with worldwide leadership in each of its product lines.”
A mission statement is what is known as your “umbrella statement,” the organizing principle under which everything in the company is done. The mission statement is complete when it says everthing that fits under this umbrella is what the company does, and everything that is outside this umbrella the company does not do.
If you want to add new products, services, or goals, you often have to change the mission statement. Establishing a mission statement is like getting the right combination to a lock; once you get the right combination, the lock opens. The strategy is how the mission is accomplished.
Determine Your Values
Before an organization can create any kind of strategic plan, it has to ask, “What do we believe in?” What are our essential values? The most successful companies are those that are crystal clear about their values. IBM is a good example. IBM has three values: excellent products, excellent customer service, and respect for the individual. Everything in the company is organized around those three values.
What are your values? Do you value quality? Do you believe in excellence? Do you believe in taking care of people? Do you believe in market leadership or innovation? What are your fundamental beliefs about what is right and wrong inside and outside of your business?
Here is an important question to ask yourself with regard to values: What is your ideal of the how the customer views you? In other words, how would you like your customers to think about your company? Looking at you from the outside, working with you, being involved with your people, using your products and services, and then turning around and speaking to someone else, how would you like others to describe your company? What words would you want them to use? These questions are a good starting point for determining what your beliefs and values should be.
If the people in your company had to describe your company to someone else in terms of what kind of a company you have, what would you want them to say? What would be your ideal description if you could have your company described in any terms at all?
How do you get from where you are today, the way that you are currently perceived by your market, your bankers, suppliers, and by your own people, to where you want to be in the future, to how you want to be described at that time? This question is key.
The Driving Force: Key to Strategy
The term driving force comes courtesy of consultants Zimmerman and Tregoe, and is an important concept in strategy. The driving force, once determined, becomes the key principle around which all planning is done. A strategist can choose from several driving forces.
Product or Service
The first and most popular is the product or service driving force. The product or service driving force determines the scope of your markets and the range of your products. If for example, you were Domino’s Pizza, you would have a product-driven driving force. Your entire focus would be aimed at selling more of your particular product. It is perhaps the most common driving force in business.
If your business was accounting or legal services, you would have a service-driven driving force. In other words, your entire focus would be on selling more of your services, in every way possible.
Market Needs
The second type of driving force is what is called market needs. Market needs are when you identify a particular market and you ask yourself, “What is it that my market needs?” You then develop or offer the products and services for that market.
One of my clients sells exclusively to the legal market. The company has set themselves up as a legal supply firm, an all-purpose firm that will supply every single product or service that a law office needs, from the time it signs its lease to the time it closes its doors. It supplies furniture, software, coffee supplies, paper, and stationery. Everything a law firm needs can be satisfied by this company, which has identified its market and produces whatever products those customers need.
Sears defines itself as being the American family’s all-purpose or all-resource place to buy foods, housewares, insurance, hard goods, and so on. Its goal is to satisfy the market needs of the average American family.
Perhaps the best example of a market-needs driving force is Walmart. It defines its market as “those people who live from paycheck to paycheck.” Walmart focuses on serving its customers with the products, services, groceries, and requirements that they want and need, at the lowest possible prices, and the most comprehensive guarantees of satisfaction.
Technology
A third driving force is technology. If you are in semiconductors, then everything that you do is determined by what applications your technology has in other products. Whether it is computers, telecommunications equipment, or satellites, your technology determines the products and services you develop, the markets you serve, and your plans for the future.
Apple is an excellent example of a technology-driven driving force. It only brings products to market that are based in its proprietary technological methods and patents.
Production Capability
A fourth driving force is production capability. For example, take a company that is set up to produce furniture. It has the equipment—the lathes, saws, drills, and assembly lines to produce furniture, and only furniture. Its production capability determines how much and what kind of furniture it can make. It can produce whatever its production capability may be. It can produce furniture, cabinetry, or prefabricated parts for homes, but its production capability is its driving force.
Method of Sales
A fifth driving force is your method of sales. It could be retail, wholesale, direct mail, distributors, MLM, or Internet-based. For example, the method of sales for McDonald’s is its retail outlets. This method of sales determines all the different products it makes and the markets it serves.
Method of Distribution
Number six is a method of distribution driving force. For example, Avon distributes through individuals from house to house, and person to person. This method of distribution determines the products and services it can offer, the market it can serve, the prices it can charge, and everything else about its business.
Natural Resources
The seventh type of driving force is natural resources, which could be coal, oil, gas, timber, or other minerals. Natural resources would be the driving force for a company such as Champion International, Weyer-haeuser, or ExxonMobil.
Size/Growth
The eighth driving force is size/growth. Your driving force could be determined by the speed at which you want to grow. Toyota for many years has had a size/growth driving force. Its objective has been to gain market share above all else. As it gains more market share, its costs of production decrease and profits increase.
Many Japanese companies use size/growth as their key strategy. As their costs of production decrease because of economies of scale, their prices decrease. As their prices decrease, they are more competitive and their market share increases. Finally they reach the point where they have 25 percent, 30 percent, or 35 percent of the U.S. market.
Return/Profit
The ninth driving force is return/profit. American Home Products has a variety of different products that it offers to individuals, corporations, businesses, and families throughout the country and the world. It has one simple driving force: that every single product must have a 20 percent pretax return on sales. If the product does not have that kind of profitability because of its position in the market, the company doesn’t carry it.
What Is Your Driving Force?
The selection of your driving force is absolutely critical to your future. It does not mean that you don’t have other forces operating too; it just means that your primary driving force becomes the organizing principle upon which your strategy is based.
If it is market needs, then the products and services you offer are determined by the market you have decided to serve. Your production capability is determined by that market. Size/growth and return/profit are determined by how well you serve your chosen market, and so on. And as soon as you’ve determined your driving force, then you are free to go on to the next part.
Concentrate Your Powers
When we talk about concentration of power we think of the 80/20 rule. People, money and resources, and time are always limited. You cannot do everything. You must therefore concentrate on the few things that you can do well and on your best opportunities. All strategy revolves around massing your powers. You want to focus and leverage your strengths to achieve maximum advantage in the marketplace.
One of the most important of Peter Drucker’s works is Managing for Results. In this book, he talks about the fact that 20 percent of your business will account for 80 percent of your profits, and 80 percent of your business will account for 20 percent of your profit. You always have to be looking at your business and asking yourself what is the 20 percent of your business that generates 80 percent of your profits. Remember, the cost of a business is in the number of transactions, but the profit is in the size of the transactions.
When you ask yourself what is the best part of your business to be in, you will often come to realize that you have to get out of certain parts of the business. One of the things that you ask with the 80/20 rule is “What are our key strengths?” And simultaneously you assess key weaknesses as well.
All strategy focuses on strengths and compensates for weaknesses. Ask yourself what it is that you do well, and ask yourself what you do poorly. Then, do more of what you do well and do less of what you do poorly.
Practice Zero-Based Thinking
Zero-based thinking is a strategic concept that asks, “If we were not now in this business, knowing what we now know, would we get into it?” If the answer is that, knowing what we now know, we would not start it up again today, then the next decision is, how do you get out and how fast?
One of the places where you continually apply zero-based thinking is with regard to people. “Knowing what we now know about this person, would we hire him or her? Knowing what we now know about this person’s capabilities, would we put them in that position?” And if the answer is no, then the next question is, “How do we get rid of this person, or how do we redeploy this person?”
It takes courage to apply zero-based thinking to every part of your business on a regular basis, but avoiding it can lead to underachievement and failure. It can lead to inaction, passivity, and indecisiveness. Failure in business revolves around these key reasons, just as defeat in warfare is inextricably linked to them.
Investment and Divestment Strategy
Investment strategy asks where we put our resources to achieve the greatest return on investment. Where are we going to invest our resources in new product development, in technology, people, skill training, time commitment, and so on?
These questions also require that you consider your divestment strategy. What are you going to get out of, cut back on, remove, or eliminate? Divestment strategy means that you have to get rid of yesterday before you can go on to tomorrow.
One of the basic rules for resource allocation is for you to never get into something new until you get out of or discontinue something old. Your key resources are the time and talents of your executives. If you expand into new areas of activity and continue in old areas of activity, you will diffuse your efforts and your powers. You will simply not have enough resources to do everything well.
Perhaps the number one reason for the failure of businesses is investments in managerial ego, which takes place when you dig in concerning a product or service that is not selling or not succeeding. Investments in managerial ego lead companies to take their best salespeople, their best marketing people, and their advertising budgets and focus them on the products of yesterday rather than the opportunities of tomorrow.
Crisis Anticipation
This military term, crisis anticipation, is also relevant to business. Always be asking yourself, “What is the worst possible thing that could happen in this business in the months and years ahead?” Look down the road six months and 12 months and ask, “What could happen that could endanger or threaten the survival of our business?”
Then ask yourself what you would do, what actions would you take, if such a thing were to occur? How would you react or respond if you experienced a major setback or failure in your business? A key part of the leader’s job is to look into the future and anticipate crises. It is to plan for the worst, should it occur. Your job is to always have a backup plan.
Choose Your Competition
Choosing your strategy means choosing your competitor. Who is your competitor? What is your competitor? What other companies or factors in your world determine your success or failure in your industry? Your competitors determine your level of sales, your profitability, your pricing, and how fast or how slow you grow. Establish who your competitors are and then ask yourself, “What do we have to do to win against determined competition in our market? What are our strengths and weaknesses relative to our competitors? What do we have to do to please our customers better than anyone else?”
Four Important Strategic Questions
The first key question in strategy is, “What is our business?”
What is your business today? Describe it clearly. Most people are not exactly clear what their business actually is. A good example is the history of railroads. The railroads used to think that their business was simply building and maintaining railroads, when their business was actually transporting goods and services.
Most of the railroads in the United States went bankrupt or nearly so because most of their transportation services were taken over by trucking, airplanes, and ships. In Canada, Canadian Pacific (CP) is a railroad, but it’s also CP airlines, CP trucking, and CP shipping. Early on, CP determined that its business was the transportation of people and products, and it invested in every area of transporting people and products.
The second question is “What will it be?” If you don’t do anything about your business today, knowing everything you know, what will it be in one or two or three years? How is your business changing? What will your customers want in two or three years that is different from today? What are the trends in your market?
Question number three is “What could it be?” What are the possibilities for your business? What are your best opportunities for the future? This question can open up a tremendous number of exciting possibilities.
A fourth question is “What should it be?” If you could wave a magic wand and make your business ideal in every way, how would it be different from today? What would it look like? What would you be doing? What kind of products or services would you offer? What levels of sales and profitability would you achieve? What kind of reputation would you have?
In strategic planning, one of the most important things that you do is to create a dream or vision of something that your business could be that is far greater and more exciting than it is doing today. Could you be a world leader in a particular product or service? Could you be the best in a particular area? Could you produce a product or service that people could say proudly: “This is the best product or service of its kind available anywhere”?
Could you create a corporate environment that is the most dynamic and innovative in your industry? Could you create a business that you could look at and say, “This is a great business”?
Continually ask yourself these four questions: (1) What is our business, defined in terms of how we take care of our customers? (2) What will it be, based on current trends? (3) What could our business be, if we made the necessary changes? and (4) What should it be, especially if we have no limitations?
Determine the Financial Objectives of Strategy
Financial objectives are the reason for setting strategy. Financial objectives and the changes in financial results are the key ways that you measure whether your strategy is effective. The first financial objective is return on equity, or the return on the actual amount of money working in the company, the amount invested and owned by the shareholders.
The next consideration is return on investment. It is the return on the actual amount of capital—your own investment, plus the money that you have borrowed from banks and other sources.
The third financial objective is return on sales. How much do you earn in net and gross profit for every dollar of sales?
The fourth number is net profit. In the final analysis, net profit is the only real measure of how well you’re doing strategically. Net profits that increase consistently over time offer the proof that your business strategy is a good one. In the final analysis, every successful strategy leads to increased net profit. Net profit equals, in military terms, victory. It is net profit, or free cash flow, that enables the company to grow.
Set Strategies for Profitability
In the Profit Implications of Marketing Strategy (PIMS) studies, one of the most exhaustive studies done on what contributes to profitability, the researchers discovered two key factors that were most responsible for business profitability. The first discovery was the centrality of the quality of the product or service. It turns out to be the most important factor in business success. Striving for top quality and continually improving your product or service offerings provide the offensive strategy in business. Quality is a key profitability strategy. The quality leaders in every business are also the most profitable in their industries.
The second discovery of the PIMS studies was the importance of the associated services that accompanied the product or service offering. These factors include how the product is sold, serviced, delivered, packaged, and every aspect of how the customer is treated personally before, during, and after the purchase.
Define Quality
Quality is always defined and determined by your customer, your competitor, and by the alternatives that are available in the market place. Ask your customers. How do they define quality? What does quality mean to them? What do they seek when they are thinking of buying your product or service?
The answer is that it’s not what you produce; rather, it is what they want. Many companies have no idea why customers buy their products. Many companies are not aware of why they are successful when they are, or unsuccessful when they are not. However, as Tom Peters says, the most successful companies are the ones with an internal mindset that is exactly the same as the customer’s. They see the product or service the way the customer sees the product or service, and are continually working to increase the quality of the product or service relative to the customer’s perception.
A key part of strategy and profitability is to make sure that your product or service is exactly what your customer needs, wants, and is willing to pay for.
Practice the Strategy of Quality Leadership
Begin by defining quality clearly, and make sure that everybody in your company can recognize quality when they see it. Make sure that each person knows what constitutes quality work and quality products or services. Be sure that everyone has a quality target to aim at, and that each job in the company can be measured.
The most profitable companies in the United States, and around the world today, are companies that have continuous internal and external focus on quality. Everyone talks about it, thinks about it, and continually works to improve it.
Action Exercises
1. Determine your exact goals and objectives in terms of sales, profitability, growth, and market share for the next 3–5 years.
2. Identify your driving force and resolve to put all your energies and resources into dominating your market in that area.
3. Mass and concentrate your resources, especially the people, products, services, and areas of excellence where you can attain market leadership.
4. Go on the offensive and resolve to move aggressively to take advantage of market opportunities, to sell more of your products and services in every way possible.
5. Practice zero-based thinking in every area; what are you doing today that, knowing what you now know, you wouldn’t get into if you had it to do over?
6. Implement an ongoing investment and divestment strategy in your business, with your time, money, and resources. What should you get into, or out of?
7. Identify your competitive advantages in every area of your business, and continually seek ways to offer your products and services better, faster, cheaper, and more conveniently to your customers.