Marina Gorbis's Blog, page 1350

Great Strategy Begins with a CEO on the Frontlines

Building a winning strategy begins with recognizing that strategy is too important to be delegated to a strategy department. It can certainly be valuable to have the help of strategy officers or teams on refining and implementing strategy, but the strategy itself needs to be conceived and owned by the CEO (or equivalent for a division). Otherwise, strategy often becomes a diffuse product of group thinking and compromises among multiple stakeholders in the organization.

It follows that the CEO must deeply understand customer needs and how to meet them. Yet it is dangerous to depend on this information flowing up through multiple layers in the organization. The transmission of customer knowledge through multiple layers often causes distortion and risks the addition of personal agendas, or ”managing upward,” with people telling the CEO what they think he wants to hear.

That’s why it is essential for the CEO to cut through the corporate clutter and reach out to the colleagues who are closest to the customers: the frontline sales people and their direct managers. By using these colleagues as a window into customer needs and expectations, asking their advice, and leveraging them to validate strategic choices, the CEO can get the insights he needs, from those who know best — an approach we learned from Fred Hassan, our mutual mentor and a serial CEO (see the HBR interview with him and his follow-up article on the topic.)

Here are two examples of how that dynamic worked and the lessons learned from our own experience:

At Schering-Plough, where Brent led the Consumer Healthcare division and Ken led strategic affairs, we needed to energize the somewhat sleepy realm of Dr. Scholl’s foot care. Brent’s team hypothesized that a line of customizable orthotics could help do the trick. We went straight to the frontline people to ask if it would grab consumers — and also if it would work with our B2B intermediary customers in stores where the custom orthotics stations would be placed. They said, “Yes.” With those votes from the frontline, we reversed or neutralized negative perceptions in the middle ranks that otherwise could have killed the strategy.

When we moved to implementation, we ran into a big obstacle. Some key decision makers at one of our biggest customers objected to putting such a large, high-profile display on the coveted end cap of the aisles. We turned to our frontline managers who knew the customer intimately and asked for their help and advice. This drove a strategic campaign to identify and convert the mid-level objectors through our frontline teams. The same teams guided Brent and other senior managers in making the case to top management on the customer side. As a result, the custom orthotics line became an important profit driver for Consumer Healthcare.

The lesson: Frontline people can not only help the top leader validate an innovative new strategy, they can also be a powerful means to convince customers and those in higher levels at your company to buy in. 

From Schering-Plough both of us moved to Bausch + Lomb — Brent as CEO and Ken as head of corporate strategic affairs. We found a deeply stressed business that was running essentially as disconnected units: contact lenses and solutions, eye pharmaceuticals, and eye surgery systems. Two big challenges were how to be more relevant to customers while also being more efficient than bigger competitors that were deploying more resources. Brent developed a decisive strategic insight from riding with sales reps on calls to customers. One day he observed a pharmaceuticals sales rep stop the car and run into a Costco for a few minutes. Brent figured she might be doing some quick shopping and asked politely about that. “No,” the rep responded. She was dropping off products to a customer of a friend who was in the division that sold lenses and solutions.

The moment crystallized the realization that our doctor and optometrist customers did not see their world through the lens of our three, disconnected business units; rather they saw their customers as patients with integrated eye health issues. The experience with the sales rep helped lead to our core strategy of “One Bausch + Lomb.” The center of this strategy involved creating connections among our business units, cross-selling products across  the three sales forces customers, and positioning Bausch + Lomb as a company that cared about total eye health. This greatly increased our efficiency, while differentiating us from bigger companies with a fragmented sales approach. The new strategy drove sales growth and customer loyalty.

The lesson: By spending a lot of time out with the sales force on calls, a CEO will gain strategic insights. And be on the lookout for the unexpected insights like the one Brent had with the rep visiting Costco; that is where true strategic gems may lie.

There is a wonderful additional payoff from listening to the frontlines to formulate strategy: It will give them ownership of the strategy and make them passionate about turning it into a reality. That’s pivotal. Great strategies are only as good as the execution.

What Matters Most to Positive Feelings? R-E-S-P-E-C-T

A vast study of people in 158 countries shows that among the nonmaterial personal needs of respect, autonomy, and social support, respect is the strongest predictor of positive feelings, say Weiting Ng of SIM University in Singapore and Ed Diener of the University of Illinois at Urbana-Champaign and the Gallup Organization. In the survey of 838,151 people, respect levels were gauged through respondents’ answers to the question of whether they had been “treated with respect” the previous day.

What Successful Work and Life Integration Looks Like

Too many people believe that to achieve great things we must make brutal sacrifices, that to succeed in work we must focus single-mindedly, at the expense of everything else in life. Even those who reject the idea of a zero-sum game fall prey to a kind of binary thinking revealed by the term we use to describe the ideal lifestyle: “work/life balance.” The idea that “work” competes with “life” ignores that “life” is actually the intersection and interaction of four major domains: work, home, community, and the private self.

From years of studying people in many different settings, I have found that the most successful people are those who can harness the passions and powers of the various parts of their lives, bringing them together to achieve what I call “four-way wins” — actions that result in life being better in all four domains. My research has shown that there are ways for everyone — from the managers of sales teams, to executives in government agencies, to computer engineers, to florists, to coaches — to achieve professional success without always having to sacrifice the things that matter in their personal lives.

And yet as someone known as “the work/life balance guy,” I get pushback just about everywhere I go, especially from high achievers. “Stew, it’s nice to try to balance it all,” they say to me, “but in the real world, c’mon: How can you have a substantial impact without making major sacrifices in your personal and family life?”

So in writing my new book, I set out to find well-known people who have practiced, wittingly or unwittingly, the skills for integrating work and the rest of life and who could not only show that it can be done, but help teach us all how to do it. In the end, I settled on six people. I’d argue that these six people are successful at their work not despite having full lives outside of it, but precisely because they do:

Tom Tierney is the cofounder of Bridgespan, the best-known advisory firm for nonprofits. Throughout his career, he has sought creative ways of fitting the different domains of his life together, including learning from his children about what really matters. He has built organizations that encourage personal growth by rewarding results — not “face time” — and by motivating people with a vision of contributing to a greater good.
As COO of Facebook, Sheryl Sandberg has been redefining what it means to be a leader. Her candor about the challenges she faces in resolving conflicts among different parts of her life — as an executive, a catalyst for social change, a friend, a wife, a sister, and a mother — and about the non-traditional means she employs for doing so, has made her a persuasive role model and an outspoken voice on women and leadership.
Eric Greitens, humanitarian, author, and non-profit founder, attended Oxford as a Rhodes Scholar and completed his doctorate before becoming a Navy SEAL. For his service in Iraq he was awarded a Purple Heart and went on — after a difficult search for a meaningful next step to take in his life — to found The Mission Continues, an organization that helps heal wounded war veterans by guiding them to be of service in their communities.
Michelle Obama, the 44th First Lady of the United States, explains that she considers her daughters to be her first priority, even if this stance rankles those who would have her do more in seeking broader political and cultural change. In making sure her own children were receiving the most nutritious food possible, she began to advocate for better nutrition through the national initiative Let’s Move!. Her policies have won national acclaim.
Julie Foudy is a soccer champion who, in 1991 as a member of the U.S. national team, won the first Women’s World Cup. She was also part of the iconic U.S. soccer team that garnered Olympic gold in 1996 and again in 2004. She has since led an array of organizations that promote athletics for young people, empower young women, and advocate for social causes. Foudy’s success is an outgrowth of her ability to fuse all the important parts of her life — her soccer teams, her family, and her advocacy for worthy causes.
While it may seem counterintuitive to think of a rock and roll hero as an exemplary leader, Bruce Springsteen has said that he creates music “to make people happy, feel less lonely, but also [to be] a conduit for a dialogue about the events of the day, the issues that impact people’s lives, personal and social and political and religious.” With his hard-won clarity of purpose, derived from years of painful self-scrutiny, it follows naturally that he makes clear what he expects from the people around him, whether they’re members of his band or members of his family — he’s called “The Boss” for a reason.

Lest you think that their success derives just from great luck, think again. Not one of them was born into a life of high privilege. They have strived to achieve their own kind of greatness and, one way or another, to make themselves into who they are now. Each has suffered disappointment (half of them are on second marriages), frustration, doubt, and loss.

But in each of their stories I found naturally occurring illustrations of people who did great things by discovering — usually through trial and error — ways to integrate the different parts of their lives to reinforce and enhance each other. They show how accomplishment in a career is achievable not at the expense of the rest of your life, but because of commitments at home, in the community, and to your interior life.

Each has identified a life’s work that is important to them, and each both draws on and gives back to their families and communities in order to make that life’s work succeed. They exemplify how one can cultivate a life in which values, actions, social contribution, and personal growth exist in harmony. It’s a life in which disparate pieces fall into place, not every single day — that’s the impossible myth of “work/life balance” — but over the course of a lifetime.

Yes, these six people are extraordinary – but they use skills that all of us can use to make ourselves a bit more extraordinary, too.

Start by considering three principles: be real, be whole, and be innovative. To be real is to act with authenticity by clarifying what’s important to you. To be whole is to act with integrity by recognizing how the different parts of your life (work, home, community, self) affect one another. All this examination allows you to be innovative. You act with creativity by experimenting with how things get done in ways that are good for you and for the people around you.

Doing this means thinking and talking about what truly inspires you, whatever that might be. It requires figuring out how to take incremental steps that are under your control and that move you in the direction you want to go, while bringing others along with you. It’s not easy (and I never said it was). But like these six people, you can attain significant achievement in a way that fits who you are. As these leaders show, your own way is the only way that will work for you.

Marketers Don’t Need to Be Data Scientists

Consider your average FDA food label. The nutrition information on these labels is comprehensive and accurate, but the label itself is not at all well-suited for the job of making intelligent food choices – especially when you are a busy parent racing down the super-market aisle with your screaming kids.

Marketers today are often working with data that is similarly hard to parse. There’s been a lot of hype has been about “Mad Men” becoming “Math Men.” But this is the opposite of how we should be thinking about it. We need to help marketers use data to do their job better, not ask them to change jobs. In fact, the more precise the targeting algorithm, the more a campaign requires brilliant creative. When marketers over-invest in algorithms without any increased investment in creative, the result is that the right people are being targeted at the right time, but with a pretty unimpressive message.

What marketers have today is the equivalent of a food label full of calorie counts and mystery ingredients – we have classifications for talking about who owns data (1st party, 2nd party, 3rd party), how data were collected (explicitly, implicitly), and what sort of insights data reveals (descriptive, predictive). But what we need is a more user-friendly solution that tells us in clear terms “this will make you fat” or “this is really healthy.” Otherwise, the expensive analytics platform you’ve invested in will just go unused, just as nutritional labels are often ignored. In a recent study, almost four of ten respondents said they didn’t use analytics tools that their company had adopted because they didn’t understand “how to use analytics to improve the business.”

If, for example, you’re running a social marketing campaign, your community manager probably doesn’t have time to schedule a meeting with the “analytics department” to see what’s trending and why. She is optimizing for viral traffic which moves very fast. She doesn’t need data, she needs answers: is this the right headline, what should I put at the top of the page right now, what article should I promote with my limited paid media budget? Those answers should be readily available in her natural process — not trapped in an analytics report.

A company that is putting data into the right context is UPS. The shipping giant crunches thousands of data points to optimize package delivery routes. The output they give to their 55,000 drivers and route supervisors — turn right, turn left — is far less complex, but much more useful, than what food manufacturers give the average consumer. Especially for a driver with a truck full of deliveries to make, winding his way through a city in high traffic conditions. These algorithms enable drivers to be productive while also minimizing emissions from their vehicles.

Remember that analyzing data isn’t the point. The point is better marketing. And marketing decisions are still made primarily by people, not machines (even if, increasingly, it’s people operating machines). It’s not that these people are innumerate and can’t understand math, but that they have a lot more on their plates than just analytics. The point of collecting massive troves of intelligence and having great data sciences is to help these people accomplish what they need to accomplish — just in a more effective and convenient way.

As much as Big Data holds great promise for marketing, churning out more and more analytics will not unto itself create better marketing and maybe worsen it. Let’s put math in the service of the job to be done.

Why Monopolistic Pension Funds Undermine Capitalism

Peter Drucker was right, as he repeatedly was, when he foresaw in 1976 the emergence of pension funds as the most powerful wielder of capital in the modern economy. In his unique way he gave the story a neat twist by arguing that pension funds would save capitalism. Workers, he predicted, would own the means of production — but not through the violent overthrow of capitalism in the way Marx had suggested. Rather they the ownership would come through the stocks held by their pension funds.

Drucker was right, especially if you lump traditional pension funds along with their sovereign wealth fund cousins. The top 350 pension and sovereign wealth funds control just under $20 trillion of assets. They are the largest holders of securities in for-profit organizations competing in democratic capitalist environments. Of course, the funds have holdings in securities in non-competitive vehicles too, such as government issued securities. But Drucker was principally concerned about their holdings of the means of capitalist production.

If one looks carefully at these holders of competitive, capitalist company securities, one thing jumps out distinctly: they are not themselves competitive, capitalist organizations. Virtually all of them share a single form: a monopoly enforced by government regulation. As a Canadian, I have no choice as to where the pension contributions that are legally deducted from my paycheck go. Whether I like it or not they are sent to the Canadian Pension Plan Investment Board. CPPIB is granted a monopoly right by the Government of Canada to serve me (except in Quebec, where the relevant and equivalent monopoly body is the Caisse de Dépôt et Placement du Québec).

The same rules hold in the home of the brave and the land of the free. California state employees, Texas teachers, and New York City workers have zero choice. They are served by government-regulated pension fund monopolies. In fact, 19 of the top 25 U.S. pension funds, with $2.1 trillion of assets under management, are government-regulated monopolies. The other six, with $500 billion of assets, are corporate-run monopolies in which employees have little or no ability to opt out.

Capitalism has broad support because of a general belief in the power of competition, free entry to industries, and customer choice to produce increasing productivity and high levels of innovation. However, the ownership of those actively competing companies is increasingly in the hands of organizations that face zero competition, no threat of entry, and have customers who are forced to use them.

Why is putting the economy in the hands of regulated monopolists is a good idea? Obviously, many of those monopolists are doing a good job. I don’t begrudge sending my pension deductions to CPPIB because it is well run and does a nice job for me with my pension savings, and I have to applaud California Public Employees’ Pension Fund (America’s second largest pension fund with about a quarter of a trillion dollars of assets under management) for making the bold and brilliant decision to eliminate hedge fund investments from its holdings.

But the broad history of regulated monopolies is not inspiring. Without the forcing mechanisms of competition, entry, and choice, monopolies slowly but surely gravitate to serving themselves, not their customers. That is why your cable TV provider probably won’t tell you specifically when between 9 am and 1 pm the repairman will arrive to fix your defective cable connection. Although the company caused the problem, you are responsible for accommodating a schedule that is convenient to them not you, or they won’t fix their error. Who is being served here?

If we really believe in competition and choice, then a big question we should all be asking ourselves today is what should be done about our monopolistic pension system?

Create a Strategy That Anticipates and Learns

The buzz around using predictive tools to analyze big data in discrete areas of a business is loud and deserved. In health care, these tools are changing the way doctors identify people at risk of developing certain diseases; in fashion, they crunch purchasing data to anticipate trends; sales and marketing experts use them to tailor ad campaigns. The restaurant chain, Olive Garden, uses predictive analytics to guide its food buying and retail staffing plans.

But maybe the thrill of accomplishment in these pockets is diverting senior managers’ attention from another, even more critical opportunity: Digital technologies are also rapidly changing how managers can acquire and assess the information they use to develop and execute on enterprise-wide strategy. Strategy-making can now happen in real time.  Strategy can anticipate and learn.

Traditionally, the discipline of strategy has emphasized a deep understanding of market economics and potential disruptors, the evolution of demand and value expectations, the competencies of the organization, and the role of talent and performance management. Long-dominant frameworks like the Five Forces or SWOT analysis have been based, accordingly, on a fundamental, often static or relatively long-duration, set of market and firm characteristics.

Today, though, many of those characteristics are in flux much of the time. And so the power of incumbency, firm competencies, and market share is giving way to the ability to engage across companies and industries, innovate, individualize, and deliver. The definition of a market, customer, partner, or even competitor is now a moving target. Consider, for example, the work that Apple is doing with Epic (an electronic health record provider for hospitals and large medical groups). Together, these two companies are bridging the divide between personal health data that’s collected in a clinical setting, and data that’s collected by the patient. Not only can patients gather more comprehensive “home-based” data with Apple’s HealthKit platform, but also potentially stream that data (with permission) to their doctors via Epic’s systems. Is Apple suddenly a healthcare company? To what extent? Neither Apple, nor Epic, is a cog in a linear value chain (as is, say, a company that provides a variety of components with applications in different industries, like semiconductors for aircraft, appliances, or vehicles). Instead, together, they are sketching the outlines of a new market.

In this new environment, where markets can be created by ecosystems of partners, and innovations can originate anywhere in an ecosystem and grow at great speed, the ability of business leaders to predict and influence what’s around the corner—rather than act on what they see—becomes central to the ability to commit to a direction and allocate resources.

At the same time, powerful new tools are becoming increasingly available to enable real-time strategic decision making.  Now we have an opportunity to crunch the insights of key talent, data assets, and technologies from multiple internal and external sources, as they arise. We can connect insights and execution at a pace never before possible. That strategy in real-time, or even more aptly, strategy that anticipates and learns.  Using machine-learning tools, for example, data that currently exists in different enterprise systems and diverse external sources (production, supply chain, market, customer trend, financial and economic data) can be ingested and mashed together to reveal meaningful patterns and highlight gaps in markets. These analyses can identify opportunities for maverick business partnerships, and balance the biases of individual decision makers quickly and effectively.

This isn’t a retread of scientific management, nor is it an updated take on scenario planning. It’s an entirely different animal. To call it a new version of either, in fact, would be to overlook entirely the volume and scope of information that big data can provide and predictive analytics can crunch—in real time—for dynamic strategic purposes at the enterprise level. Scientific management and scenario planning, while forward-thinking, rely on information that’s in the rear view mirror.

No company is yet an exemplar of setting and activating strategy in the way we envision it. In many companies, setting and enabling strategy is still a regularly scheduled process or a defined annual deliverable. But a number of businesses have put more pieces of the practice than others into place. Amazon, for example, analyzes enormous pools of data to predict who their customers are and what their customers will buy next. The company uses these insights to drive—and adapt—strategic plans for new device and service offerings (e.g., Fire TV, Amazon Prime) and to stock its warehouses.

One can easily imagine Amazon and other like-minded companies building out more and more tech-enabled strategic and operating capability—linking the pieces. Financial services companies have made a promising start, and we are also seeing signs that other sectors—healthcare, life sciences, media, and entertainment—are waking up to the possibilities. The snag is that using predictive analytics in this way will be difficult for global companies with traditional compliance-centric and business intelligence reporting capabilities. Rigid, rules-based enterprise systems, installed in most companies 15 or 20 years ago, can’t easily be re-jiggered to integrate data and “mine” for patterns. Current enterprise technologies, and the business processes they support, are so hard-wired in most big companies that shifting to a more fluid, fast-paced, way of operating will be a major transformation.

The onus is on the senior leaders at these firms to demand predictive insights at the executive table and within core management processes by:

Investing in enabling data infrastructure and advanced analytics just as they would top talent, a new product innovation, or a strategic relationship
Embedding predictive analytic approaches throughout the organization—from the front line to the C-suite
Advocating their use both formally (as performance requirements) and by example, to move the organization’s focus from planning and coordination to analytics-driven and anticipatory
Holding these analytics to the same standard of precision, performance and improvement as management and key processes.

Predictive analytics is bringing new levels of speed, relevance, and precision to decision making. Prediction as a mode of engagement and insight will increasingly be a requirement for setting strategy. The companies and executive teams advancing, mastering, and integrating prediction as core to how they evolve strategies and manage will be the distinctive performers and leaders of the future.

Put Yourself in Your Colleague’s Shoes

I start my mornings with a run around Central Park in New York City. Over the last 18 months, it’s become more like dodging the cyclists as I make my way around the loop than going for a relaxing jog.  Cursing, flipping the bird – even a near miss – are regular occurrences as these two groups of athletes try to get their daily workout. I’ve even seen a cyclist spit on a runner.

How could so many cyclists be so angry? Wanting to understand, last Saturday I borrowed a friend’s bicycle, strapped on his cycling shoes, and clipped into the pedals. I entered the park on West 77th Street, where a steep ramp descends into the 6-mile loop. I quickly accelerated down it and had to merge onto a roadway packed with runners and pedestrians who weren’t paying attention to me. As my bicycle picked up speed and I tried to enter the loop, I realized I was in danger — and so were the runners in my path. That’s when I shouted, “HEADS UP!”

I had been bicycling in the park for only a matter of seconds and I was already yelling at runners and pedestrians.

My perspective shift was immediate. But I didn’t feel angry – I felt scared. Any unexpected move by a runner could mean a serious collision, both for me and for them.

This got me thinking: how common is it to really put ourselves in someone else’s shoes? For instance, earlier this year, a friend introduced me to a senior vice president at a Fortune 50 Company. In our introductory phone call I expected to discuss different productivity and labor models available for his large, multinational corporation. But after I asked some high-level questions and offered the important principles for how I organize roles and systems, this executive raised his voice, shouting, “That won’t work here! You don’t understand us!” and “It’s more complicated than that!” I quickly excused myself from the call, thanked him for his time, and suggested that maybe my area of expertise wasn’t helpful for him at this time. Privately, though, I was thinking, Great, another arrogant executive that you can’t tell anything that he doesn’t already know. What a jerk.

But now, in light of my recent Central Park epiphany, I have been rethinking how I perceived that call.  During our 25-minute conversation, I’m almost certain I did not say something to anger this man. And he is probably not a jerk; after all, we did get introduced through a mutual friend. What manifested as a demanding, short tempered, take-no-prisoners posture may have just been an executive under extraordinary pressure, working to protect himself or his team from something he feared — inadequacy, failure, embarrassment, or even just change.  Maybe if I’d done a better job of putting myself in his shoes, I would have been able to help.

How many conflicts at work result from simply being unable to see the issue from your counterpart’s perspective? I began to brainstorm a list of how coworkers might be better able to understand one another’s point of view:

Asking your boss if you can be a fly on the wall at one of the meetings her supervisor runs, so that you come away with a better idea of the pressures she and her peers face, and how you can help mitigate them.
Rotating responsibilities within your department, so that you create a shared understanding of what it takes to get stuff done, and increase visibility into the teammates’ competing objectives.
Accepting a role on a cross-enterprise or cross-functional task force – roles that are usually avoided at all costs – to get more exposure to what is going on elsewhere in the organization.
Taking an “externship” with a customer, working with their company for a defined period of time to really understand what it’s like to be a customer being serviced by your organization.

This list is far from exhaustive — and it’s worth emphasizing that what actually worked best for me had nothing to do with work. Building your empathy muscles in any capacity can improve to your ability to see situations differently in unexpected ways, whether you’re in or out of the office. It doesn’t have to be some touchy feely training session. It can be as simple as changing some habits or reading a good novel. Or even taking a ride in the park.

3 Terrible Strategies for Companies Seeking Growth

Some call . Some call it a never-ending recession. Some call it a disconnect or a decoupling. Some call it a not-quite recovery.

Here’s the truth. Econ doesn’t have a word for whatever we’re in…because whatever we’re in flouts the so-called laws of economics. Quarterly results look great; job growth is “up;” and financial markets are ebullient. So why are so many still worse off than they were before? Why hasn’t all this “growth” actually translated into a real feeling of prosperity? And – as so many CEOs would like to know – is there any way to make money in this era of perma-semi-stagnation?

Most leaders seem to think they have three choices:

Option 1: Shine it with gold and sell it to the super rich. Make it a “luxury”! Rebrand! Make the logo platinum! Add a fleet of maids and an entire army of butlers to it, if you have to!

Witness the rise of the ten thousand dollar cocktail, the million-dollar pair of jeans, luxury doggy spas (Wagsworth Manor: “a luxury retreat for the furry elite”). Nokia tried it with phones—and went down in flames. The UK tried it with an entire economy, turning the once great city of London into a ghost town of global oligarchs who own entire blocks, but spend barely a few weeks there. It’s a strategy of appeasement: trying hardest to placate the strongest.

Why doesn’t the gambit of merely trying more and more desperately to please the every idle whim of the super-rich work? After all, they’re the people who still have money left, right? It doesn’t work well for a simple reason: there simply aren’t enough of them, and they simply can’t spend enough on consumption, to make up for the world’s falling middle classes. Your profit margins might rise, temporarily, but soon you’ll be furiously adding another platoon of maids or regiment of butlers, daubing platinum gilding on top of the gold leaf. It’s a losing game played more and more desperately for a shrinking prize.

Option 2: Sell to the rising global “middle classes” instead! Forget appeasement…let’s flee! To the very edges of the world, if we have to.

Except when you think about it, that doesn’t work either. The rising “middle classes” are significantly poorer than the ones that are falling. A middle class person in India makes maybe $10k a year and a middle class person in America used to make $50K. So sure: you can flog the same junk to the so-called rising global middle classes. But before that’s a valid strategy, they’ll have to rise a lot faster and a lot further than they probably can, given a stagnating global economy.

Option 3: Fleece the falling. After all, it’s true that they might be falling — but they’ve got credit cards and home equity. And on the back of that debt, says the most desperate junior vice president at Useless Widget Co, we can grow our profits! It’s the story of the “growth industries” of the last decade. The pawnshop economy. Casinos, payday lenders, private prisons, insta-on-demand-McWorkers serving everyone else who can barely afford them five dollar triplex mega soy mocha latteccinos. Fine print clauses in impossibly long contracts to hit people with hidden fees.

Can you earn a few extra pennies by fleecing people? Sure you can, Scarface. But here’s what you can’t earn: an organization worth building. Consider the sad, predictable story of embattled payday lender Wonga. Your customers will despise you. Your employees will hate working for you. Society (or at least Germany, Sweden, Australia, and Canada) will fight you. You’ll be vilified…and sooner or later, the regulators will force you to change. It’s a losing battle; one fought merely for marginal pennies of short-term gain that are already shrinking.

Finding cleverer, crueler ways to turn a more poisonous profit?

That’s not what strategy’s about at all.

Strategy is about building an institution that can compete. Competitiveness isn’t merely short-term profitability. It is about all the things that underlie lasting, healthy prosperity. It means having not just a “vision statement” but a passion. Not just a mission but a point. It’s about doing something that matters.

Appeasing, fleeing, and fleecing are precisely the wrong strategies for an age of stagnation—because if you employ them, what are you, really? Just another agent of stagnation. And so, sooner or later, your destiny will inevitably be stagnation.

Skepticism Is Warranted When It Comes to Facebook Likes

Facebook Likes are so valuable to people promoting products, songs, and movies that a thriving business known as “Like farming” has sprung up, and you can buy 1,000 Likes for $50 (same price for 5,000 Twitter followers or 200 Google +1s). In a study reported by Pacific Standard, researchers who paid for Likes found that unlike real Likes, fake Likes tend to rush in all at once or in blocks of a few hundred a day, and fake Likers are generally older. Also, in comparison with real Likers, a higher proportion of fake Likers are male.

Why Tesco’s Strengths Are No Longer Good Enough

Troubles at Tesco, the UK’s leading retailer, are mounting. If round after round of profit warnings was not enough – group operating profits fell 20% between 2011 and 2013 and are likely to fall another 30% in 2014 — the company recently announced it had overstated its first-half profit by about $400 million. The “accelerated recognition of commercial income and delayed accrual of costs” undoubtedly flatters short-term results, but it soon catches up with you, as four suspended senior executives have found out. Tesco, the success story of the British retail scene for the last 20 years, has suddenly fallen from grace. How did this happen?

Successful companies are notoriously prone to pursuing tactical fixes rather than confronting strategic problems. They exhort their people to try harder, introduce overhead cost reduction programs, and reorganize – anything rather than admit that their strategy needs an overhaul. Fiddling the books is normally the last resort, when all else has failed. It is also often a sign of impending bankruptcy, but this shouldn’t happen at Tesco.  It is still the biggest player in the UK supermarket scene by a mile, but unless it opens its eyes to its strategic challenges and begins addressing them effectively – i.e., shows a little more Strategic IQ – it will continue to spiral down.

UK retail, like the rest of the developed world, is witnessing a few big long-term trends.  Private label (retail-branded merchandise) has been growing for years – since Sainsbury and Marks & Spencer invented it over 100 years ago – increasing in quality and forcing down brand premiums. It provides consumers with a viable, lower cost alternative to the manufacturer branded products.  Tesco came to the party much later in the 1980s but ended up winning with its “good-better-best” private label lines, setting the industry standard for how to play the private label game.

The rise of convenience store chains is another big trend in the UK. Consumers are increasingly shopping for a few items every day rather than waiting for the weekly or monthly supermarket trip. There have always been convenience stores in the UK, but the shabby, independent corner shops are giving way to sparkling new outlets run by the supermarket chains full of fresh merchandise, albeit at premium prices.  Of the big supermarket chains, Tesco was the fastest to pick up on this opportunity in the early 1990s (with Tesco Metro and Tesco Express), and it remains in the lead.

And of course, online shopping is the other big trend that started at the turn of the century.  Why travel to a supermarket for the monthly big shop if you can buy it online and have it delivered?  Tesco was quick to pioneer in this area with the launch of tesco.com in 2000 and is still the leader in the UK.

So with such a track record of strategic innovation, why has Tesco been blindsided by the hard discounters like Germany’s Aldi and Lidl? In the last three years, these two companies have rapidly gained share and now account for more than 8% of the market, while Tesco has lost more than 2% share, down to 28%.

Aldi opened its first UK store in 1990, but made little progress then. UK consumers didn’t seem to want to shop in cheap looking stores with only 1000 private label items on offer and minimal service. And yet Germans, even those with Porsches, shopped at Aldi. The hard discount format accounts for as much as 40% of the German market, and for some good reasons.

Aldi offers not just low prices, but convenience. There are over 4,000 Aldi stores in Germany – they are everywhere. Tesco’s idea of convenience, like most of the large UK chains, is small outlets in high-traffic locations stocked with a narrow line of products, many of them fresh food, at prices that are far higher than in the supermarkets. This is all very well for the rich punters prepared to forgive Tesco for its gouging, but for the majority of UK consumers, this premium isn’t viable. German consumers, in contrast, get convenience and quality merchandise at lower prices so they can afford the Porsche! Everyone shops at Aldi.

Now UK consumers are discovering that Aldi is good for them too. This is partly because they have gone through tough times in the recession and wages are stubbornly low. It is also because Tesco has raised prices in the UK to pay for its less profitable international ventures, which has left it vulnerable at home. (Wal-Mart, the world’s number one retailer, is also guilty of this – it makes most of its money in the U.S. and spends it in international markets. As a result, dollar stores have gained significant ground in the U.S.)

Finally, Aldi is growing because it is tailoring its offering to the UK market. Blindly transporting a retail concept across international borders is seldom a recipe for success. But Messieurs Barnes and Heini, joint managing directors of Aldi UK, have added more fresh products and up-market lines at prices 15-20% below those of regular UK supermarkets. The goal is to attract the British middle classes, and it appears to be working. Aldi UK sales grew from $6.3 billion to $8.6 billion in 2013, and operating profits increased 65% to $422 million. The company plans to double the number of outlets in the UK to 1,000 by 2022, and it won’t stop there if Aldi Germany is any indication.

You might wonder how anyone can make money with such low prices. The answer is simple – selling more. Hard discounters aim for twice the volume with the same fixed costs so they can make the same returns at half the gross margin. Aldi’s sales per employee are already twice those of Tesco in the UK.

Tesco and fellow major UK supermarket chains seem to be frozen like the proverbial bunny in the headlights in the face of these discount convenience stores.  But Tesco, with the biggest purchasing power, the best experience of private label, and strongest track record of strategic innovation, is hurting more than most.

And talent knows where the future lies. In its latest annual report, the Times places Tesco 23rd in its ranking of top 100 graduate employers in the UK, down from 15th last year; Aldi moved up from 6th to 4th place.

Many thousands of discount convenience stores are going to appear in the UK over the next decade. Tesco must decide whether it is prepared to risk cannibalizing its other formats and compete in this segment or be left behind. In the past, Tesco has demonstrated it has the wherewithal to add many more convenience stores a year than the target of 60 Aldi is setting itself, and it has consistently shown itself to be one of the first to embrace new formats. Whether they can do it this time depends on the strength of their leadership. Distractions caused by fiddling the books will not help.