2.

Developing a Strategy

The essence of strategy is making choices . . . One of the leader’s jobs is to teach others in the organization about strategy—and also to say no.

—Michael Porter

In chapter 1, we introduced “vision”—the practice of creating a unifying picture of success for the future. To realize a vision, you need a strategy—a coordinated set of concrete actions to reach the vision and achieve impact in the market. Welcome to our second leadership practice.

Many strategy discussions are faddish (e.g., one-size-fits-all solutions for greatness) or misleading (e.g., in the fast-moving global economy, strategy is dead). But strategy always depends on a company’s particular situation, and though it has evolved far beyond corporate planning, the concept is hardly dead.

Developing strategic thinking and learning to assess the trade-offs of different strategic choices will help you grow as a leader. Several executives that we interviewed highlighted how successful strategies boosted both the impact of the organization and their own leadership, too: CEO David Winn’s breakthrough retail strategy for American Express France in the 1990s earned him a subsequent stream of top job career opportunities; General Stanley McChrystal was celebrated for the daring network strategy that dramatically degraded Al Qaeda during the Iraq War; Anne Mulcahy became one of the most influential CEOs of her day for her strategy that rescued Xerox from bankruptcy.

But strategy is not just for CEOs. Most organizations have an overall corporate strategy that is supported by smaller, more focused strategies for specific business units to roll out individual products or services or to guide specific initiatives. Strategy making at any level offers rich opportunities for you to hone your leadership skills—by analyzing your unit’s situation, understanding different choices for operating within your market, and building commitment among other people for a particular course of action. Throughout the process, you also can learn why, when, and how to stick to those decisions—saying no to initiatives that take your intended strategy off track.

We’ll show you the enduring fundamentals of this practice and then walk you through six steps of strategy making—from defining a process, to making decisions and implementing them—so that you can increase your own leadership impact.

We’ll begin with a recent case of a strategy-making process within a relatively large organization: how a small team of unit leaders at the Public Broadcasting Service (PBS) developed, through cycles of adaptive learning, a strategy for a new 24/7 children’s educational TV channel. The strategy—which resulted in one of the most successful service launches in recent PBS history—began as a bottom-up initiative and had to overcome the initial doubts of PBS’s CEO.

A strategy for a dedicated children’s channel at PBS

Children’s programming has long been part of PBS’s cultural and educational mission. But beloved shows such as Sesame Street and Daniel Tiger’s Neighborhood have historically had to compete for airtime with all the other programming that local member stations distribute, so the hours of children’s educational broadcasting are always limited.

In 2005 PBS made a strategic move to reach more children beyond its member stations’ segmented schedules: it joined a consortium of partners to launch an additional nationwide channel dedicated solely to kids’ programming (at launch, the channel was called PBS Kids Sprout) that would be distributed, through cable and satellite, throughout the day and evening. The channel was initially successful, but in 2013, because of some of the partners’ shifting priorities and other educational concerns, PBS (under the direction of CEO Paula Kerger) chose to withdraw from the partnership.

Following the withdrawal, Lesli Rotenberg, PBS’s senior vice president and general manager of children’s media and education, continued to see an opportunity for PBS to expand its educational service to children. As she talked to local station managers and looked at Nielsen ratings and other data such as Google Analytics to better understand children’s viewing patterns, she saw that there was a continuing need for more quality children’s programming, especially during weekday evenings and throughout all hours of the weekend. She also believed if PBS now built its own kids’ service, separate from its onetime partners, it not only would expand overall preschool audiences, but could help realize a vision Kerger had been emphasizing—reaching more children in TV households that couldn’t afford cable channels or access to broadband internet. Rotenberg pitched Kerger on building a new, all-PBS children’s channel.

Her boss was skeptical at first. “I didn’t think there was a big enough market for us alone, nor that local stations had spectrum available for a dedicated channel,” Kerger recalled. “I told Lesli she’d have to convince me with some real numbers, and a viable new strategy.”

As Rotenberg gathered data and built a business case, Kerger met with her periodically to review her findings, always remaining tough on her general manager. From the start, Kerger insisted that the new strategy answer three questions: Is there a market need and opportunity for PBS to do this alone? Are local stations willing and able to deliver it? Can PBS organizationally develop and sustain it at current investment levels?

“This concept has to be both market-driven and sustainable. We can’t fritter away resources on a one-shot idea,” Kerger told Rotenberg. But upon reflection, the PBS CEO began to see some broader potential: “Media landscapes were changing because of digital—and this was particularly true for children’s media. I urged Lesli to team up with Ira Rubenstein, head of our digital group, and to collaborate on shaping a strategy.”

Working together, Rotenberg and Rubenstein began to see the benefits of choosing a more multiplatform approach. Their excitement grew as team members brainstormed ways to integrate educational games with television programming, based on research that proved children’s learning accelerates when they play games and video connected to the same curriculum goals. They started to pull in other PBS functions, too (technology, member relations, etc.), including Renard Jenkins of engineering, to expand their innovative thinking and to make the operational details more concrete.

As this expanded team marshaled more specifics for a new children’s channel, Kerger became its coach. The CEO kept the pressure on, but also reinforced the team’s collaborative problem-solving approach, helping members learn from each other’s expertise. In this way, they tackled technical problems like extending the reach of regular broadcast programming, while also developing pedagogical ideas at the intersection of digital and broadcast. They also brainstormed different ways to minimize costs. When Kerger set a goal for the number of PBS stations that had to commit to the new service for it to be sustainable, the strategy team began to regularly engage local leaders. Those discussions helped the team shape the outlines of the new programming service, while also assessing implications for building and maintaining the channel.

Through research and ongoing discussions with member stations, the strategy team members developed options for answering Kerger’s initial questions. They then worked to narrow those down to their final answers, which resulted in the following:

• There was indeed a quantifiable market opportunity in communities for a new 24/7 PBS KIDS channel offering the organization’s historically high-quality programming, especially with the decision to target higher engagement among children, including more lower-income households (via broadcast) and a growing population attracted to online streaming (via digital).
• There were also opportunities to expand PBS’s reach to certain community institutions (such as hospitals, where children were up at odd hours watching television).
• Member stations had spectrum available that they would use to broadcast this programming around the clock to their communities, and a significant number were prepared to make a commitment to do so.
• A new 24/7 children’s service could be financially viable if it could build on existing shows and add digital features incrementally, and if PBS units outside the kids’ team would prioritize this project over other initiatives. With this approach, existing budgets could therefore support the service, as operating units shared both new development and ongoing operational tasks by working together more closely.

These recommendations represented some tough choices for PBS and the team. The success of the initiative would depend on the participation of a sufficient number of member stations and on PBS’s willingness to redirect people resources. It would also require PBS to commit to a project that would have a permanent impact on the organization’s operating budget.

The team’s can-do approach, however, encouraged cost-saving collaboration and helped smooth over what might have otherwise been turf battles. Instead of competing for budgets, the members shared resources to reduce duplication of effort and hiring. The children’s unit cut back development of brand-new content, instead relying on existing educational programming. The digital team focused its efforts on bringing the channel online via a livestream feed. And engineering prioritized its technical work to accommodate the new service. Kerger explained some of the choices they made as part of the strategy process: “We traded off developing some near-term new programming to build a stronger, longer-term growth platform through which even more programming will be delivered in coming years.”

Once Kerger embraced the team’s strategy proposal, she began to advocate for the service across the network. In the latter half of 2016, when enough member stations signaled their formal interest and commitments on both sides were agreed, the CEO green-lighted the project for launch. The PBS KIDS 24/7 channel (as it was now branded) was formally rolled out in January 2017.

The CEO and the strategy team, working together and with member stations, had created a unique offering: the only 24/7 nationally distributed channel of engaging, curriculum-based, noncommercial educational programming, available for free, enhanced with links to educational digital games, available on children’s digital devices at home or for viewing wherever they might be. Engaging, multiplatform, interactive, and pedagogically rigorous, PBS KIDS 24/7 was like nothing else in the market. And it was successful: a large majority of the stations committed to PBS KIDS 24/7 in the first year, making it available to 95 percent of all US TV households. It was a big step forward in recognizing Kerger’s vision and the mission of the organization: PBS ratings among kids increased by 23 percent—including growth of 85 percent among children in low-income families.

Kerger views the strategy for the offering’s development and launch as one of the more successful in her tenure at the network. She is quick to give credit to Lesli Rotenberg and the full team that created it together. (Kerger today recalls her pride and wonder at seeing how many different contributors to the effort were in the room at the party celebrating the channel launch.) PBS KIDS 24/7 went on to become a valuable piece of the broader PBS corporate strategy in place at the time, focused on developing quality noncommercial content and strong distribution, strengthening the health of the PBS member station network, and building a culture of innovation.

What is a strategy?

We define strategy as a coordinated set of actions that organizations, divisions, and teams follow to win: to create distinctive value for customers, differentiate their performance, beat out competitors, and move toward the vision they’ve set. Leaders develop a strategy by guiding their people through choices about where and how to compete for customers that are better than their rivals’. (Our perspective here is indebted to seminal works by Peter Drucker, A. G. Lafley, Roger Martin, and Michael Porter.)

Following a coordinated set of intentional actions is a reminder that strategy is not accidental. Though companies and initiatives occasionally thrive by being in the right place at the right time, enduring business success requires that the group’s actions be deliberate. PBS KIDS 24/7 didn’t simply fall into its new strategy; it was coordinated by Rotenberg and the full team under Kerger’s leadership.

The phrase “where and how to compete” points to the kinds of options and decisions you’ll sift through to develop strategic choices for your unit or initiative. In creating products, services, or other business programs, you’ll have to decide about particular arenas to focus on (e.g., customers in a certain geography, industry, or market space) and the way you’ll serve your chosen customers (e.g., by offering some combination of benefits, pricing, branding, additional support, etc.). For example, for their new initiative at PBS, Rotenberg and the team chose to develop an offering for broadcast and digital, and they also decided not to partner with other outlets, as they had with Sprout.

The idea of choices is critical here, because, as Michael Porter famously said, “Strategy is as much about what you decide not to do, as what you do do.” The mark of a failing strategy is trying to be all things to all people—and not having the courage of focus. The best strategies develop offerings targeting some unique and defensible sweet spot—a winning blend among multiple variables, for example, satisfying the needs of certain customers; doing that with the right combination of product or service attributes at the right cost; shaping the offerings on the basis of particular strengths of your team; and doing it all in a way that makes it hard for competitors to beat you at the same game. Find the right strategic sweet spot and you can win too.

The process of strategy

Of course, strategies sometimes fail (even spectacularly, as famous case studies will attest). Your growth as a leader must be built not just on successes but also on learning from your setbacks. Strategy making will provide plenty of those, too, along the way. Don’t shrink from the challenges.

But as a rising leader, you should also understand why strategies fail. Two common pitfalls are:

• Incorrectly assessing an external market situation or misjudging an internal capability needed for the strategy—or both
• Being surprised by a trend that suddenly changes the game of your business—for example, a new technology or unforeseen competitor that arises

In today’s dynamic global economy, such risks are increasingly common. You should do your best to minimize those risks, but even the savviest strategists can still get caught off guard.

The practice of strategy is changing as leaders more deliberately attempt to hedge against failure and adapt more nimbly to changing circumstances. The lengthy, internally focused planning processes of yore have given way to much more flexible, outward-facing, short-cycle, and learn-as-one-goes-along approaches—reflecting the mindset and so-called lean methods seen in many Silicon Valley startups. (This kind of thinking was epitomized in Steve Blank’s HBR article “Why the Lean Start-Up Changes Everything,” but the concepts were introduced earlier in Rita Gunther McGrath and Ian Macmillan’s 1995 HBR article “Discovery-Driven Planning.”) A lean approach may seem more informal and practical, but it is not without its own structure and logic. Great leaders still follow a deliberate and structured problem-solving process to identify critical choices and develop decisions to shape their strategies. And so should you.

So what are the essential steps? What is the best way to find the right balance, on the one hand, between analysis and deliberation to make the right choices, and on the other, embracing speed, flexibility, and openness to adaptation, suited to today’s faster and more unpredictable climate?

Developing a process to make your strategic choices

You don’t frame and make such strategic choices in a vacuum. You identify and shape them through a deliberate problem-solving process, working with others, over time. Even if strategy making now happens faster, more informally, and more flexibly than previous planning-intensive approaches, some methodological discipline will sharpen your thinking and structure your learning. Let’s walk through some typical problem-solving steps to help you develop the right choices of a winning strategy.

Step 1. Set the stage

First, be clear what you’re generally trying to accomplish with your strategy making and how you want to go about it. Start with a simple checklist of key questions and tasks to guide your journey.

• Purpose. Why generally are you developing a new strategy? What’s driving the need or opportunity to do that? Do you need a fresh approach to achieving your vision, or do you have a new vision? Your strategy should begin by answering a simple powerful question about the intent of your effort.

  At PBS, Kerger helped focus Rotenberg’s desire to expand the children’s market with a new kids’ channel by asking if there was a need for that and, if so, could the network viably do it on its own?

• Audience and stakeholders. Who will the strategy potentially benefit, who must be involved in developing it, and who must ultimately approve it? Key stakeholders might be, for example, major influencers in the organization, board members, or frontline people who would have to be centrally involved in delivering the strategy. It might also, later if not sooner, include customers, partners, and other relevant players in the external environment. (You’ll have to balance the risk of potential competitors being alerted to your ideas through such external discussions with the benefit of gaining valuable input.)

  At PBS, Kerger coached Rotenberg that the strategy, though ultimately aimed at children and parent viewers, would have to be built by—and ultimately be embraced by—both the broader organization of PBS and the leaders of the network’s local stations.

• Scope, constraints, and potential implementation implications. What arenas and unit of analysis must the strategy be situated within? (That is, is the strategy for a particular business unit, initiative, or a broader part of the enterprise?) Are there limits or boundaries to what can be pursued from the outset? If the strategy is accepted, what ripple effects will follow? What are the implications for other corporate units? Customers? Brand identity? And so on.

  At PBS, the new channel began as a service strategy within the children’s educational unit, but as it evolved, it touched most other parts of the organization. From the start, it was always seen as supporting the broader vision of the network. At the same time, Kerger imposed important constraints on the level of investment that would be available for the new service.

• Participants, engagement, deliverables. What kind of team will work to create the strategy? How will its members work with one another and the broader universe of stakeholders? Will there be off-sites, virtual meetings, multiple strategic planning sessions? How many, when, and so on? And what final form will the strategy take?

The creation of any strategy demands finding the right balance between involving key stakeholders and experts in the problem solving but also keeping the effort small enough to remain nimble and practical. The best projects, as the PBS team represented, are a hybrid: organized as a small central team that then involves other contributors periodically as needed. The team ultimately led by Rotenberg and Rubenstein was a core of children’s media and technical experts from different PBS units, but its members regularly met and shaped the project with input from other leaders and key staff from member stations across the system. (See the box “Don’t go it alone.”)

As your team starts to work, identify the final products your effort must produce and for whom: Will it be a written plan, a presentation for your boss, or an executive-style memo for your CEO? Will it include (as such things normally do) specific goals and objectives, a fit with a vision, analyses, a rationale for the initiative, a financial model, competitive analyses, an assessment of risks and rewards, and so on?

Give some initial thought to how you will communicate the final strategy and extend it to the broader organization. Involving as many stakeholders as possible in the process—including frontline employees—will smooth the way for greater acceptance. For those not actively involved, good communication will be particularly necessary. At PBS, Kerger noted that a major success of the PBS KIDS 24/7 strategy was how broadly and continuously the team had built participation and enthusiasm across multiple units of the organization.

Step 2. Set strategic goals

After such preliminaries, talk to your team about what success for the strategy making overall might look like—how to imagine what a great result would be. To get more concrete, think next about some specific goals and how the strategy will help move your organization toward whatever kind of future vision might be in place (see the box “Check in on your vision”).

Because lean-style strategy making involves iterative learning and evolution of thinking, different strategic choices will likely emerge through your process, but whatever the path forward, the final measures of success (what you’re ultimately aiming to achieve) will likely stay pretty constant. Choose measures that clearly signify value and impact consistent with your team’s vision and the broader vision of your company. The goals you choose should resonate with your key stakeholders, too.

In the PBS KIDS case, Kerger and the strategy team agreed early on that the programming for the potential new channel would have to reach a particular audience size, measured by a threshold of member affiliates that would agree to carry the service; and they placed special emphasis on reaching more lower-income households. They also understood that the channel and its programming would have to be in line with the PBS mission of educational improvement of the nation and the network’s corporate strategy of building and distributing quality content, ensuring strong member stations, and promoting innovation.

Different businesses and different strategies will have different measures of success. A business unit with a vision of, say, reaching a new level of market growth might set strategic goals that are top-line financial targets for specific customer segments or achieving a percentage of revenue derived from new products. For a civic or governmental organization committed to, say, eliminating poverty, strategic goals might be providing a level of food and shelter security for a specific community or increasing its level of employment. For David Winn, who became CEO of the failing American Express Bank in France, the organizational vision was to revitalize the institution with the consumer financial expertise of the global corporation; he set strategic goals to make the bank profitable again and expand market share against financial competitors. General Stanley McChrystal’s mission when he took over the Joint Special Operations Command in Iraq was to slow the terrorism of Al Qaeda; he was working toward a vision of establishing a more peaceful Iraq and Afghanistan that wouldn’t harbor terrorists. The strategic goal he set was to kill or capture as many Al Qaeda leaders as possible.

A good strategy should aspire to achieve a limited number of relevant goals that stakeholders of the organization can easily understand; it should also simply explain how achieving them will reflect progress toward its vision. (Goals are usually further broken down into specific objectives and intermediate outcomes for executional planning; see chapter 4.)

Step 3. Understand your current situation

Once you’ve set goals tied to your unit’s or your company’s larger vision and strategy, turn your team toward understanding the status quo. Make an honest appraisal of your team’s existing business—current performance, assets, capabilities, basis for competition, and so on. Then do the same for the world in which your unit and broader company operates, looking at how that landscape is changing (e.g., shifting consumer tastes, new competitors emerging, new technology restructuring business models, etc.) and the threats and opportunities that come with those changes. This dual assessment will provide the starting point for developing ideas and opportunities to improve or even transform where and how you compete and deciding on a distinctive value proposition.

You can approach the appraisal of your existing team in many ways. It may vary depending on how well the performance of your company is already documented and understood, and the level of analytical rigor you feel is now needed. A radically lean effort might begin with minimal analysis or a starter sketch that is then iteratively tested and refined, but a few fundamental questions must nonetheless be addressed, for example, “Who are we today and how does that fit with the external world and new challenges?”

Other frameworks can help with such questions. Consider, for example, Peter Drucker’s theory of the business—the often tacit assumptions of “policies, practices, and behaviors” about how (and how well) your company operates and how well those fit today’s competitive climate. Or you may want to analyze your business model in more detail, which includes your key value proposition to customers; how you make money (which is important whether you are for-profit or nonprofit); and the processes and resources you rely on to deliver value. The current situation appraisal should also consider aspects of talent, financial and technology resources, culture, brand, and similar assets to bring to your strategy for winning.

The second part of the task—understanding the external world in which you operate—is complex: you must consider not just existing markets, customers, and competitors, but also those emerging and changing due to social, economic, and technological trends. This is also the time to assess major discontinuities in markets and how emerging new players are reinventing ways to serve the traditional needs of customers (including what Clayton Christensen has famously labeled disruption) or creating whole new markets that previously didn’t exist.

Frontline workers are important sources for getting these perspectives (another reason for including people with pivotal jobs in your strategic task force). In all cases, you should be sure to tap their experience and observations—both about forces at work externally (changing customer needs, new competitors arising, pricing pressure, etc.) and internally (e.g., organizational obstacles or operational inefficiencies blocking your company’s ability to compete).

Many off-the-shelf analyses assess internal and external issues, and armies of consultants are happy to help you further, often with their own special tools, including an increasing set of analytical and big data interpretative technologies. But beware: you can be easily overwhelmed by the amount of analysis you may think you have to do, even (and, sometimes, especially) when you have consultant help. (See the box “When to bring in consultants.”) Constraints and the pace of competition will here again force you to make some choices. Constantly ask yourself whether the ongoing investigation is still adding substantial benefit to the process. Keep building your experience about the kind of effort needed: ideally, when you’ve done enough to get the picture roughly right, but not so much that momentum and opportunity are lost due to analysis paralysis. These are judgment calls that distinguish effective from less effective leaders.

In the PBS case, Kerger challenged Rotenberg not only to explore the market need and station capacity for a stand-alone children’s channel, but also to leverage the knowledge of Rubenstein and his colleagues in the digital unit about technology’s evolving impact on the media landscape. That could have expanded into an almost endless research project, but by working with a few established experts, mining PBS’s already rich audience research, and also filtering what was being learned with the judgment of various local station managers, the PBS strategy team found the right balance to be sufficiently comprehensive—but not needlessly exhaustive—to make the design choices required for a new channel.

Identify key issues and problems to solve

In synthesizing your findings from the internal and external investigations, strive to identify the key issues and problems to solve, that is, where there’s a mismatch or clear opportunity arising when you compare trends or external conditions and what your organization is currently doing. Your central task is to select questions relevant to the strategy that will frame key choices and ultimately shape the overall strategy.

For example, as the research unfolded, the PBS team realized the strategy for the new children’s channel would have to address several critical issues: specifically designing the programming service for the channel to deepen engagement and learning opportunities with the target audience of children in low-income households; identifying the most promising opportunities for integrating broadcast content with digital games; differentiating the new channel from others in the children’s media marketplace; determining the operational implications of the cross-platform approach; uncovering the financial and technical implications of adding a new channel to the operations of current member stations; and many others.

Step 4. Develop options for where and how to compete

Once you’re clear on your goals and understand your team’s current situation (both internally and externally), you can begin to identify the key choices defining your strategy. The shorthand we’ve been using for strategy making—“deciding where and how to compete”—reflects the two core, interrelated decisions that represent your formula for making an impact in pursuit of your vision. They will ultimately frame the kind of sweet spot of unique and defensible value your strategy must strive to create.

Remember, as discussed in our original definition, “where” and “how” to compete are placeholders for several more subtle themes. “Where” might be literally geographical—a particular market in France or a specific theater of operations in Iraq. But it can also signify a certain group of customers, defined by selected demographic characteristics, or a group of companies in an industry sector, or making a division between wholesale and retail channels, or many other things. (Because segmentation of market opportunity has become its own rarefied science, you may need some specialized expertise to help.)

How to compete can refer to a product or a service, the particular markets through which you sell them, or some combination of both. “How” can also refer to the specific approach you choose for your packaging, pricing, branding, financing, customer service, and many other things, including whether you do these things in-house, purchase them from outside, or acquire new capabilities (see the box “Exploring make-or-buy and acquisition options”). “How” combines the “what,” “why,” and “in what manner” that you are using to create distinctive value for your “who.” In McChrystal’s military case, the how–to-compete issue turned on building a new culture of information sharing among disparate military and civilian units, so they would collaborate better and faster to strike terrorists across the Middle East. For Winn’s American Express bank, it was the design—features, pricing, regulatory compliance, check-writing services, interest-paying rates, and so on—of a new retail product at the heart of a transformed consumer strategy.

The PBS children’s channel focused on a strategy of “where” that would target children and parents (especially mothers) in member station communities and also particularly try to reach both children in lower-income households without cable access and others using digital devices for streaming. The “how” of the strategy that eventually emerged was to develop a high-quality, curriculum-based, noncommercial educational service that was cross-platform in delivery and interactivity.

From problems to opportunities

To begin developing the “where” and “how” choices for your strategy, consider the problems you identified in the previous step—for example, an out-of-date business model, encroaching competitors, maturing product lines, and so on. As you consider these problems, your analysis may well suggest new ideas to do something excitingly better and different. Look for opportunities for winning in some new way, suited to the changing environment, such as leveraging a new technology to improve your cost position, redeploying your talent to improve a customer experience, or adapting products to changing cultural tastes. You may also want to consider whether partnering or even acquiring another business may open new opportunities for creating more value for customers. Keep asking yourself and your strategy team: Is there something superior and distinctive we could do, in light of what we’re learning about our company and its competitive, external operating context?

Developing the best strategic options requires creativity in addition to analytic skills. Leaders can often boost creative capability by examining innovative approaches to growth in other businesses and brainstorming whether there are patterns that they could adapt to their own company. You can also find fresh thinking outside your strategy-making team: have the members brainstorm with your frontline people, explore new innovative approaches by collaborating with lead customers, or call on networks beyond your company. For example, you could partner with a university or design firm, or work with outside experts to adapt a wholly different business model from another industry.

Throughout our executive interviews, we constantly heard about strategy making that was based on options developed by learning from others—McKinsey’s global managing partner Dominic Barton raising up innovative client service approaches that were being experimented with in different corners of the firm’s global network; Tamara Lundgren applying new approaches to mortgage securitization in Europe based on technologies she had utilized in the United States to create more innovative products earlier in her career for Deutsche Bank; Stan McChrystal literally borrowing some of the network organization’s playbook from his enemy to create the more nimble, information-sharing culture of Allied Special Operations in Iraq. At PBS, with Kerger coaching her, Rotenberg expanded her horizons by engaging other colleagues who, with her, developed the idea of a combined broadcast and digital service, with crossover content and interactive learning games linked to the broadcast programming.

Narrowing the possibilities

The PBS strategy team fleshed out its final strategic choices through more discussion and problem solving between the broadcast and digital units of the organization, and its ongoing research with member stations, too—allowing all stakeholders to learn from one another and understand the costs and benefits of a dedicated, multiplatform channel. The team was able to finalize decisions based on some fact-based projections of audience size and a lot of carefully collected and analyzed feedback from—and specific commitments made by—local stations in the network.

As you start to develop different options for your strategy—by exploring different combinations of where and how to compete—you’ll need to identify certain filters for making your final bets. One set of filters should be Porter’s five essential tests of a good strategy (see the box “Five tests for your strategy”). Beyond those, a few other usual suspects should also be part of your investigations: standard cost, benefit, risk considerations; the likelihood that your organization can deliver on the value proposition; how much flexibility you have to fall back on or change direction if the new strategy doesn’t work out; whether a particular option will also provide learning to more generally improve future performance; and, of course, how well the strategy fits with your vision for the group, as well as the strategy and vision of your organization overall.

As you start to formulate different options, you’ll feel the risks and pressure to make the right choices. Careful analysis and using the right filters will be critical, but bear in mind that going from “where we are” to “where we want to be” can’t be achieved only by rational calculation. You can’t analyze your way into some brilliant new way of operating, nor can you surely predict what new product or service is going to take off and help your organization soar. Improve your chances of success by also considering less tangible factors, for example, how urgent the need for a new strategy may be; whether the timing is right to make a big change or it’s better to wait until later; how emotionally ready your team is to undertake a certain new strategy idea versus another; the potential ripple effects—both positive and negative—on the organization beyond your own unit or operating group; whether you have the talent on board to do what’s needed, and if not, whether you can find and hire them quickly enough; and whether you yourself have enough confidence and strength to do what’s needed. Which now brings us to you and your leadership role in getting to final decisions and action.

Step 5. Assess options, engage stakeholders, move toward decisions

As smart and hardworking as your strategy team may be, it won’t get every thing right the first time around, and you as the leader must set the tone for your people to learn and adapt toward the best possible answers. New information will appear, situations will change, bugs will surface that will reveal flaws in your “where” and “how” choices. Good strategy making, especially in today’s operating climate, is more of an ongoing process than a decision that you make once and forever. The recognition of this reality is why lean approaches are growing in popularity, shifting away from more static strategy formulation and planning that presupposed completeness once key senior leaders had spoken.

That’s not to say that developing strategy doesn’t require some final decision making and, indeed, moving from analyzing and debating options to real action. Knowing when to make that critical shift is where good leadership makes a real difference. The boundary between such steps is more blurred now, and strategy is generally more iterative—marked by testing, learning, and continuous adjustment, not punctuated finality. In its own simple way, the PBS KIDS 24/7 story, with a solution that slowly evolved and improved over time, is one more example of the trend.

As you develop your own strategy, consider embracing at least two learn-by-doing aspects of the lean startup approach. First, as you identify different options of where and how to compete, try out the ideas with key stakeholders whom you identified earlier in the process and refine accordingly.

Second, consider taking a further step to test your ideas—literally run trials or experiments of your most promising options (e.g., building a prototype, mock-up, or simulation of your product or service, and then sharing it with stakeholders to observe usage, bugs, and operational challenges).

Such testing will reveal what works and what doesn’t, and you’ll doubtless gain insights to make your strategy even better. Testing can also break the paralysis of uncertainty, as Ron and Logan Chandler wrote in their HBR article “Four Tips for Better Strategic Planning.” Finally, testing and experimentation can help you more deeply understand barriers to overcome and the resources and systems for implementation at scale. It could also highlight new aspects of value that you can package and sell, or add to your marketing campaign.

You can use testing for any strategy-making process, though your situation may call for different levels of rigor. Common practices include setting up specific hypotheses to test, comparison between control groups and groups experiencing the new product or service, iterative refinement of the offering based on earlier rounds of testing, and so on. At key intervals, your strategy-making team should reflect on what it’s learning and brainstorm changes to improve chances of success.

The PBS KIDS 24/7 strategy mostly involved packaging and distributing content already known to member stations, so the team did only minimal and informal testing of that, mostly by discussing sample programming schedules with other leaders. But the incorporation of gaming and digital streaming products was much more experimental, and the team created some simple prototypes to help network executives understand and critique the concept and to test it with target audiences. The team also leveraged existing research funded by the US Department of Education’s Ready to Learn grant, which validated the educational benefits of combining broadcast programs with game play linked to the same learning goals.

Avoid indecision

Testing, learning, and evolving a strategy must not, however, become an excuse for extended indecision. As a leader you must be both open to new ideas but also committed to action. You can’t develop strategic options forever. At some point, you have to freeze the code and commit to a strategy, or risk losing valuable momentum. Thus, at PBS, after a year of development and testing, Kerger and the team officially launched PBS KIDS 24/7 in partnership with member stations.

That’s not to say you shouldn’t still seek learning and improvement even after a strategy has been rolled out; it’s always right to correct missteps and refine improvements over time. But after the initial process of development and testing, teams need a clear signal to move ahead and commit to coordinated action. Finding the right time to do that—knowing when you’ve not only analyzed enough but also done enough real-world testing to shake out remaining practical problems and adapt accordingly—and then having the courage to move forward is the critical purview of the leader. As you develop strategy, watch for the right window to make that decision.

Step 6. Allocate resources and manage implementation

The clearest signal that you are truly launching a strategy is when you begin to allocate resources and build implementation into your operational processes. This, too, requires some advance thinking and preparation. Toward the end of any strategy-making process, you will have to do more detailed financial and organizational modeling—analyzing the investment and people needed, additions or modifications of infrastructure, changes in organizational structure and responsibilities, and so on.

Once you’ve agreed on a final strategy, you and your team must build the choices and decisions into existing systems for your company: you must integrate funding, cost allocations, and expected revenue (as appropriate) into your budgeting process. You must accommodate any new recruiting and training within your company’s HR systems. You must introduce any new operational, technology, and infrastructure requirements of the strategy into other functions as appropriate (for more details, see chapters 3 and 4).

But throwing the implementation switch is not purely mechanical. You as the leader must also ensure that your organization embraces and pursues the new strategy in a way that generates the results you hope for. To do that, you’ll want to pay special attention that the strategy is managed for the highest possible performance—focused clearly on appropriately aggressive goals, well integrated into performance reviews, freed from what may be constraining barriers in the structure and culture of your organization, and similar (more on this in chapter 4).

In addition to providing for the operational integration of implementation, there are a few additional steps you should consider to get your strategy off on the right foot and build critical early momentum.

Focus investment

Planning and testing is always easier than finally committing to the public launch of something new. Once you give the green light, you might be on the way to becoming a hero, but even a promising strategy might fall flat and open you up to criticism or worse. But when you’re ready, have the courage to move forward and accept the consequences, because unless you enter the game, you will certainly be seen as a failure. Too many leaders undermine their chances of success by flinching at the moment of execution.

Anne Mulcahy, again reflecting on her Xerox turnaround, emphasized the importance of considering resource allocation as a leader: “Much of the leadership I had to exercise was fighting to secure the right funding and people needed for the new initiatives. Leaders often don’t want to expose themselves to failure by making the hard decisions, so they suboptimize and put a little money here, a little money there, and nothing has enough oomph to break through. Those decisions are really difficult, because inevitably you’re taking money away from one group to support another.”

As implementation starts to move ahead, you’ll also have to keep enforcing discipline on what the unit has to stop doing to maintain the focus of your strategy. Just because everyone seemed to agree in this or that workshop about making a major shift, or shutting down this or that older initiative, doesn’t mean they will follow through on their promises. Institutions are hard to change, and the anchor of tradition and what’s familiar can be very heavy. PBS, in order to pay for the new dedicated children’s channel, had to postpone the launch of new individual shows and undertake some organizational restructuring. Kerger had to make and enforce what were ultimately some difficult decisions.

Communicate clearly

Any strategy-development process will have its share of complexity. Your job as a leader is also to simplify and communicate your choices about where and how the team will now play—and why. Everyone in the unit and other stakeholders (colleagues in the organization, board members, customers, investors, partners, etc.) must understand what the strategy intends, why specific goals are targets, and how the team will achieve them. Keep your key messages short, powerful, and easy to understand; they should clearly connect strategy to the vision and mission. Repeat them constantly, in every interaction you have with your stakeholders, and make clear what the strategy will mean for each of them. (The discussion and experimentation you’ve had along the way will mean that the key tenets will not be surprising, but they will still need to be constantly reinforced.)

Mulcahy engaged the people at Xerox constantly during the company’s strategic transformation. As she met with stakeholders worldwide, she always explained how their particular work could help the company’s strategic efforts. By staying away from conceptual executive speak and addressing the implications for change in a targeted, practical way, she was able to make the strategic transformation personally meaningful.

At PBS, Kerger continues to allocate significant time to promoting PBS KIDS to the system and a wide range of stakeholders—speaking candidly and personally about the importance of the strategy and its fit with her vision and the broader educational mission of PBS. She is methodical in reaching out to different leaders across the organization, her board, station managers, and other community leaders in the PBS network. She also now regularly references PBS KIDS 24/7 in her outreach to current and future donors across the system.

Keep learning, keep adapting

The notion that strategies must be continuously renewed is not new, but the pressure on organizations to do that is harsher than ever before. The rise of lean and learn-by-doing approaches to strategy reflect a new generation of organizations finding ways to adapt to a more volatile and competitive climate. To help with the shift, they are using new technologies to collect and analyze large amounts of customer and market data, including, in real time, enabling faster tailoring of product or service offerings as change unfolds.

Similarly, at PBS, the national office monitors viewership progress of the new children’s channel and continues to collect feedback through audience data analysis and ongoing discussions with local station leaders. It has integrated PBS KIDS 24/7 into regular planning and operations for all PBS national units, and managers continue to work with content producers and curriculum advisers to refine the various offerings.

As a leader, you should embrace such tools, but don’t confuse technology with human judgment or assume that more data analytics is all you need: if you’re going to keep your strategy fresh and relevant, you must keep challenging the organization with these questions: Why is a particular strategy working or not? Why are changes in markets opening up new problems or opportunities? What, in fact, does that mean for our strategy now—and tomorrow? Leaders lead strategy making by leading the learning that must continuously shape it, while also looking to reinvent it periodically through more dramatic innovation over time. (For more on this, see chapter 5.)

Are you ready to lead a strategy-making process?

Kerger brought good judgment and a willingness to help a passionate, bottom-up, cross-functional team succeed in its development of a successful new kids’ channel strategy. The team members’ willingness to collaborate and learn from each other, plus some fortuitous timing and even a little luck, all contributed to that success. In the end, however, the most critical factor was the disciplined problem-solving and iterative learning approach Kerger encouraged the team to follow. Its analysis of markets and opportunities, engagement with other leaders and experts across the system, and then the continual refinement and improvement of the concept that it developed over the course of a year allowed PBS to navigate key strategic choices about where and how to create new and distinctive value within its educational mission.

If you are an emerging leader in a larger organization, be alert to strategy-making opportunities to build your knowledge and skills. You might be invited—or raise your hand—to develop strategy for a new product or create a localized strategy to start a process of innovation or some broader transformation for your firm. Or you may have a chance to develop a strategy outside the boundaries of a traditional corporate structure, for example, with a consortium of partners working on a collaborative venture, or to help launch a new experimental initiative or social advocacy program your company is sponsoring. Every opportunity to develop new forms of value, requiring informed choices about where and how to compete within a particular domain, and then turning those choices into well-aligned action, can provide you with valuable experience—teaching you how to work toward your vision and achieve impact through the focused power of people working together.