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Hope Is Not A Strategy

by Jack Boutchard & Cascade Team, on Jun 1, 2021 10:34:44 AM

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If your company is adopting a wait and see strategy for survival and growth, then prepare now to lose your business.

Hoping for better days ahead or relying on government handouts during the pandemic is not an effective long-term business strategy.

A strategy can be an effective tool to stack the odds in your favor to keep your business afloat and even prosper over the long term. Strategy is an incredibly misunderstood topic and is a way to get from point A to point B through adaptable execution.

Too many high-ranking managers make it sound complicated but it all boils down to common sense, which may be in short supply. It’s amazing how many companies don’t have a strategy. Make sure your company isn’t one of them.

The term strategy is on a downward trend.

Graph of the use of the word strategy

Worse, if companies do have a strategy only 13 percent of them have a defined plan to execute it properly, according to Daniel F. Prosser.

Ensure your Company has an Executable Strategy.

If the success of a corporation is determined by the execution of a great strategy, then why aren’t more companies using this powerful tool? Why for that matter, are these corporations still in business? The answer may lie in management.

Since 2014, there’s been a disturbing trend emerging in the business world.

An increasing number of managers are putting short-sighted prosperity ahead of long-term strategic thinking. This ultimately creates disaster for the corporation, but not for managers, who collect hefty bonuses and quickly move on.

There are many examples out there. Most end horribly for the company, employees, and shareholders.

A Long-term Strategy Could've Saved Sears Canada

Sears Canada was a publicly-traded company that was affiliated with the Sears department stores in the U.S. The company began as Simpson-Sears and was in operation from 1952 until 2018. Canadian operations could have been saved if managers built an effective long-term strategy.

When Sears Canada ran into revenue problems back in 2017, instead of looking at a strategy to build revenue, the Board of Directors chose to lay off 2,900 employees that worked at 59 stores, some for decades according to the Canadian Broadcasting Corporation.

The Toronto Star reported that laid-off Sears Canada workers were shocked by $9.2M in bonuses for key staff for cutting workers. On top of this, because pensions weren’t properly funded, retirees were left with lower payouts and thousands lost part-time jobs.

Talk about the self-interest of board members and the complete disregard for workers and their own corporation. Shutting down operations was the easiest way to see short-term gains to meet earning targets and line executive pockets with bonuses rather than build the company and create a strategy for long-term value for shareholders.

Sears Could've Listened to Staff to Build a Better Strategy

If Sears Canda wanted to grow its brand with a long-term strategy, executives could have started by listening to what customers wanted. What better resources to understand customer needs than your frontline workers?

They are in the battle every day trying to win customers. They also have your company’s eyes and ears and routinely listen to customer's raves and complaints. Their feedback is not just helpful but crucial for the creation of a long-term growth strategy for your company.

They instinctively know what will work to gain the trust and loyalty of customers more than anyone else in the corporation, including executive MBAs. Not listening to staff to build your strategy is a big mistake.

There were also stories that Sears prices were more expensive than their competitors. Customers were telling the company to lower prices, but they didn’t listen because they wanted to brand themselves as higher end. They weren’t prepared to change, and that was a fatal error.

Learn from Sears Canada's Mistakes:

  • Make sure management has the best interest of your company over the long term.
  • Always listen to customers especially in establishing branding and pricing strategy.
  • Customers will make or break your company.
  • Prepare for change and be ready to pivot.

Another reason why we’re seeing a downward trend in business strategy is old-fashioned arrogance. Managers make assumptions of what will work without checking the facts, especially when entering new markets. This can be dangerous.

An example of this was Target when they decided to take on the Canadian retail market in 2013.

Poor Strategy Led to the Closing of Target Stores in Canada

Target didn’t seem to follow any strategy. They thought they could apply the same strategies with the Canadian market as with the U.S. Great idea if everything were the same.

They didn’t check their facts and made a costly error. Canadian consumers had different buying habits and needs. Canadian consumers were also expecting to get the same quality products at great prices as they did in the U.S. Management failed to recognize this.

The company also had a problem with logistics, and they couldn’t deliver inventory on time to Canadian stores. U.S. managers also dictated to Canadian managers what items to put on store shelves. Some of those items also couldn’t be delivered to stores because of delivery issues.

There were stories that when Canadian store managers decided to stock the bare shelves with other items from the back room, they were told by American managers to take them off the shelves. Often consumers would go into their stores, wanting to buy but the shelves were empty.

Target had to bail out of Canada in 2015 with a $2.1 billion loss. Their overly aggressive expansion with seemingly no strategy into the Canadian market entailing higher prices, and a limited selection of products compared to U.S. Target stores contributed to their demise.

They were called A gold standard case study for what retailers shouldn't do by the Financial Post.

Target Financials Infographic

Learn from Target's Mistakes:

  • Managers should learn to leave their ego at the door and listen to the people who know what they're doing to develop a long-term strategy and executable plan.
  • If you’re going to expand into another country, make sure you’re able to deliver the goods.
  • It doesn’t matter what your company wants to sell. Listen to what customers want to buy and stock the shelves accordingly.
  • Make sure your shelves are stocked with goods that consumers want.
  • Be responsible to shareholders, who are expecting value from investment dollars.

Corporations also need to have a longer-term vision and that includes how executives are compensated. Instead of being paid for raising short-term earning, executives need to be motivated for long-term gains so they can develop a strategy for growth.

The solution is to change their pay structure.

Reward Managers for Thinking Strategically

“A way to solve managers’ short-sighted thinking is to change the way they are compensated,” according to a research paper by London Business School Finance Professor Alex Edmans. “An executive motivated to meet next month’s earnings target may cut wages and employee training, damaging long-term value and fuelling political hostilities.”

A better way is to change the vesting period with a longer-term view of how managers are paid.

“With a long-term perspective, executives will treat workers like long-term assets. Pay caps may appeal to political populism, but it’s the structure of pay, not the level, that will have the biggest impact on society,” said Edmans in his paper.

Walmart Revenue Infographic

Walmart Canada’s Winning Strategy

Defunct Canadian retailers like Sears and Target left a huge gap in the retail market opening the door to other corporations such as Walmart to flourish and increase their profitability.

Compared to Target and Sears, Walmart managers had a winning long-term strategy from the moment they entered the Canadian market. When they entered the market in 1994, instead of assuming Canada was the same as the U.S. market, they made it an international operation.

Even though Canada is right next door to the U.S., Walmart management realized there was a difference in buying culture.

The strategy was to buy 122 struggling but already established stores from Canadian retailer Woolco that would be converted to Walmart stores. Walmart realized Woolco’s true value was its 16,000 employees and gave them a five percent increase to stay on board.

It even acquired 13 Target stores after the company went bankrupt in 2015.

Today, Walmart is one of the most profitable retailers in Canada with more than 400 stores.

Everything they did from the start was based on long-term strategic planning. If they wanted to grow in Canada, they had to be accepted and trusted by the Canadian consumer. They developed a strategy that helped build that trust by being seen as a valuable asset in the community.

Businesses should realize they are part of the community. It’s the community that allows them to grow and be profitable. Being a good corporate citizen and partner within the community is not just moral and ethical, it’s a winning strategy. Walmart realized this and took an interest in the local community and issues such as the environment. It executed its community program with precision.

For the past 27 years, it has raised and donated more than $500 million for Canadian charities, with a focus on helping Canadians. Some highlights include:

  • 60 million meals to Food Banks Canada
  • $53 million to Breakfast Club of Canada to help feed students in schools across the country
  • $54 million in disaster relief funding to support The Canadian Red Cross
  • $169 million to Children’s Miracle Network to save and improve the lives of sick children in Canada

They’re also working on sustainability and landfill diversion programs to improve the environmental quality of local communities where stores are established. The execution of their strategy paid off as the company is one of the most profitable retailers in Canada. As of Feb. 18, 2021, Walmart Canada's e-commerce sales surged 229 percent.

Learn from Walmart's Success:

  • Reward management for thinking long-term.
  • Company involvement with the community. It’s customers from the community that allows your company to grow.
  • Giving back to the community as a good corporate citizen helps you grow.
  • Look at employees as valued assets and reward them.
  • Take advantage of bankruptcies that allow you to pick up valued assets without wasting time and spending money searching for them.

Home Depot Infographic

Invest in your Community & People to Grow Like Home Depot

Everyone knows that online services such as Amazon are thriving during the pandemic. Home Depot ranks No. 5 across all eCommerce retailers.

The company has invested billions in revamping its eCommerce site since 2018 as a long-term strategy and it’s paying off. Every year more and more sales are coming from the eCommerce site that attracts at least 120 million people annually.

Last year, online sales were up 27 percent. The website is easy to use and more than 50 percent of orders are picked up in parking lots.

Like Walmart, Home Depot takes a long-term view of strategic growth by investing heavily in community initiatives. Its corporate responsibility strategy focuses on people, operating sustainably, and strengthening communities.

The Home Depot Community Impact Grants Program provides up to $5,000 to registered nonprofit organizations to help fund community projects.

The company’s Veteran Housing Grants Program helps nonprofits fund the development and repair of multi-unit veteran housing facilities. Awards range from $100,000 to $500,000. Since 2011, The Home Depot Foundation has granted more than $24 million to Habitat for Humanity to build, repair or rehabilitate veteran's homes.

Home Depot also invests in workers because management understands that these people are valued assets to the corporation by serving customers and bringing in revenue. The company rewards hard-working employees with weekly bonuses, double pay for overtime, and extended time off. In 2020, the company invested about $2 billion on enhanced compensation and benefits.

These strategies are working for Home Depot as yearly revenues steadily increase. According to the 2021 annual shareholders meeting presentation, the company made more than $130 billion in sales in 2020 from 2,298 retail stores. A $22 billion increase on the previous year.  

Learn from Home Depot's Success:

  • Invest in your people, community, and state of the art eCommerce site to deliver dividends now and down the road.
  • Practice corporate social responsibility.
  • Adopt a holistic approach to strategy formulation and execution

Strategy Isn't Optional 

As illustrated through the previous examples, strategy is the difference maker when it comes to business success. Businesses that fail to plan struggle when the going gets tough, as they don't have any preexisting measures in place to combat unforeseen circumstances. Strategy should be ingrained through a business, democratized to make it business as usual for all employees. The businesses that understand this are the ones that succeed long term.

Topics:Creating Your Strategy
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