Four friends and I grew up with a love for hiking around Lake Tahoe and Yosemite National Park. When it came time to mark a common milestone birthday, we jumped on the idea to hike a 175-mile section of the Pacific Crest Trail that connects these two icons of the American West. What better way to celebrate our shared past and current friendship?
Our plan was to start in Yosemite and finish 10 days later at Lake Tahoe. But after only two days, we knew we were in trouble. As boxer Mike Tyson famously said, “Everyone has a plan until they get punched in the mouth.” Well, we had been punched in the mouth, nose, and stomach by a punishingly difficult set of climbs and drops, a rocky, uneven trail that often doubled as steps, and altitude-induced nausea that refused to fade. None of these were surprises; we are all experienced hikers. In the past, we had finished 18-mile slogs and made multi-thousand-foot climbs while carrying 50-pound packs. But we had never done all of that for 10 days straight. After 80 miles and 8 days, we left the trail.
Although we had embarked on this trip with a goal and a good plan to achieve it, we got our strategy wrong, and this caused us a lot of pain. In fact, starting with a big goal — hiking 175 miles in 10 days — was our first mistake. Like most goals, especially those that come before strategy, ours was an arbitrary one, and it diverted our attention from some fundamental choices. Why were we doing this in the first place? Was it to test our stamina and stretch our physical selves as we’d never done before? Our goal suggested the answer was Yes. But in reality, we just wanted to enjoy some great scenery and have a laugh or two while reminiscing about the many hikes we had taken in the past. Had we been a little sharper about the value proposition for our hike, we might have realized that our goal was incompatible with it.
We also wore rose-colored glasses when it came to the capabilities we were bringing to the trip. We were all former athletes and used to challenging workouts, and we had trained hard for the hike. Incredibly, though, we implicitly refused to acknowledge that the passing of time might have eroded our hiking abilities. We were marking our 60th birthdays. The last time we had taken a big hike together was 35 years ago. We just couldn’t — or wouldn’t — imagine that perhaps we no longer had the capabilities it would take to achieve our plan.
As I contemplated all the above in the midst of our trip, it became evident that I was relearning some old lessons about strategy. One is that having goals come ahead of strategy is putting the cart before the horse. When this happens, companies often fall into trouble. Consider Tata Steel, which in its pursuit of global leadership acquired European steelmaker Corus in 2007, faced heavy losses in subsequent years, and is now selling its U.K. division. Or Cardinal Health, which for years pursued a goal of 20 percent annual earnings-per-share-growth and then had to spin off its medical products division in 2009, reversing almost a decade of diversification.
Beware leaders who tell you their company will be the best this or the largest that before they tell you their strategy for winning. When big, hairy audacious goals drive strategy, they can waste time and money. The goals companies adopt don’t have to prevent them from coming up with great strategies. But they often do, because the brightness of big goals has a way of blinding their owners to the realities of great strategy.
The brightness of big goals has a way of blinding their owners to the realities of great strategy.
Another lesson is that maintaining sharp thinking about your value proposition is easier said than done. That’s why most of us see little difference among the major airlines, the biggest car manufacturers, or big-box retailers. Digging ever-deeper into the truly distinctive benefits you seek to deliver is always worth it. This is how JetBlue, BMW, and Costco found ways to stand out in nearly commoditized markets.
As my friends and I struggled up yet another impossibly steep canyon wall, I was reminded of a third lesson: Great strategies require an objective, self-aware, and up-to-date sense of the capabilities that give you the right to win. Most of us are smart enough to recognize when our capabilities have lost their edge. But it’s all too easy for our emotions to get in the way. Companies are often forced into this realization after making a costly mistake. For example, following years of investment and much fanfare, Walmart had to abandon its small-stores business in early 2016, when the obvious finally became apparent: Its capabilities did not fit that format. General Electric reported in 2015 that it was transforming its increasingly troubled financial-services arm, GE Capital, by shedding most of its assets and refocusing on financing GE’s big-ticket products for industrial customers. And Disney ended up paying billions for Pixar in 2006 when it belatedly realized its once dominant animation capabilities had become obsolete with the rise of computer-generated graphics.
The fundamentals of strategy seem so obvious: Pick, choose, or design a winning value proposition for the right target market that requires the distinctive capabilities you really have — rather than those you used to have or wish you had. Our long, painful hike was a stark reminder that living up to those essentials is not so easy, however apparent they may be.