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All executives know that strategy is important. But near all also notice it scary, because it forces them to confront a future they can only approximate at. Worse, really choosing a strategy entails making decisions that explicitly cut off possibilities and options. An executive may well fearfulness that getting those decisions incorrect will wreck his or her career.

The natural reaction is to brand the claiming less daunting by turning it into a problem that can exist solved with tried and tested tools. That well-nigh always means spending weeks or even months preparing a comprehensive plan for how the company will invest in existing and new assets and capabilities in order to reach a target—an increased share of the market, say, or a share in some new i. The plan is typically supported with detailed spreadsheets that project costs and revenue quite far into the future. By the finish of the process, everyone feels a lot less scared.

This is a truly terrible manner to make strategy. It may exist an excellent way to cope with fear of the unknown, but fright and discomfort are an essential role of strategy making. In fact, if you are entirely comfortable with your strategy, at that place's a strong chance it isn't very good. You're probably stuck in one or more than of the traps I'll discuss in this commodity. You need to be uncomfortable and apprehensive: True strategy is almost placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success.

In this worldview, managers accept that practiced strategy is not the production of hours of careful enquiry and modeling that lead to an inevitable and most perfect conclusion. Instead, information technology'due south the result of a simple and quite rough-and-ready process of thinking through what it would take to achieve what you desire so assessing whether it's realistic to try. If executives adopt this definition, then maybe, but maybe, they can keep strategy where it should exist: exterior the comfort zone.

Comfort Trap 1: Strategic Planning

About every time the word "strategy" is used, it is paired with some grade of the word "plan," as in the procedure of "strategic planning" or the resulting "strategic plan." The subtle slide from strategy to planning occurs because planning is a thoroughly doable and comfortable exercise.

Focus your free energy on the central choices that influence revenue decision makers—that is, customers.

Strategic plans all tend to look pretty much the same. They unremarkably have three major parts. The first is a vision or mission statement that sets out a relatively lofty and aspirational goal. The second is a list of initiatives—such as product launches, geographic expansions, and construction projects—that the organization volition carry out in pursuit of the goal. This part of the strategic plan tends to be very organized but likewise very long. The length of the list is mostly constrained only by affordability.

The 3rd element is the conversion of the initiatives into financials. In this mode, the plan dovetails nicely with the annual budget. Strategic plans get the budget's descriptive front end, often projecting five years of financials in social club to appear "strategic." Only direction typically commits only to year one; in the context of years two through 5, "strategic" actually means "impressionistic."

This exercise arguably makes for more thoughtful and thorough budgets. However, it must non exist dislocated with strategy. Planning typically isn't explicit near what the organisation chooses not to exercise and why. It does not question assumptions. And its dominant logic is affordability; the plan consists of whichever initiatives fit the visitor'south resources.

Mistaking planning for strategy is a common trap. Even board members, who are supposed to be keeping managers honest most strategy, autumn into information technology. They are, after all, primarily current or former managers, who find it safer to supervise planning than to encourage strategic selection. Moreover, Wall Street is more than interested in the short-term goals described in plans than in the long-term goals that are the focus of strategy. Analysts pore over plans in social club to assess whether companies can run across their quarterly goals.

Condolement Trap two: Cost-Based Thinking

The focus on planning leads seamlessly to cost-based thinking. Costs lend themselves wonderfully to planning, because generally they are under the control of the company. For the vast majority of costs, the company plays the function of customer. It decides how many employees to rent, how many square feet of real manor to charter, how many machines to procure, how much advertizing to air, and and then on. In some cases a visitor can, like whatever client, decide to stop buying a particular good or service, and so even severance or shutdown costs can exist under its control. Of grade there are exceptions. Government agencies tell companies that they need to remit payroll taxes for each employee and buy a certain amount of compliance services. But the proverbial exceptions prove the rule: Costs imposed on the visitor by others brand upward a relatively pocket-sized fraction of the overall toll flick, and nearly are derivative of visitor-controlled costs. (Payroll taxes, for case, are incurred but when the company decides to hire an employee.)

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Costs are comfy because they tin be planned for with relative precision. This is an important and useful exercise. Many companies are damaged or destroyed when they let their costs become out of control. The trouble is that planning-oriented managers tend to apply familiar, comfy price-side approaches to the revenue side as well, treating acquirement planning as most identical to cost planning and every bit an equal component of the overall plan and budget. All as well often, the result is painstaking work to build up revenue plans salesperson by salesperson, product by product, channel by channel, region by region.

But when the planned acquirement doesn't show up, managers feel dislocated and even aggrieved. "What more could we take done?" they wonder. "We spent thousands upon thousands of hours planning."

There'south a simple reason why acquirement planning doesn't take the aforementioned desired result as price planning. For costs, the company makes the decisions. But for acquirement, customers are in charge. Except in the rare case of monopolies, customers can determine of their ain free volition whether to give acquirement to the visitor, to its competitors, or to no one at all. Companies may fool themselves into thinking that revenue is under their control, but considering it is neither knowable nor controllable, planning, budgeting, and forecasting it is an impressionistic exercise.

Of class, shorter-term revenue planning is much easier for companies that have long-term contracts with customers. For instance, for business concern data provider Thomson Reuters, the bulk of its revenue each twelvemonth comes from multiyear subscriptions. The simply variable amount in the revenue program is the deviation between new subscription sales and cancellations at the end of existing contracts. Similarly, if a company has long order backlogs, equally Boeing does, it will be able to predict revenue more accurately, although the Boeing Dreamliner tribulations demonstrate that even "business firm orders" don't automatically translate into future acquirement. Over the longer term, all revenue is controlled by the customer.

Companies in many industries adopt a small piece of a huge market to a large piece of a small one. The thinking is, of course, that the one-time promises unlimited growth potential. And there's a certain corporeality of truth to that. But all too often, the size of the opportunity encourages sloppy strategy making. Why choose where to play or how to win when in that location's a huge market to conquer? Everyone is a potential customer, then just get out and sell stuff.

Only when anyone could be a customer, it is impossible to figure out whom to target and what those people really desire. The results tend to be an offering that is not captivating to everyone and a sales strength that doesn't know where to spend its time. This is when crisp strategy making and clear thinking near opportunities are most important.

When you lot're facing a huge growth opportunity, it is smarter to think sequentially: Determine what piece of the overall market to tackle first and target it precisely and relentlessly. Once you've achieved a dominant position in that segment, aggrandize from there into the next, then on.

The bottom line, therefore, is that the predictability of costs is fundamentally different from the predictability of acquirement. Planning tin can't and won't make revenue magically announced, and the effort y'all spend creating revenue plans is a distraction from the strategist's much harder task: finding ways to acquire and keep customers.

Comfort Trap 3: Cocky-Referential Strategy Frameworks

This trap is perhaps the nearly insidious, because it can snare fifty-fifty managers who, having successfully avoided the planning and price traps, are trying to build a real strategy. In identifying and articulating a strategy, most executives adopt 1 of a number of standard frameworks. Unfortunately, ii of the almost pop ones tin can atomic number 82 the unwary user to design a strategy entirely around what the company can control.

In 1978 Henry Mintzberg published an influential article in Management Science that introduced emergent strategy, a concept he later popularized for the wider nonacademic business audition in his successful 1994 book, The Rise and Fall of Strategic Planning. Mintzberg's insight was simple but indeed powerful. He distinguished between deliberate strategy, which is intentional, and emergent strategy, which is not based on an original intention but instead consists of the visitor's responses to a variety of unanticipated events.

Planning typically isn't explicit about what the organization chooses not to exercise and why. Information technology does not question assumptions.

Mintzberg's thinking was informed by his observation that managers overestimate their power to predict the future and to program for it in a precise and technocratic way. By drawing a stardom betwixt deliberate and emergent strategy, he wanted to encourage managers to spotter carefully for changes in their environs and make course corrections in their deliberate strategy accordingly. In addition, he warned against the dangers of sticking to a fixed strategy in the face of substantial changes in the competitive environment.

All of this is eminently sensible advice that every director would be wise to follow. Nonetheless, most managers do non. Instead, virtually use the idea that a strategy emerges as events unfold as a justification for declaring the time to come to be then unpredictable and volatile that it doesn't make sense to make strategy choices until the future becomes sufficiently articulate. Detect how comforting that interpretation is: No longer is at that place a need to make angst-ridden decisions almost unknowable and uncontrollable things.

A little earthworks into the logic reveals some unsafe flaws in it. If the future is as well unpredictable and volatile to make strategic choices, what would pb a manager to believe that it volition get significantly less and then? And how would that managing director recognize the point when predictability is high enough and volatility is low enough to start making choices? Of course the premise is untenable: There won't be a time when anyone can be sure that the hereafter is predictable.

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Hence, the concept of emergent strategy has simply go a handy excuse for avoiding difficult strategic choices, for replicating equally a "fast follower" the choices that appear to exist succeeding for others, and for deflecting whatsoever criticism for not setting out in a assuming direction. Simply following competitors' choices will never produce a unique or valuable advantage. None of this is what Mintzberg intended, merely it is a common outcome of his framework, because it plays into managers' comfort zone.

In 1984, six years after Mintzberg's original article introducing emergent strategy, Birger Wernerfelt wrote "A Resource-Based View of the Firm," which put forth some other enthusiastically embraced concept in strategy. But it wasn't until 1990, when C.One thousand. Prahalad and Gary Hamel wrote ane of the most widely read HBR articles of all time, "The Core Competence of the Corporation," that Wernerfelt's resource-based view (RBV) of the business firm was widely popularized with managers.

RBV holds that the key to a firm's competitive advantage is the possession of valuable, rare, inimitable, and non-substitutable capabilities. This concept became extraordinarily appealing to executives, considering it seemed to suggest that strategy was the identification and building of "cadre competencies," or "strategic capabilities." Note that this conveniently falls within the realm of the knowable and controllable. Any company can build a technical sales force or a software development lab or a distribution network and declare it a cadre competence. Executives tin comfortably invest in such capabilities and control the entire feel. Within reason, they tin guarantee success.

The problem, of form, is that capabilities themselves don't hogtie a customer to purchase. But those that produce a superior value equation for a detail set up of customers can practise that. But customers and context are both unknowable and uncontrollable. Many executives prefer to focus on capabilities that can be built—for certain. And if those don't produce success, capricious customers or irrational competitors tin can have the arraign.

Escaping the Traps

Information technology's like shooting fish in a barrel to identify companies that have fallen into these traps. (Come across the showroom "Are You Stuck in the Comfort Zone?") In those companies, boards tend to be highly comfortable with the planners and spend lots of time reviewing and blessing their work. Discussion in direction and board meetings tends to focus on how to clasp more than profit out of existing revenue rather than how to generate new revenue. The principal metrics concern finance and capabilities; those that deal with customer satisfaction or marketplace share (specially changes in the latter) take the backseat.

Probably: You accept a large corporate strategic planning grouping.
Probably Non: If you have a corporate strategy grouping, it is tiny.

Probably: In improver to turn a profit, your most important performance metrics are cost- and capabilities-based.
Probably Non: In addition to turn a profit, your well-nigh important performance metrics are customer satisfaction and market share.

Probably: Strategy is presented to the board by your strategic planning staff.
Probably Not: Strategy is presented to the board primarily past line executives.

Probably: Board members insist on proof that the strategy volition succeed before approval it.
Probably Non: Board members ask for a thorough description of the risks involved in a strategy before blessing information technology.

How can a visitor escape those traps? Considering the problem is rooted in people'south natural aversion to discomfort and fear, the only remedy is to adopt a discipline about strategy making that reconciles y'all to experiencing some angst. This involves ensuring that the strategy-making process conforms to three basic rules. Keeping to the rules isn't like shooting fish in a barrel—the comfort zone is always alluring—and it won't necessarily result in a successful strategy. Only if you can follow them, y'all will at to the lowest degree be sure that your strategy won't be a bad one.

Dominion 1: Go on the strategy statement unproblematic.

Focus your energy on the key choices that influence revenue determination makers—that is, customers. They will decide to spend their money with your company if your value proposition is superior to competitors'. Ii choices decide success: the where-to-play decision (which specific customers to target) and the how-to-win decision (how to create a compelling value proposition for those customers). If a client is not in the segment or expanse where the company chooses to play, she probably won't even become enlightened of the availability and nature of its offering. If the company does connect with that customer, the how-to-win pick will determine whether she volition discover the offering's targeted value equation compelling.

This commodity likewise appears in:

If a strategy is about only those two decisions, it won't need to involve the production of long and tedious planning documents. There is no reason why a company's strategy choices can't be summarized in one page with elementary words and concepts. Characterizing the key choices as where to play and how to win keeps the give-and-take grounded and makes it more likely that managers will appoint with the strategic challenges the firm faces rather than retreat to their planning comfort zone.

Rule 2: Recognize that strategy is non about perfection.

Equally noted, managers unconsciously feel that strategy should achieve the accuracy and predictive power of price planning—in other words, information technology should exist most perfect. But given that strategy is primarily about acquirement rather than toll, perfection is an incommunicable standard. At its very best, therefore, strategy shortens the odds of a visitor's bets. Managers must internalize that fact if they are not to exist intimidated by the strategy-making process.

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For that to happen, boards and regulators demand to reinforce rather than undermine the notion that strategy involves a bet. Every time a board asks managers if they are certain well-nigh their strategy or regulators brand them certify the thoroughness of their strategy controlling processes, information technology weakens actual strategy making. Equally much equally boards and regulators may want the globe to be knowable and controllable, that'southward simply not how information technology works. Until they accept this, they will get planning instead of strategy—and lots of excuses downward the line about why the revenue didn't bear witness upwardly.

Dominion 3: Make the logic explicit.

The simply sure way to improve the hit rate of your strategic choices is to test the logic of your thinking: For your choices to make sense, what do you demand to believe about customers, near the evolution of your industry, about competition, about your capabilities? Information technology is critical to write downward the answers to those questions, considering the man mind naturally rewrites history and volition declare the world to take unfolded largely as was planned rather than recall how strategic bets were actually made and why. If the logic is recorded and then compared to real events, managers will exist able to run into quickly when and how the strategy is not producing the desired outcome and will be able to make necessary adjustments—just as Henry Mintzberg envisioned. In addition, past observing with some level of rigor what works and what doesn't, managers will be able to improve their strategy decision making.

Every bit managers utilize these rules, their fright of making strategic choices will diminish. That's good—but merely upward to a point. If a company is completely comfy with its choices, information technology's at gamble of missing of import changes in its environs.I have argued that planning, cost management, and focusing on capabilities are dangerous traps for the strategy maker. Yet those activities are essential; no company can fail them. For if it's strategy that compels customers to requite the company its revenue, planning, cost control, and capabilities decide whether the revenue can be obtained at a price that is profitable for the company. Homo nature being what it is, though, planning and the other activities will ever dominate strategy rather than serve it—unless a witting effort is made to forestall that. If you lot are comfortable with your company's strategy, chances are you're probably not making that effort.

A version of this article appeared in the January–February 2014 issue of Harvard Business Review.