CHAPTER 2

Principles for Winning

 

Think to Win (TTW) is more than a process or set of tools. It’s a mindset that becomes habitual. It’s a way of looking at all aspects of life—both professional and personal—problems as well as opportunities, big issues, and small nagging concerns. TTW can be mastered by everyone and used throughout a lifetime. And everything you need to know is in this book.

We start with five principles that serve as our compass to keep us focused and guide us to concentrate on what matters. Our principles are the foundation of Think to Win. They’re integral to every step in the process and we’ll refer to them often as we make our way through TTW.

Here they are:

  Challenge assumptions

  Scope the issue

  Rely on facts and data

  Focus on the vital few

  Connect the dots

And here’s what they mean and why they are so important.

Challenge Assumptions

An open mind is essential for Think to Win and it starts with a clean slate that accepts nothing is a given. Many of our assumptions are so basic that we accept them without even realizing it. There must be a willingness, and even an eagerness, to identify, explore, and reimagine all of them. Understanding our assumptions is the starting point for putting TTW to work whether we’re trying to solve a problem or take advantage of an opportunity.

The importance of this understanding is a lesson Jill shared with her board of directors soon after she became CEO of a large New England nonprofit. The 22 communities served by the organization depended heavily on the nonprofit’s 600 employees for affordable daycare, after-school enrichment programs, and scholarships for children to attend summer camps.

Early in her tenure, however, Jill faced a financial crisis so serious the nonprofit’s continued existence was in doubt. Expenditures were crippling the organization. The primary source of the hemorrhaging was the high cost of maintaining a number of expensive properties. Some had been bought years earlier; others had been bequeathed by donors. Upkeep was preventing the nonprofit from helping more kids. But the structures on the properties were considered sacred cows, and any proposal to sell them was taboo. The unspoken assumption was that these buildings defined and identified the organization with its constituents—and especially with its influential corporate donor committee.

To address the financial crisis, Jill engaged her board and executive staff in the TTW process. Jill needed to set priorities that would improve the short-term financial picture and establish a framework for long-term viability. The members of the board represented a cross section of ages, genders, and ethnicities, and reflected how deeply the organization was integrated into the community. There were business executives, lawyers, elected officials, shop owners, educators, and parents. As the board began to look at the issues, Jill emphasized that “Challenge all assumptions” was the mantra for the first session—everything was on the table, including the buildings. Were the structures really necessary? If the organization had no buildings, would it still be able to serve the community? These questions were no longer taboo.

Several intense days of lively and forthright debate followed. Members of the board and staff looked closely at the organization’s values and what its work meant to the community. They all agreed that the nonprofit must remain true to its service organization mission, which they defined as developing and supporting strong children, strong families, and a strong community in spirit, mind, and body. Buildings were just venues. Essential services to the community defined the organization, not its real estate.

This fundamental understanding changed the direction of the organization and energized the staff and the board members. Together they developed a new plan that reimagined how the nonprofit served the community and laid the groundwork for how it would continue in the future. They made the decision to sell off some properties and focus their financial resources on much-needed repairs and upgrades to those they retained. The nonprofit is now stronger than ever, and there is a new spirit of enthusiasm throughout the organization.

Scope the Issue

TTW requires clarity of thought and discipline, even before the analytical process begins. If an issue or problem isn’t properly scoped out, everyone involved spins their wheels. While TTW can be applied at any level or scale, it is important to identify and agree upon the scope of application. Within a company, is the scope of the issue departmental, divisional, or companywide? Agreeing on the appropriate scope helps align everyone to work from the same page.

One of the biggest caveats is the importance of avoiding “scope creep.” If an issue or problem isn’t properly scoped, then wasted time, energy, and resources are sure to result.

Hank knew the importance of scope when he took over as vice president of operations for a small appliance manufacturer. He was told that the company’s “manufacturing process was broken” and needed a “complete overhaul.” But complete overhauls are costly and time consuming, and Hank also knew that he had very little of either to get things fixed.

So rather than plunge headlong into a multiteam, multi-phased overall study, Hank spent a few days observing and asking questions. His observations pointed to problems with the engineering work that preceded the manufacturing process. A spotlight on the engineering function was much more focused, manageable, and easier to work with and fix. So time spent scoping an issue is well spent . . . and imperative. Being able to define what has to be addressed in one or two crisp sentences is critical for success.

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Rely on Facts and Data

Anecdotes are not data. Facts define an issue in a way that leads to meaningful, valid conclusions that anecdotes, instinct, and gut feelings can never do. Do we have enough data? Do we have too much and can’t tell what really matters? How confident are we in the integrity of our “facts”? We may want to hear from people who think “going with their gut” is the right approach, but we always have to keep in mind that facts can never be ignored.

And we don’t want to just compile facts; we want to know what they really mean. Let’s say that our product has a 75 percent market share. This means that we’re doing great, right? Not necessarily. Not if our share last year was 90 percent. What if our market is changing drastically? And what do we mean by “market”? Are we acting like Blockbuster, clinging to brick-and-mortar stores and fatally underestimating the Netflix impact on our future? To put it another way, are we resting easy because we have 75 percent of the buggy whip market even as the new Model Ts are rolling off the assembly line?

TTW means that we must avoid the temptation to mistake assumptions for evidence and that we must be rigorous in separating empirical data from “common knowledge.” “Common knowledge” is sometimes neither, and things that “everyone knows” are not always correct. The maxim used to be: When in doubt, go with something tried and true. We believe the saying now should be: If it’s old and tried, it’s probably no longer true.

Keep in mind that people who argue best aren’t always right. Drama majors may be able to talk rings around airline mechanics; this doesn’t mean that they know more about why the starboard engine is overheating. Listeners tend to give more credence to points of view that are passionately or eloquently expressed. When those opinions and beliefs are not grounded in fact, they can lead to faulty analysis, or immobilize decision makers at a time when bold action is called for.

TRY THIS

The recent economic recession propelled a well-known furniture manufacturer into a dramatic downsizing. But even after the cuts, market conditions remained sluggish, and the company’s future remained precarious. In an effort to address the problem, top managers hosted a town hall forum for middle and upper management in order to elicit feedback on additional belt-tightening measures that they believed were needed. They were taken aback by the response. Some department heads were so opposed and vociferously negative about any further downswing that they abandoned their plan, choosing instead to ride out the situation and hoping conditions would improve.

The leaders were afraid their top talent would jump ship if any major changes were implemented. Each time restructuring and a new direction for the company were raised over the next 18 months, the leaders caved, even though they were convinced that change was needed. As the company’s performance tumbled from bad to worse, the CEO and chief human resources officer finally decided they needed facts. Some quick research was imperative and what they found shocked them:

  On a 10-point scale that measured how the employees felt about the clarity of the mission and future direction of the company, the score was only 2.2 out of 10.

  Rather than being averse to change and restructuring, the organization overwhelmingly craved it. In fact, top talent was poised to leave if leadership failed to act.

The result was fast action and a solid turnaround, based on a fact-based plan and not on the protests of a handful of discontents.

Focus on the Vital Few

When faced with a company, operating unit, or department that is mired in problems, the best approach is to identify them all and attack them all. Right?

We think not.

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Although there may be an instinctual desire to solve problems by waging an attack on all fronts, this type of scattershot approach rarely yields the best results. Rather than scoring multiple victories, the process of spreading resources to cover more territory generally makes them less effective, and usually results in a failure to make significant progress on the vital few priorities that really matter.

When Rita took on the task of revitalizing a once-popular energy drink line, it was in freefall. The brand had lost critical shelf space in key markets, elbowed out by aggressive competition from a newly introduced brand backed by strong, youth-oriented ad campaigns. Market share had plunged from 40 percent to 28 percent in less than a year. Leadership feared this was a death spiral and was threatening to cut its losses by discontinuing the product line. Rita’s colleagues saw the brand as stale and irrelevant and did not believe that she would be able to resuscitate it, no matter what she did.

But Rita took up the challenge. As she conducted her initial review, she was impressed by the quality and quantity of research the prior team had collected. It had amassed a huge amount of data on consumer needs, demographics, and changing consumption patterns. The prior team identified a long list of problems that needed fixing, all of which it tried to tackle simultaneously. Not surprisingly, it failed. Trying to stretch limited resources to cover multiple initiatives resulted in an anemic effort that produced no wins and a lot of frustration. It also resulted in the departure of Rita’s predecessor.

You may be familiar with the Pareto Principle, better known as the 80-20 rule—the idea that roughly 20 percent of the causes generate about 80 percent of the effects. The rule is named for Vilfredo Pareto, a turn-of-the-century Italian engineer-economist-sociologist-philosopher, who noticed that 20 percent of the pea pods in his garden yielded 80 percent of the peas.

In today’s competitive environment, we’re way beyond pea pods, so TTW has given Pareto an upgrade: the 80-20 rule has become the 90-10 rule. With TTW, we believe that pinpointing the most important 10 percent will impact about 90 percent of the whole. This applies to both problems and opportunities, and this is what Rita did with her team.

To winnow down her predecessor’s long list of problems, Rita conducted a key issues workshop. She asked her team members to arrive at a consensus list of no more than six priority issues—the vital few. Then, by applying criteria such as competitive threats, consumer choices, pricing, customer requirements, and category growth, they sliced the list in half, pruning it down to the three that were most critical, two of which needed urgent attention.

The biggest of those was pricing. The price gap between Rita’s prestige brand and the rest of the competition had grown so large that many consumers had decided it was no longer worth the money. As with the Duracell Ultra battery, even customers who believed Rita’s energy drink was “better” didn’t think it was “sufficiently better” to warrant its significantly higher cost.

Rita knew that she had to confront the issue head-on; no baby steps would do. She had to sharply cut the price of her energy drink and do so immediately. A week later, during a presentation to her division leadership, Rita laid out the vital few initiatives her team had identified, with a price reduction as her number one priority. Rita’s boss liked her decisiveness; she also liked the clarity of thought behind it. Within six months, Rita’s energy drink line started to regain market share. A year later, the company greenlighted an innovative ad campaign to accelerate the brand’s resurgence.

Connect the Dots

Focus is great. As Rita’s experience showed, it’s important to lock in on the “vital few” things that matter. But a focus that is too narrow has another name, tunnel vision, and it can blind us to the significance of the final TTW principle: linkage. If the three laws of real estate are location, location, location, for TTW they are linkage, linkage, linkage.

There must be a clear line of sight between problem identification and actions to be taken. Making 10,000 widgets an hour may meet an ambitious production target, but unless it also supports the broader target of achieving low-cost leadership, the accomplishment won’t count for much. And if the market can’t absorb all those widgets, it means even less.

This was the case for Gary, the new manager of an automotive parts plant that was considered the crown jewel of his company. Newly fitted out with the latest robotic technology, the plant should have been a low-cost/high-efficiency production star. Instead, the factory had become a notorious underachiever. Malfunctions and cost overruns were the norm, not the exception. These big and persistent problems were inflating costs, placing the company at an ever-increasing competitive disadvantage.

Gary’s challenge: control costs and get the factory working efficiently. As he listened to his department heads, he spotted a common problem: they were all focused on their quotas. Not one of them was looking beyond internal production targets. When Gary studied the printouts, he saw that the state-of-the-art robotics that should have lowered production costs had actually created the problem. The newly installed equipment required a particular skill set, but the requisite workforce retraining had never taken place. As a result, technology had outpaced the capability and competence of the people on the line, which meant mistakes, downtime for the equipment, and high levels of unacceptable end product.

When Gary realized the problem, the solution was clear: improve the technical capability and competence of the workforce, and develop process improvements to boost equipment reliability, reduce rejects, and create a lower inventory level. The new plan was put in place and within six months, costs came down by 30 percent. The effect of linkage—the ability to simply connect the dots—can be very powerful and very effective.

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Let’s see how these principles and the TTW process worked at one iconic company. When Rob DeMartini took over in 2008 as CEO of the sporting goods favorite New Balance, the company was at a crossroads. For a number of years, sales were stagnant and the bottom line also suffered. Rob believed he could provide charismatic leadership. He also felt his management team had many star performers. But the company needed something more.

The company had to learn to think and act differently. So his first order of business was to introduce Think to Win for developing a place that would reignite growth. He had to lead his senior executive team through a disciplined and rigorous approach that would move New Balance from a great running shoe, product-focused company to a brand company that was focused on great running shoes and beyond.

“Marketing the brand was something New Balance had never really done,” says Rob. “We were reluctant to even stand in that competitive arena. In the past, our company leaders believed if you made a great product, everything would fall into place. But as our business got more complicated and more competitors moved into our primary distribution channel, our story wasn’t getting through.”

New Balance had to change its thinking and its approach to doing business. So Rob and a small team of senior managers spent time conducting a fact-based analysis of external trends and internal strengths and weaknesses. From there, they identified the most important issues to address, decided how to reposition New Balance, and made critical choices on setting a direction and positioning New Balance to achieve success.

Rob and his team started with a situation assessment of New Balance’s recent past. In the early 2000s, New Balance grew rapidly in distribution channels that were far less crowded than they were at the present, importantly in the “big-box stores” such as Sports Authority and Dick’s Sporting Goods. Nike was very narrowly distributed, and so New Balance had a disproportionately large market share in big box retail.

By the mid 2000s, Nike entered the big box channel. And Nike was 10 times bigger than New Balance. “All of a sudden we weren’t the darling of this channel anymore; we were playing defense, fighting to tell our story with a competitor who was spending big time on marketing,” Rob says.

For several years, New Balance struggled in the big box channel, a valiant David trying to beat Goliath. Badly outspent and outmuscled, New Balance’s sales stagnated, and earnings eroded as it pursued its unsuccessful plan, believing that great products would win out in the end. The 100-year-old company did have great products and a great story to tell, but not enough consumers heard them above the marketing salvos coming from Nike.

For Rob and his team, several issues had to be addressed.

1. New Balance was primarily a running shoe business. Should it morph into a multisport performance brand business embodying health, youth, and activity?

2. Nike was winning in the big box channel where New Balance had previously dominated. What were New Balance’s options?

3. The consumer was not hearing the New Balance story. How should it try to be heard?

4. New Balance didn’t have strong relationships in the other important distribution channels . . . with the independent/specialty retailers who played an important role in the running and apparel category. Should it try to focus on them or continue to concentrate only on the high-growth big-box store channel?

As Rob and his executive team reviewed their strengths and opportunities, they could see a very different and exciting future. Rather than continuing with a futile slugfest with Nike in the big box arena, New Balance could add a new focus and shift resources to winning in the direct-to-consumer arena. New Balance could open its own stores where it could tell its compelling brand story without competitive static.

Company stores could create a “gold standard” for the marketing, merchandising, and consumer relationships. The stores wouldn’t displace other channels (wholesalers and retailers). Rather they’d be a growth catalyst and model. The executive team’s goal was to triple-direct to consumer sales from 8 percent of revenue to about 25 percent over the life of the growth plan. The goal was difficult but attainable because DeMartini knew it was something the organization would really “care about.”

For the company store business plan to be successful, the team members realized that running shoes weren’t enough; they needed apparel to add revenue that would cover overhead retail costs and make the model work. To capture the concept of the new model, they coined the new mantra, “New Balance . . . from toe-to-head.” New Balance would be more than just a running shoe brand; it would be an athletic brand from head to toe.

Not really having apparel as part of the company’s DNA was an issue. New Balance could grind out a new competency in apparel through a time-consuming trial-and-error approach. Or it could think differently and acquire an apparel company, which it did.

Since the direct-to-consumer model must also have an Internet direct sales component, a similar choice existed in this space. Learn and grow . . . or acquire. New Balance acquired a small but solid Internet capability.

The independent specialty store segment, which had received short shrift when New Balance was focused on the big box channel, received extra attention. Special initiatives and programs were designed to create strong bonds with New Balance and raise the company’s brand profile in these stores.

So New Balance’s new thinking was employing all the principles of Think to Win. Old concepts and ways of doing things were challenged. The basis for new decisions was a fact-based and rigorous analysis of strengths, weaknesses, opportunities, and threats. All elements of the new thinking were tied together. And priorities were narrow and focused.

To provide even more focus, Rob and his team agreed on what they termed the “three truths.” These truths encapsulated sustaining the competitive advantages that truly differentiated New Balance:

1. New Balance is first and foremost a running brand. The running shoe anchors everything about our brand and enables us to expand into the lifestyle arena of apparel and other merchandise. But we must never lose focus on our running shoe heritage and brand.

2. New Balance is American. Twenty-five percent of New Balance shoes are manufactured in U.S.-based factories. New Balance is the last athletic company to operate running shoe factories in the United States. New Balance maintains 5 plants that make more shoes now than they did 20 years ago. This heritage is an immutable part of the New Balance culture. More than 90 percent of the running shoes made in the United States are made by New Balance.

3. Specialty sports retailers are special. Although large sports retailers and big-box stores are important, the footwear and running apparel business is heavily influenced and represented by over 4,000 independent family shoe stores. Those are critical to New Balance’s future—its growth, its success, and its new strategically oriented business model.

Getting Results

New Balance more than doubled its stores. In the United States, it operates about 190 units and globally around 1,200. Over four years, the company has become a $3.3 billion business, growing at an above-average rate throughout. The final chapter for New Balance is yet to be written, but the prospects are excellent for more great TTW results.

While most of the illustrations and examples in this book focus on professional and business situations, TTW works very effectively with personal issues. Emma is a young professional who is looking for a new position with a different organization. She has been working as a learning and development coordinator for a small human resources firm. She hopes to find a similar position with a larger organization where she can expand her career interests and development. Like many young professionals, Emma is struggling to sort through the labyrinth of possible career opportunities. She has important choices to make, but right now she’s immobilized. She doesn’t know how to begin narrowing down her options. We will follow Emma’s progress, chapter by chapter as she uses TTW to guide her search.

Chapter Summary

The five guiding principles are the foundation of Think to Win and are integral to every step in the process. There’s nothing difficult or mysterious about TTW; the underlying principles are straightforward and easy to access.

1. Challenge assumptions by keeping our minds open. We have to ask questions about why we’re doing what we’re doing. And conversely we must reimagine options for new or different approaches. Our assumptions may be well-grounded, but the situation may have changed or may have been altered by a shifting competitive environment, by new technology, by macroeconomic factors. The warp-speed changes of today make it more likely that assumptions must be reimagined rather than stay fixed.

2. Scoping the issue is essential to the TTW process. Just because the thinking is strategic doesn’t mean the issue involved must be big. Regardless of its size, all issues should receive the TTW approach. Whether we’re thinking about the numbers in our global workforce or the price we can charge for our customized cupcakes doesn’t matter. What does matter is that we identify the precise scope of the undertaking so we can set it in the right framework and have everyone working from the same page.

3. Facts inform outcomes. Opinions, beliefs, biases, hunches, intuitions, gut feelings—all of these may or may not be on target. But we must realize what they are and aren’t. And we must be sure that our decision making relies on fact-based analysis.

4. Focus on the vital few. Don’t try to take on everything at once. It may make us feel like a hero, but it’s more likely to undercut our chances for success than enhance them. Even if we are working with an overabundance of resources, which is not usually the case, trying to communicate and align people on multiple tasks and targets rarely works out well. Prioritizing and working on the vital few, always works best. Apply the “90-10” rule: focus on the 10 percent of actions that will deliver 90 percent of the results.

5. Connecting the dots seems so self-evident. But in the rush to accomplish specific tasks and goals, the need to identify linkages and ensure the connections often are overlooked. And the consequences of such oversights can be a hit to morale as well as missed opportunities. If a unit in a group believes its targets are being overlooked, or short-changed, or aren’t being incorporated within the overall effort, the “second-class citizen syndrome” can easily take root.

These five principles are our compass, helping guide us through the TTW approach.

Chapter 2 Exercises

Here are some questions and exercises to guide you in applying the TTW principles. As you spend time with each of the principles, your overall competence with thinking strategically will improve. So spend the time and the results will follow.

Mastering the Five Principles

Building an organization with strategic thinking capability starts with creating a new mindset, both for yourself and for your colleagues. This mental transformation begins with our five guiding principles that lead the way in helping you think differently. They underlie every step in the TTW process.

Challenge Assumptions

Having an open mind is a necessity. It starts with an exploration of what you might be taking for granted. Peel away any built-up layers of assumptions by asking how they came to be accepted, and envisioning what would happen if they were not.

Begin by asking the what if? and why? questions:

  Why did we see the need for this decision in the past?

  What if we do things differently?

  What if our biggest competitor were in this room; what would he or she say about us?

  What if we reimagine things radically? What if we create a new market segment?

  What if I owned this business? What would I do differently?

Exercise: “From Then to Now”

Continue with the following actions:

  Ask the person in the room with the most experience to describe what the business, culture, and attitude were like when he or she first arrived.

  Progress to the next most senior person to describe differences now versus when he or she started.

  Continue to record differences as the length of service shortens.

  At the end of the exercise, ask what was learned? What if things hadn’t changed? Where would we be today?

Scope the Issue

First ask at what level does the problem exist?

  Is it a companywide issue?

  Is it within my business unit?

  Is it a team and/or departmental concern?

  What is within my circle of influence? My circle of concern?

  Who is the “person” who could begin to address this issue best?

  What is within scope? What is out of scope?

Rely on Facts and Data

Meaningful decisions and conclusions are drawn from clear and precise information. Develop a heightened awareness of how to spot opinion and speculation that may be disguised as data:

  Use facts to make decisions and reach meaningful, valid conclusions.

  Drive for clarity on any opinion-based statements.

  Ask for clarity/quantification with colleagues. Words or phrases such as best, great, competitive edge, and best informed should be challenged. Always ask: What’s the evidence?

Focus on the Vital Few

Thinking to win means making the deliberate choice not to tackle everything at one time. Prioritizing and working on the vital few always works best.

  Narrow conclusions down to the vital few—use the 90-10 rule.

  What are the themes coming out of your analysis?

  What did you learn?

  Which conclusions are the most important? Create a statement for each.

Connect the Dots

Thinking to win means looking both ways. There should be a clear line of sight throughout the entire process, from beginning to end. You and your colleagues need to see and understand the linkage from one step to another, both forward and backward.

  What informed your goals and strategies? Is there anything you learned about your competitor that is missing from your strategies?

  Visually show linkages between your analysis and your solutions. In your documents, color code relationships between goals and strategies and analysis.

  Print PowerPoint pages and align them horizontally. Can you track ideas from start to finish?

Organizational Assessment

Use the following table as a checklist for identifying TTW principles and practices. This will help you to better understand where you need to focus your energies. To get an idea of where you stand, read through each statement and jot down a rating of 1 to 5:

Review individual items. Look for items where you scored lower (3 and below) and think about the following questions:

  What do I believe is driving the score?

  What do I need to stop, start, or continue doing?

  What do I want the result to be?