Persistence is a virtue. But refusing to quit is the more common strategic error.
No one wants to be a quitter. We all know it is a loser’s game. So, leaders argue with their last breath against altering their well-worn strategy. But quitting is often the winning move.
I’ve written about this before, but somehow it feels especially critical right now, when so much is changing in our world.
Pernicious Persistence
Amazon would never have become an institution without steadfast commitment to its long-term vision, despite years of early losses. But for every Amazon with a 25-year strategy, there are hundreds of companies still grappling with an obsolete and fruitless strategy.
Many things keep leaders from changing strategy. Some of it is psychological—whether bias or ego. But just as often, no one even considers the strategy as the problem.
An Industry Interloper
When Seiko introduced a quartz watch in 1969, it shocked the Swiss watchmaking industry. For hundreds of years, they had monopolized the market with precision, mechanical watches.
Fifteen years later, most of those watchmakers were gone. They couldn’t adapt to the competitive challenge of cheap, accurate timepieces.
But, Rolex, which looked a lot like its peers, never lost its momentum.
Unlike other companies, Rolex adapted to the change, introducing their own line of quartz watches. They also stopped promoting their accuracy, and instead distinguished Rolex as the watch worn by the powerful.
Despite the massive competitive change, and the resulting Swiss recession, Rolex never contracted and thrives to this day.
Strategy
At some point most of us develop a company strategy that we believe will give us an edge. It may be focused on our product, pricing, delivery or our chef’s unusual spice-mix.
But whatever it is, we tend to stick with it. In fact, the longer it goes on, the more likely we are to hang in there—even if the results are poor.
From the outside, that seems illogical. If the business isn’t growing, and the customers are scarce, or some competitor is stealing market share, isn’t it obvious that we need a change?
But at what point should we declare failure—or even anticipate future failure? Did we give it enough time? Is the problem the strategy or do we just have incompetent sales reps?
It’s especially bad if the strategy once worked.
Leaders tend to be nostalgic about success. They struggle to update their perspective.
So it was for the Swiss watchmakers. Their approach had once worked brilliantly. And that past glory tethered them to history, not reality. They had no strategy and no lifeboat.
Most organizations in similar situations do the same thing. At best, they tinker with messaging, marketing, staff, and management. Often, for years after a strategy has failed, investors continue to pour money into organizations, believing that the next iteration will be the “tipping point”. (Recall WeWork, which raised $11.615 billion over 26 rounds of funding—and then went bankrupt.)
The Pull of Inertia
Most failures aren’t as gigantic or as dramatic as WeWork. Instead, the conditions have changed, but poor results are slow to come. If someone were looking, they might expect a problem. But that’s IF someone is looking.
More surprising, even when their numbers are falling, many companies still don’t recognize the need for a change.
The technical term for this type of blindness is strategic inertia.
No Strategy
One way to ensure that failure escapes notice is to have no explicit strategy. Startups call that “seeking product-market fit”—and they often fail to identify failure. Why? Because, they have no strategy. Instead, they are in endless pursuit of some imagined phenomenon out there.
Instead of making the hard choices of where to sell, who to target and how to win, the company is on an endless quest for the next opportunity, use case, vertical or position. Nothing ever fails because nothing is ever chosen.
As common as that is, it’s still not the most common way companies fail to respond when conditions change.
Failure? Where?
To address imminent failure strategically, leaders must first notice there is a problem.
Surprisingly, failures aren’t always obvious. It may be apparent when you look at the starving “actor” working at Starbucks in his 50’s. But, what about the SaaS start-up that ekes out every quarter? Is it failing? Or progressing?
It seems like a judgment call. But judgment becomes necessary only in the absence of structures that reveal failure.
Observable Failure
Making failure observable should be a conscious choice. But many leaders never consider the possibility that they could be both failing and oblivious to it. So, they don’t build in failure signals—or triggers to quit or change.
But the risk is clear. Take your focus away from the success you imagine and gaze at the potential failure down the road. Unless there are obvious and unignorable signs, you may find yourself recognizing the failure just as funding dries up, or the liquidator knocks.
Then, it’s too late.
So, building a failure signal system is critical.
Most leaders create metrics as they roll out their strategy. But those metrics usually measure the progress of the implementation.
To make failure observable you must track strategic validity. That shows up in the theorized correlations between precursors and results.
The Logic of Strategy
Ultimately, every strategy is a syllogism:
1) If we do A, B and C, THEN
2) We will deliver X (our value proposition) to Y (our target customer), THEN
3) We will win (however that is defined).
Measuring implementation, which is what KPIs and OKRs purport to do—is all about tracking how well (1) is going.
But measuring validity requires tracking both sides of each THEN proposition.
“If 1, THEN 2” is a theory about how you can deliver your strategic advantage. It proposes that developing certain capacities will lead to producing your distinct value proposition.
Measuring that correlation will reveal whether (2) delivering the value proposition, does in fact, follow (1) the enablers of the strategy.
“If 2, THEN 3” measures whether your value proposition will win the day (as your strategy suggests). You could brilliantly deliver “2”—and have little revenue. That would be a failure. And specifically, it would be a strategy failure.
It’s easy to keep doing the same thing if all you measure is what you’re doing and not the degree to which it is causing the changes you desire. Instead of questioning the strategy, leaders begin to question their staff’s competence or the customer’s intelligence.
Both are irrelevant when the strategy is wrong.
Quit Trigger
Having those metrics isn’t enough. You also need to know when to call it.
Obviously, the first time that the syllogism seems problematic you don’t call it quits. You may refine the process, improve areas of weakness, or take other actions to ensure you are really doing what the strategy demands.
But, at some point, you need to indict the strategy, not the product or sales team.
There is no perfect answer to this. But creating a quit trigger in advance –whether in months, revenue or number of iterations makes a difference. And the time to do it is before you are in the grip of strategic inertia –or any of several cognitive biases.
Caught in a Mental Trap
For founders, it’s common to personally identify with their product. But that personalization makes discovering strategic failure hard.
Several of my clients have fallen into the trap of believing so deeply in their product’s value that they couldn’t see the market’s yawning disinterest. When that happens, they reinvent, reposition, rebrand, hire, and fire. But, in at least one case they had to close the company. As much as the founder loved his product, there were simply too few other people who shared his enthusiasm.
Compounding that personal attachment is a combination of cognitive biases. The sunk cost fallacy makes us reticent to quit. Having invested time and money in an existing strategy, everyone feels like walking away would be tantamount to burning those resources. But, those resources are already ash.
Yet, we convince ourselves that with enough work, it will turn around.
That phenomenon is intensified by status quo bias—the idea that the current way is the best way.
When you consider the Swiss watchmakers in the 1970s, their heritage and tradition blinded them. They never considered that their centuries-old approach would stop working.
But, when the conditions are different, no matter how brilliant the strategy once was, it may be obsolete. If you don’t discover that early, the opportunity to quit or change will vanish.
The solution to bias is two-fold.
System and Culture
At a systemic level, everyone must understand that the strategy is a theory. This is something that we say and believe when we first create it.
But at some point, without repetition, ritual and rigor, its theoretical-ness will vanish. When that happens, the strategy becomes a kind of A Priori TRUTH: Unimpeachable.
You fight that with language—characterizing the strategy as a theory, constantly revisiting its validity, building ongoing SWOT checks to scan the horizon. If the theoretical nature of the strategy is alive in the language of the organization, then the healthy skepticism needed to see looming failure can thrive.
People and Practice
The second necessity is to build a team of detectives; people who question and notice changes.
They are likely to be curious and sometimes disagreeable. But every tier of the organization must include non-followers. Even the most strategically inquisitive culture will not be enough if people are so “nice” that they won’t raise bad news.
Build Failure-Friendliness
Ideally, we avoid strategic inertia through prevention, not remediation. Once in a state of inertia, by definition, nothing can quite rise above the fray.
But prior to it, you can create an inertia moat.
To make those structures work you must imbue them into daily work, quarterly reviews, one-on-ones, and team life.
Fundamentally, knowing when to quit—in time for quitting to matter—demands that we never let our strategy languish. [Click to tweet this thought]
Talk about it.
Reference it.
Continually assess it.
If we don’t police ourselves, we will all succumb to seeing our strategies as sacred cows. And when you are kneeling at that altar, who is watching your back?
