Rich Horwath on New Growth from New Thinking, Setting Your Strategy and Contextual Radar

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Episode 130 - Rich Horwath on New Growth from New Thinking, Setting Your Strategy and Contextual Radar

Rich Horwath is a strategy expert. He teaches managers like you how to "think strategically" so that you can generate new growth from new thinking.

"The weapons ultimately brandished in competitive battles come in the form of offerings." What is your organization's offering and are you putting the right priority on it for true growth and success?

Learn the three value disciplines of successful organizations: product leadership, operational excellence and customer intimacy.

Find out why "think time" is the most important precursor to success and how to produce a "Creative Insight Generation Process."

If you are responsible for setting strategy at your organization, or you're just fed up with the bad strategy under which you labor, this episode will help you crystallize your next steps.

Transcript

Susan Bratton: Welcome to DishyMix. I’m your host Susan Bratton, and on today’s show we’re going to talk about strategy. It’s that time of year when we’re thinking about the New Year and what’s coming for ourselves and our business, and today we’re going to focus on strategic thinking around our business, our strategy, our differentiation and how we can pull ahead next year and have the best year ever. And to that end, I’d like you to meet Rich Horwath. Rich wrote a book that I’ve really enjoyed called Deep Dive: The Proven Method For Building Strategy, Focusing Your Resources and Taking Smart Action. And we’re going to go through how you can be taught to think strategically. If you’re already a good strategic thinker we’re going to give you some tools to take you to the next level. If you feel like you could be a much more strategic player within your organization or in your own company. We’re going to show you how to do the work to help you outperform your competition. So lets welcome Rich on the show. Hey Rich.

Rich Horwath: Susan, great to be with you today.

Susan Bratton: I’m so glad you are. It took us a little while to get together, but I really appreciate it, and I’ve had so much fun with Deep Dive. I did the strategy worksheets, and, you know, it’s interesting because I took a survey about a year ago, a little survey called Self – oh gosh, what was the book called? I’ll have to think about the name of it, but you got to do this whole survey and figure out what your five best talents were. And one of my top five was strategy. And I thought, oh, thank god. I never really felt like I was that confident about thinking about strategy, but when I took your test I thought, oh, we talk strategy all the time in our business. We’re always thinking about differentiation and business opportunity and how we can outsmart the competitors and how we can be better and take the best of what they’re doing and make ours better. So it was not only a level set to get some new tools, which I liked, and some new frameworks, which you did a really good job with in the book, but also just a new way of thinking about how to be more strategic in business. So I want to start out with my first question, which is you believe – and so do I – that in general probably aren’t often as strategic as they might be, but that they can be taught to think strategically. So tell us more about how we go about doing that.

Rich Horwath: You know Susan, I think strategic thinking is a lot like playing the piano; it’s a lot like golfing or playing tennis. You know, all of those things, we can get better at by practicing. And strategic thinking, and the research in my experience over the last 20 years has shown that’s the exact same case here as well. If we practice thinking strategically, we can be more strategic and more effectively lead and manage our business. The challenge is that most people, and roughly 90 percent, have never had any formal training or exposure to strategic thinking or to the tools that you talked about just a moment ago that allow you to think strategically day in and day out. So there definitely is a pathway that we can carve out to help people move from being tactical to strategic.

Susan Bratton: Well speaking of tactical, I really liked your rule of touch, and I think that’s a good foil for us to decide how strategic we are. So describe the rule of touch.

Rich Horwath: The rule of touch helps people with one of the most common misunderstandings, and that is confusing strategy with tactics. Strategy is abstract; you can’t reach out and touch it. It’s like leadership or love. Tactics on the other hand tend to be very tangible, and so the rule of touch is if your people are having trouble discerning between is this a strategy or is it tactics they can use the rule of touch, which means if you can reach out and physically touch it then it’s most likely a tactic - things like sell sheets, CD ROMs, training programs those types of things. So the rule of touch really helps people get a better understanding of is this a strategy or tactics because there are lots of folks struggling with that.

Susan Bratton: Well I’ll tell you that if anybody still thinks that a CD ROM is a strategy, they better just like go back to the 20^th century and enjoy themselves.

Rich Horwath: They’re out there though.

Susan Bratton: Are they? Oh, good lord. So I liked this quote in the book: “The weapons ultimately brandished in competitive battles come in the form of offerings.” Tell us what you mean by offerings.

Rich Horwath: Really what we’re talking about is competitive advantage, and, you know, if you go around your office and you ask ten people, “What is competitive advantage?”, you’re most likely to get ten different answers. You know, it tends to be that holy grail in business, but very few people have a concrete understanding of what does that mean to my business. So what I try to do is break competitive advantage down into simply three things: capabilities, activities and offering. And capabilities are really what are our resources or assets. Activities then are what we do with the resources and assets. And offering then are the things that emerge from our activities that customers actually see, hear, touch, feel, the products and services that we bring to the market, and the reality is that stepping stone of competitive advantage, going from capabilities to activities to offerings, is really how we differentiate ourselves from the marketplace.

Susan Bratton: One of the things that you said in Deep Dive is that successful organizations are categorized by one of three value disciplines: product leadership, so they have a really great product, like Dyson…

Rich Horwath: Right.

Susan Bratton: Operational excellence; you mentioned FedEx as a company that, you know, obviously is doing a better job than Post Office, which is 180 years older than FedEx…

Rich Horwath: Right.

Susan Bratton: And customer intimacy. And I actually forget – oh, did you say, Whole Foods was a customer intimacy company.

Rich Horwath: Right.

Susan Bratton: Those are the three things. So do we have to think about in our company which one of those three we need to put the most focus on, and then really differentiate ourselves against our competitive with one of those three? I mean, we want to have all, we want to have a great product, we want to operate excellently, we want our customers to be happy, but do we really need to have a lead? Is it ruinous for us to try to do it all?

Rich Horwath: It is ruinous for us to try and do it all, but the reality is we cannot be all things to all things, especially today. You look at companies like United Airlines whose gone bankrupt, and you know, trying to be all things to all people, trying to come up with a low cost airline called TED to serve the cost conscious travelers, while still trying to do a really high-end job with business and international travelers. The reality is that’s going to lead you to bankruptcy. We’ve got to have a laser like focus today, and the value disciplines that you talk about really help us think about where does that focus lie. Well you mentioned the three - product leadership, customer intimacy and operational excellence. What I’ve found in most companies is that they’re doing a little bit of each, and what that’s going to get you is a mediocre return on your business. You know, it’s like investing. If you spread your investments across the boards from bonds to golds to stocks to mutual funds, you’re going to probably get a fairly mediocre return, and it’s the same way in business. We’ve got to choose which one of those best fits our core competency and hone in on that.

Susan Bratton: What if, for example, you’ve been focused on all three – ‘cause you didn’t know that you have to focus on one of three value disciplines, and you’ve worked on having a really good product, you’ve worked it having operational excellence, you’ve worked at customer intimacy – but what if you say, “Boy, I actually think that the thing I’m doing the least well” – lets just take customer intimacy as an example. Lets just say you have a reasonable product and your customers can get it from you and they’re reasonably satisfied, but you’ve never really focused on something like customer intimacy, and you decide that’s actually – because you were going to talk about this in a minute – you do a competitive analysis and you realize that the real market opportunity is in customer intimacy, yet you’ve put no time there. What would you recommend on a strategic level that a company do? How would they go about implementing a change? And if it’s the worst thing you do but you see it as the market opportunity, should you go after it?

Rich Horwath: Well and you Susan, you hit on a really key point. You know, one of the things that we need to remember at the end of the day, strategy is always about serving customers. So sitting in a conference room and saying, “Well, this is what we do best, so we’re just going to put the blinders on and go do it”, without really understanding where’s the customer value in the marketplace and can we serve that above and beyond our competitors. That’s the real thing people miss, is they put blinders on, they don’t focus on what’s the customer value. So if you find in your research that customer intimacy is the real key to driving customer and brand loyalty, then absolutely what needs to happen is you need to get your people together, not just the senior ones, but midlevel, as well as some up and comers, and you need to sit down and have a strategic thinking session, two hours, three hours, where you really talk about what would it take internally to get our organization to be a customer intimate organization and what does that start to look like.

Susan Bratton: I have three things I want to ask you about that, so we’re going to probe on this for a minute.

Rich Horwath: Okay.

Susan Bratton: How do I do the research to find out what my customers want?

Rich Horwath: Yeah, great question. And, you know, depending on the company’s size and your resources….

Susan Bratton: Lets assume small-medium business here because if you have money you can always do better, so lets assume we don’t have much money.

Rich Horwath: Okay, yeah. If you don’t have much money the first place to start is with your current customers. You know, we tend to say, “Well, we know our customers.” But the reality is we don’t talk to customers, especially if we’re at a senior level, as much as we probably should. So the first place to start is to actually go on some customer calls, talk with customers, find out what they’re doing. Social media is another important area as well. You know, you can glean a lot of good insights from Twitter, from Face Book if you have a presence there, so understanding what are people saying about our industry, about our market, and then maybe even about us relative to our products and services. And then the other thing – and this is more painful, but it’s an important piece – is you’ve got to contact in some way, shape or form former customers, people who no longer are working with you and find out why is that, what is the reason that they’ve moved to another offering or to another company. And if we do those three things that starts to help us better understand is this truly an area of value.

Susan Bratton: Well you answered one of my three questions in that response and it was very helpful for you to say what you did. I was going to ask you in the realm of customer intimacy are you seeing when you’re teaching you clients to take a more strategic approach to their business, are you seeing them in the customer intimacy area moving towards social media? Are you seeing that happen in the corporate world, or are they still like “What the hell is Twitter? Why do people do the Tweeting thing?” I mean, like I get that a lot, where people just are, you know, like they don’t understand it and it actually makes them angry because they don’t understand it and they feel disenfranchised from social media.

Rich Horwath: Yeah, I think you know that it’s a great point Susan. I think all of us as human beings don’t like to change. I mean that’s inherent in our makeup. But to your point the great leaders, the great managers, the great business people out there, are the ones that are least open to listening, learning and hearing about what’s new. And to ignore social media at this point, wow; that’s probably the quickest path to business failure today. Now are you going to adopt all of the social media? Obviously not. You have to find an expert in social media that can help you understand strategically which of the tools out there will give you the best insights into customer intimacy for your business. So you’re right, there are a lot of people that aren’t doing a good job with it, and really you ignore that at your own peril.

Susan Bratton: You know, it’s funny, just this weekend when I was away – I was traveling, visiting my family – and I had an emergency call from a client of mine who said “I’ve got to do a presentation on Monday and I need you to tell me…. I need you to, in an hour-hour and a half can you get on the phone with me this weekend and just tell me what the whole landscape of social media is, how I need to think about it strategically, what kind of questions I need to go in and talk about”, and we did it. I mean in an hour and a half, we were super tight. Because I’d known this person, I had a lot of shorthand, I could speak to her. But what I’m finding more often now is that I’m being called in to speak to people about, okay, just explain it all, give us a level set, show us how other people are using it and give us some ideas about how we should think about what we might do. And they want that really high level approach right now. They’re not in the weeds yet on this stuff.

Rich Horwath: Yeah. And, you know, the important thing for folks out there to understand is you’ve got to find somebody who is truly an expert, and the way I define expert is somebody that can sit down or talk to you on the phone and tell you, like you said, in an hour-and hour and a half, here’s the landscape of social media. There’s a lot of people out there who think they know it, but you’ve got to find somebody like yourself Susan that is an expert, that can condense it down and give you the meat of what you need to know to acquire it to your business. So I think that’s a really important piece is that, you know, if you’re looking to be more customer intimate with the folks at you work with, you’ve got to find an expert in social media who can bring that level of expertise to you and explain it in a simple and understandable way, and there’s not a lot of folks out there that can do that.

Susan Bratton: Yeah, you have to have a lot of water under the bridge to be able to work at that strategic level, but that goes to my other point in this. The first one was how do we, you know, how do we find out about creating value. The second was is social media important; you said yes. The third thing that you also brought up was the midlevel and the up and comers and getting them involved. This is a two-sided question, Rich. The first side is that there are a lot of people who work in organizations at the junior and mid level, and they see the lack of strategy or a bad strategy and may feel disempowered to say anything or to change it or they may be so busy with their own work that they don’t feel like they can take the time to do the research to figure out a strategy, to offer it up, or they don’t have enough experience or whatever it might be. How does somebody in that situation read your book and come up with some ideas?

Rich Horwath: Yeah, and that’s a great point. I’m working with a company right now that’s about a 40 billion dollar company, and they’re facing that exact thing. The folks in the director and VP level or at the mid level are feeling a lot of frustration as you pointed out from getting strategy handed down that’s not really great strategy in some cases, and there definitely is that frustration level. I think that what the folks that I’ve seen be most successful in working through that are the ones that are able to realize that you as an individual manager, whatever level you’re at – whether you’re just starting out or you’ve got 20 years in the business – you are a strategist technically because a strategist is somebody who intelligently allocates their resources, which are time, talent and budget. And everybody has those to certain degrees. So while you may be getting strategies handed down from upper management that you’re not happy with, you cannot abdicate your responsibility to strategically manage your resources – your time, your talent and your budget – because if you do that successfully that’s going to get noticed within your department and within the organization. And as you talked about, I try and bring to light a lot of different tools, practical tools people can use to do that.

Susan Bratton: I love how every answer you have has three points to it. You read somewhere very long ago that a mind can only remember three things, and you were like, “Okay, I’ll do three things for the rest of my life.”

Rich Horwath: Exactly.

Susan Bratton: Busted. So we’re going to take a break to thank my sponsors, and when we come back I want to talk to you about the value of think time, contextual radar and how we can sharpen or get some good contextual radar, and I want to talk about the creative insight generation process and how any one of us - whether we are up and comers, mid level or running the company – how we can help our organization get to this level of strategic thinking. Sound good?

Rich Horwath: Excellent. Thanks.

Susan Bratton: All right. I’m your host, Susan Bratton. We’re with Rich Horwath. Rich is the author of Deep Dive: The Proven Method For Building Strategy, Focusing Your Resources and Taking Smart Action. And yes, yes, yes, he has two personally autographed copies of Deep Dive available for you, DishyMix listeners. You know the drill. You go to dishymixfan.com, which is the DishyMix Face Book fan page. Post your desire and we’ll look at all the fun requests, and Rich and I will decide which two of you will be the lucky recipients of a personally autographed copy of Deep Dive. So don’t be shy, get on there anytime ‘cause we wait for – I usually wait for four to six weeks to make the decision so lots of people have time to post, so I don’t want you to feel like, “Oh, I maybe listened to this a week late and they’re all going to be gone.” They’re not. We take our time. You’ve got time; go on, do it. We want you to have a copy. So lets take a break, thank our all-important sponsors that let us bring this great info to you, and then lets get back to teaching you some strategy. We’ll be right back.

Susan Bratton: We’re back. I’m Susan Bratton, your host of DishyMix, and we’re with Rich Horwath, author of Deep Dive. And Rich before we left for the break, we were talking about think time. I’ve been reading a book by Robert K. Cooper. It’s called Get Out Of Your Own Way. And one of the things that he says is that he likes to, instead of just going and sitting down at his desk and starting to work, he likes to walk out on his front porch every morning with his cup of coffee, after he’s worked out, before he’s even taken a shower, and he likes to look out into the distance and he likes to make his brain think about what his goals are, what his outcomes are and what are the top things that he needs to do to accomplish that work so that every day he reminds himself that it is so important to keep a focus on your goals and objectives. And you talked about this importance of the hour of think time. So I can’t imagine how important any of this is. This is the most important thing in your whole book really. So tell us about what you recommend.

Rich Horwath: You know Susan, it’s – and first of all, I love that example that you provided because I think anybody that is willing to have the discipline to take time out of their day is doing something that probably 99 percent of the rest of people are not doing, and that is as you said taking time to think, just think about your goals, about your projects, about your work, but doing it in a way that’s reflective and allows you to kind of see inside yourself what’s motivating you right now, what’s working for you, what’s not working for you. And, you know, there’s a bunch of examples in the book about folks that have done that, that have taken that think time and really made that their own. And it’s very easy to do, but the challenge is having the discipline to say, “You know what, I’m going to block off an hour every Monday or every Friday afternoon or 20 minutes away to devote just to thinking about my business, my work, my life.” And if we do that now all of the sudden – and if we have a journal to go along with that, either on our PC or on our hardcopy – now what we’re doing is we’re reflecting on what we’re learning about our work as well, and that’s really where the great ideas, the great insights come from.

Susan Bratton: We have to train our brains, and our brains want to just go do email, you know. We just want to sit there and do the safe stuff. And being a strategic thinker is the opposite of safe stuff. Thinking about your goals and your life outcomes and what you’re going to do to make meaning in your life and how you’re going to really behave today to lose that 15 pounds, whatever those things are that you’re working on, those are the things that take that extra focus. And I loved the other thing that you said too; you quoted Darwin in here, basically that the people who win are the people who are most responsive to change. And that’s really what I see happening is that outside of our organizations the landscape is constantly changing, yet for many of my listeners, I think they can relate to this, that we’re inventing a new world with digital marketing. My listeners are digital marketers and web services developers and entrepreneurs in the Internet, and they’re creating something new. So they can’t just look out and say, “Oh, well this is competitor A, B and C and, you know, here’s what this guy does better, and…”, it’s not old school stuff where they’re, these markets are solidified. They’re massively shifting landscapes. And so I think one of the areas where we need your help the most is in your concept of contextual radar, because we tend to be real naval gazers in our industry, trying to come up with new technologies that solve problems. Often the problems change and we haven’t even realized it.

Rich Horwath: Yeah, that’s a great point. You know, the whole idea of change in, you know, companies – and we’re seeing lots of examples today, whether it’s General Motors or Lehman Brothers – you know, companies that just were not responsive to change and, you know, have taken, you know, bankruptcy hits because of that, and I liken it to medicine. You know, there’s a simple adage in medicine that says prescription without diagnosis equals malpractice. So Susan, if you went into your physician’s office next week and said, “Boy, I have a bad back”, and you went and you waited and you got into the office and she, the physician finally came in, she looked at you but didn’t ask any questions and didn’t take any tests and just wrote a prescription and walked out, you know, what would your response be?

Susan Bratton: Well I would definitely not take the prescription.

Rich Horwath: Exactly. And it’s a ridiculous situation in a doctor’s office, but we do that same thing in business every single day. We’re running around like hamsters on a wheel, going, going, going, without stopping to understand and visualize what do we want to happen in the future. What is the future going to look like, whether it’s for our business, our product, our service, our personal life, what does that look like? If we don’t stop and diagnose that, then we can’t possibly come up with the pathways to get where we need to go. So the contextual radar is really a simple tool for any manager to look at their business in four areas - the market, customers, competitors and company - and help them gauge on a regular basis what’s going on and what’s changing.

Susan Bratton: Okay. The next question is the creative insight generation process. Now I read this again in your book. I’ve read about Mike Czikszentmihaly I can’t tell you how many times recently. I don’t know what I’m doing, but I’m reading every book that ever referenced Mike Czikszentmihaly.

Rich Horwath: And the fact that you can pronounce that makes you a, you are a Goddess in my eyes.

Susan Bratton: I practiced it because I did an interview with Sir Ken Robinson and he also talks about Mike in his book – it’s actually (unintelligible) I think. And he had it phonetically written out in his book, and so I had practiced being able to say it ‘cause I like to show off, you know. And so there was an ad agency executive, James Young, and some things you read from Mike Czikszentmihaly, and you came up with the creative insight generation process. I think a lot of my listeners would like to conduct some kind of a workshop, a management meeting exercise. They would like to be at least a catalyst for better strategic thinking. So tell us about this creative insight generation process.

Rich Horwath: Well, you know, again, I think when we talk about the world, you know, creativity, everybody gets flustered and they think, “Well, you know, I’m not a creative person” or, you know, “We can’t do innovation because it’s too big of a process”, and really what I try and do is, you know, using some, you know, some of the other wonderful thought leaders out there, trying to condense kind of what they’ve said into a simple process, and it’s really, you know, five different steps, you know. The first step is, you know, have a subject or topic in mind. So what, you know, what are you really trying to be creative or innovative about? So have that in your mind and then really start, you know, putting together – and I like to use three by five note cards – you know, just start putting together some ideas, some thoughts, some parts of this subject, this topic, and write those down on individual cards and just let them sit for a moment. And then start putting those things together in different ways. So moving the note cards around, trying to understand, “Well what if I moved this idea over here, what would that look like?” And then I think really the part that we tend to forget most often, that third step, is incubation, where we’ve just got to simply let it go. We’ve got to move on, do some other work, go for a bike ride, go see a show, whatever. Give ourselves a day, two days, three days, just to let it be sitting and simmering in our subconscious, and then sooner or later that idea, that subject will come back to you, and the interesting thing is it will come back to you in a new way. And then it’s simply a matter of sitting down with that new idea, that new way, and working through the details of it.

Susan Bratton: I like Post-It notes myself, but three by five cards will work. But I’m the same way, I do the same thing you do. I even do that to prepare for our interviews. On the interviews that I have today I brainstormed a whole bunch of things that I wanted to talk to you about. I both went through your book and I thought about the things I wanted to ask you, and I wrote them all on Post-It notes. And then I leave them for a while and then I come back and I prioritize them so that I get to the things I really want to do with you in the time that I have. So it’s funny that you use a very similar process.

Rich Horwath: Yeah, that’s great.

Susan Bratton: One of the things that I also think is super valuable in Deep Dive is the, you cover the five execution errors. So you have your strategy, but then what do you do wrong once you have it. And the other piece that I think is really good is the flawed strategic thinking; these really common ways that people kind of undermine a good strategy, and even if you’re not the person who has the confidence, the capability, the time or the experience or the desire to set the strategy in your organization, a lot of times you can be the one that calls bullshit on some flawed thinking and rise yourself in your organization by being a really rational clear thinking employee. And I was hoping of

that we could end the show with you talking, maybe just give us a really top line overview of the typical flawed strategic thinking, things that happen in organization, like group think and others, and then maybe just one of the ones where you can give us a way to navigate when we hear that happening, how we can overcome it as an individual.

Rich Horwath: Yeah, that’s a great point because we all sit in the meetings where a lot of times we know the top executive talking about their marketing strategy is not talking about strategy at all, and so we want to, as you say, call him or her onto the carpet, but we just don’t really have either the, you know, the political sense to do it or know the terms well enough to do it. But you know, there are a couple things, and I think the first one is, you know, people simply misusing the term strategy, you know. There’s an example from about a month ago when Microsoft and Yahoo announced they’re search engine Alliance, and the CEO of Yahoo came out and said that their number one strategy was to grow their audience. And as soon as I heard that I cringed because that’s not a strategy at all. That’s their goal, that’s what they’re trying to achieve, to grow their audience. How will they go about doing that is the strategy. And so I think that’s probably the biggest flawed strategic thinking I see out there is people confusing strategy, which is how you’re going to get there, with your goal, which is what you’re trying to achieve. So I think that’s probably the biggest thing that people can go back, look at the marketing plans, the sales plans, the operations plans, the HR plans, and if you want to call people out and you want to get things right, go through and ask yourself are the goals listed what we’re trying to achieve and the strategy’s how we’re going to do that, because in many cases they wont’ be. And then the other one that you had just mentioned I think is very prominent is this whole idea of groupthink. And groupthink is when people who work together, especially after a long period of time, start thinking very similarly. And they do lots of things, either consciously or subconsciously, to keep everybody happy and to not break away from the groups thinking. And that is one of the biggest thinking of business failure because it goes back to your point earlier Susan, people that aren’t responsive to change simply aren’t going to be as effective, and if we’re all thinking in the same way and we’re not encouraging debate and different points of view, then we’re going to fall into that trap very quickly. So I’d say those are probably the two biggest things is mistaking strategy and goals and really allowing group think to set in where you’re not allowing for different points of view to come to the surface.

Susan Bratton: You know what I think is the biggest mistake? Forecasting. Forecasting is not strategy, and I think most organization, even if they do forecasting, they think that’s the strategy.

Rich Horwath: That’s a great point. It would be like saying, “Well when I’m 50 years old I want to be a multimillionaire and have an island in the Pacific”, you know. That’s not your strategy, you know. So it’s fine to want that, that’s what your goal is. How are you going to do that? And to your point, financial forecasting usually in many companies, that substitutes for strategy. So saying you want to be a five hundred million dollar company, that’s not your – or being number one in the market – that’s not a strategy. How you’re going to do that, how you’re going to add that differentiated value to get there is the strategy.

Susan Bratton: Another one that you mentioned was “anchors.” I actually think this last part of your book on flawed thinking, if you decided that all you did in your organization was call them when you saw them, called these flawed thinking things when you saw them – and even do it in a super kind way, like, “Hey, I just want to check in and see if we’re all suffering in this moment from group think or if this is really what we all believe is the right way to move forward. Are we just agreeing because we’re tired and we think this is what everyone wants to do?” I mean just that could be a super effective thing for changing a strategy, right?

Rich Horwath: Absolutely. And, you know, you don’t have to be the CEO to do that.

Susan Bratton: You don’t. You can be anybody.

Rich Horwath: Exactly, or anybody can do that.

Susan Bratton: So anchors, I didn’t really understand that one. Explain it to me.

Rich Horwath: Well, you know, the concept of anchors comes really from the field of negotiation. So an anchor in negotiation is a data point or a piece of information that comes out initially that kind of acts as an anchor. So everything you talk about or think about from that point on is in relationship to that anchor. So like in real estate, an anchor would be the list price of a house.

Susan Bratton: Okay.

Rich Horwath: So the list price might be $495,000 dollars, that’s an anchor. What they’ve shown is that, you know, we immediately then use all of our negotiation based on that anchor of $495,000 dollars.

Susan Bratton: Setting a frame of reference. It’s an NPL phrase, setting an anchor is an NLP phrase, so that’s what you’re really doing.

Rich Horwath: Exactly…

Susan Bratton: Uh huh.

Rich Horwath: So when we, when we relay that then to strategic thinking what happens is in most companies we look at the budget from this past year and we say, “Okay, what is the number that we have to hit next year? And okay, now lets back into the strategy.” And that’s exactly the opposite of the way it should happen. So we wind up using our budget numbers and our forecasting numbers, they wind up becoming anchors that don’t allow us to really think creatively and strategically about potential new value or new innovations for the business.

Susan Bratton: That makes sense. I get it now. So Rich, where are you based?

Rich Horwath: I’m based just outside of Chicago.

Susan Bratton: Okay. So you’re in Chicago. And your company is called The Strategic Thinking Institute, and you do a lot of public speaking, so you’re a speaker for hire, is that right?

Rich Horwath: That’s correct.

Susan Bratton: And when you do that do you do workshop facilitation or do you come in and keynote or do you do both?

Rich Horwath: I do both.

Susan Bratton: And when you do the workshops how long do they usually last?

Rich Horwath: Generally anywhere from a half day to two days.

Susan Bratton: Wow, that’s a long time. You must be tired when you’re done.

Rich Horwath: Actually I’m super energized because I love…

Susan Bratton: Yeah.

Rich Horwath: I love doing that. I love…

Susan Bratton: I get that.

Rich Horwath: helping people get practical tools in their hands that are going to help them beat their competition; that’s what I love to do.

Susan Bratton: Now we can buy your book, Deep Dive, but you also have a website with tools. How do people play with you and the site at strategyskills.com? How does all that work?

Rich Horwath: Yeah, what I’ve tried to do with strategyskills.com is put together an online resource center – so articles, white papers, MP3’s, instructional videos – so if you’re trying to lead a swat analysis with your team, you know, you can watch a five minute video and understand, “What are the key elements that I need to facilitate that?” There’s software, there’s strategic planning templates on there. So really it’s, I’ve tried to just create a warehouse of strategic thinking tools and educational pieces that people can use to get better when it comes to strategy.

Susan Bratton: And what’s your favorite thing in the world? Is it to get hired for speaking or workshops, or what do you do that is the thing that makes you the happiest?

Rich Horwath: You know, I would say it’s actually doing a half day, full day training session, where we really have time to get into some valuable and practical tools that people are really excited about at the end of the day that they know that they’ve been practicing using during the day and they know they can use starting that next day with the rest of their team to help them beat their competition because the reality is 50 percent of bankruptcies are caused by bad strategies. So I love at the end of the day when people are excited to walk out with that workbook and those tools that they know they’re going to be giving themselves a chance to be much more successful.

Susan Bratton: Last question: if I am the CEO of a company and I’m listening to you right now, and I know in my heart of hearts that I have a forecast and I have a plan and I have a pretty mediocre strategy, what are the three or – lets give you three, ‘cause you love the three – give me the three steps that I should take starting right now to create a strategic plan for my business.

Rich Horwath: The three steps I would say – and I would process this by saying one thing first; new growth comes from new thinking. And so if you’re that CEO, that manager looking at 2010, you cannot simply do the same things in the exact same ways you did the year before. That’s not going to get you new growth. So that being said, the three things I think really need to happen are number one, you’ve got to write down and get consensus with your team, what are the top three goals, the three things we want to achieve in 2010. The second step is to understand the context. We talked earlier about the contextual radar; what’s going on around us. Customers, competition, marketplace and with our company, we’ve got to understand the context. And then the third thing, we’ve got to be able to answer one question: what’s the differentiated value we provide to customers? If we have a good discussion on what that differentiated value is, that’s going to be the cornerstone of our success.

Susan Bratton: That was excellent. I can’t think of a better way to stop that show. That was what we needed. That’s our formula. Rich, thank you so much for writing an amazing book, creating a great website. I hope you get some good opportunities out of this interview. I hope people call you up and book you for some of those strategy sessions.

Rich Horwath: Well Susan, thanks a lot. The pleasure was all mine. This was by far the most innovative and enjoyable interview I’ve done in a long time, so I really appreciate it. And I’m definitely going to be, I’m a fan of yours just having been on the website a couple times…

Susan Bratton: Thank you.

Rich Horwath: And your area of expertise is something that I can definitely get a lot better in, so I will be certainly following you and your work as well and your speaking, and who knows, maybe one day we’ll be on the same bill together.

Susan Bratton: Oh, that’d be super fun. I love it. Well…

Rich Horwath: That would be great.

Susan Bratton: Awesome! I’m going to close the show here. I am your host Susan Bratton. Thank you so much for spending time today with Rich and I. Rich Horwath is the author of Deep Dive. He’s at strategyskills.com. Go check out all that good stuff he’s created, and I will see you next week. Have a great day.