Passion, People and Principles

Can You Say No?

post # 85 — May 23, 2006 — a Strategy post

Today I posted a new article on my website entitled Strategy Means Saying “No”.

I won’t try to summarize all of the arguments here, but will just point out that the article is about the difficulty that all companies and all individuals have in turning away the opportunity for short-term cash in order to stay focused on their declared strategy. (The article is an explicit follow-up to my earlier article Strategy and the Fat Smoker.)

One of the saddest mistakes businesses make is that by stressing growth and volume (goals that are almost sacred in most companies) they are inescapably, unavoidably inevitably led to compromise their own strategies and turn themselves into undifferentiated organizations that look like everybody else.

If you stress growth and volume above all else, then you’ll end up, strategically, with the posture of “We’ll do anything you ask, just pay us and we’ll do it.” And you know what that reminds you of, right?

Being strategic is hard. It requires you to focus on what makes you truly differentiated and special, and truly delivering on that promise. You do achieve greater volume and profits because of your excellence.

But there’s a difference between “Let’s make money by delivering on our strategy” and “let’s make money any way we can.”

Too few companies (or individuals) have the courage and ambition to do the former, and too many companies (and individuals) come across with the latter clearly as their operating philosophy: “we’ll do anything for the money, just ask.”

14 Comments

Ben said:

Companies that go for the money all the time at any cost will lose out in the end. I’ve learned this in the past on two fronts:

1. Responding to RFPs (generally I won’t do it anymore because they’re a waste of time)

2. Accepting jobs that took away from my main focus. It’s tempting to take a job and get the money, but if it doesn’t lead anywhere beyond that, to the larger success of your business, it’s probably not worth it.

posted on May 23, 2006

Geoff Considine said:

“Strategy Means Saying No” is a very valuable article

and I have seen the problems that getting “off focus”

can cause. While it is very tempting to go for the

near term win of additional sources of earnings, the

long term value is usually not high. Thanks for this

insightful discussion.

I have worked through this issue at my own firm, with client firms, and at previous employers. The issue of chasing RFP’s is a great example. Be good at what you are good at rather than trying to chase the “I can do that, too” approach.

posted on May 23, 2006

Carl Singer said:

One additional thought: In your example you have the MacDonalds clerk offering to help the customer find an alternative. In many cases this is a great tactic—it maintains the relationship even when you “lose the sale.”

I recall an incident perhaps 20 years ago (it still sticks in my craw.) I was on the road on business. I keep kosher so when I’m in a city that has kosher restaurants I rejoice that my jar of peanut butter can remain unopened. At the time my G2 told me that there were two kosher restaurants in the town I was visting. One a Deli / grocery store (serving hot meals, sandwiches, etc.) and the other a bakery / pizza shop. I found the former and stocked up and ate dinner there for three straight days. Seeking a bit of variety as I was paying for dinner on the 3rd night I asked the owner where the other store was—he stonewalled me. I did eventually find the other place AND resolved not to go back to the first place even though it meant pizza or peanut butter for the remainder of my stay. This wasn’t Macy’s & Gimbel’s.

posted on May 23, 2006

Barend BlondÃ© said:

Excellent article. The idea is not new but brilliantly translated for professional services.

I have a question for David though.

I consult professional services firms in Belgium. I have a number of law firm clients who claim, like so many others, that they are providing a ‘full legal service to business’. I don’t believe in ‘full legal service’ as a selling proposition because clients are not looking for full legal service. But lawyers cling to that message because theu don’t dare saying no.

The full service message is often the glue that keeps the lawyers together. Insisting on focussing and ‘saying no’ and all the consequences it has, will result in the firm being blown up or, more probable, the consultant being fired.

Question: what’s the best strategy or tactic for turning the ‘always-yes-saying’ law firm into a law firm that sometimes says no?

posted on May 24, 2006

Stefan TÃ¶pfer said:

Great post, helped me to focus this morning and to make a “NO” decision. Thanks.

Mentioned it on my blog, trackbacks are not working between us I Think.

posted on May 24, 2006

Ed Boulton said:

Thought provoking as always and clearly the “right answer” but doesn’t the

ownership structure (i.e. partnership model) of many professional services

with it’s inherent short termism and partner incentives based predominantly

on personal sales limit many senior managements teams ability to implement a

more focused strategy? I guess the question becomes how do you change the

measurement system to reward staying on the strategy, or is the partnership

model fundamentally flawed?

posted on May 24, 2006

Carl Singer said:

David—this is the prior comment that got lost in the ether.

“Know when to say no” is a mantra of many a worried parent. And should also be that of strategists.

I see two “flavors” in your outstanding article. The first is certainly strategic: What market segments do we wish to pursue (and conversely which will we eschew) as we shape ourselves and our offerings. Here we deal with populations of would-be customers. To some this is a bit abstract—“build it an they will come.” We will do market research, so ultimately we should be making this strategic decision a posteriori. And then we wait to see the results of that decision. Perhaps fine tuning along the way.

The second “flavor” to me is both tactical and strategic. We have a potential customer knocking at the door and need to decide whether to let them in or turn them away—either directly by refusing the business or indirectly by not responding to a Request for Proposal. In this case the risk / reward is staring us in the face. Will we make your decision based on the same analysis as above, or will gut feel and the “here/now” cloud our decisionmaking.

posted on May 24, 2006

David (Maister) said:

Barend and Ed both ask whether some firms are strucdtured in such a way that makes it impossible for them to say NO. I think that;’s correct, and means they are incapable, as an institution of having a coherent strategy. You can’t have your cake and eat it – that’s all I’m saaying.

Which comes first – your compensation system or your strategy? Clearly, for many firms, the compensaation system (or the autonomous partner sytem) is paramount – so be it – just recognize what you can and cannot accomplish with such systems (and STOP engaging in strategic planning!)

I also agree that VERY few clients care about “full-service.” It’s just an excuse to add more volume without trying to be especially etrrific in any one service.

posted on May 24, 2006

Shaula Evans said:

Stefan, I’m on David’s tech support team. I apologize for the difficulty you had sending your trackback.

It is appearing on the site now, and we are looking for the root cause of the problem.

If you have troubles again in the future with sending a trackback to the blog, you are welcome to contact me directly at support AT davidmaister DOT com and we’ll take care of things for you right away.

I apologize again for any inconvenience.

Best wishes,

Shaula Evans

posted on May 24, 2006

Scott Allen said:

Generally speaking, I agree with your assessment, and for the mature organization, absolutely. However, for the bootstrapper, “cash (flow) is king”.

Long-term strategy counts for nothing if you don’t have the cash flow to get from here to there. In my current business, I’m now (three years into it) having the ability to be more focused and selective about the clients and projects I take on, but until very recently, I did pretty much anything anybody would pay me to do, so long as I had the ability to do it.

There are, of course, still some limits, such as not taking on something that is truly beyond your capabilities, or a project that so overwhelms your capacity that you can’t continue to work on building business that’s more within your focus.

But for a bootstrap organization, a few off-focus projects to keep your cash flowing may be exactly the right strategy.

posted on May 29, 2006

Jay Wynn said:

Interesting post. But here’s a conundrum we face—the firm I work for has achieved considerable success through industry and functional specialization (per the “brain surgeon” model). The firm has become a very well-recognized boutique shop, and of late business has been booming—too much so, in fact. The MDs can’t seem to say no when clients call, even when we’re already booked to the hilt. This isn’t a case of strategic overreach, but operational overreach. I can appreciate the need to accept business that presents itself (you never know when the next dry spell could hit). But I’m very concerned about workload, stress on the staff (including me!) and ultimately, the quality of the end-product, which may suffer as we try to do 2x as much work with out expanding our team. Note that I’m a non-equity director (the founders are great guys, but keep a close hold on the business) – so I have limited say in decisions to hire and expand the practice… this is a serious concern, and any advice or comments would be much appreciated…

posted on May 30, 2006

David (Maister) said:

Jay, I support what Ben says, and would try to explain to your equity holders that quality must always come before volume, and that you really cannot affod too many “OK quality” experiences for your clients if you are trying to have a reputation for being high-end.

(See my blog post about “The Disproportionality Principle.’”) Do the math: – if there is a 1 in 5 chance that we give a weak client service experince, how mnay other clients or customers will that person tell? How many weak client service experinces does it take to get a repuattion for being unreliable in quality? 5% of the time? 10%? 1%?

Your arguments about stressing out the satff are valid, but less likely to work well (I’m sorry, but that’s the truth.)

Keep your equity holders focused on the risks of quality.

AND (most important point of all – when demand exceed supply – RAISE YOUR PRICES!!!!!!)

posted on May 30, 2006

Ben said:

Jay,

Expanding by hiring is an option, but also risky. If/when a dry spell/slow down hits, suddenly you’ve got too many staff, and staff is always the biggest expense.

Have you considered outsourcing the work? It comes with its risks too, but it might allow you to balance taking on more work vs. increasing costs.

Depending on the type of work, you can always find quality outsourcers that are smaller, hungry and provide great quality.

It might also make sense to talk with clients about the issue; let them know you’re extremely booked. If they’re hooked on you as a vendor they may be willing to push deadlines or adjust in other ways. Asking a client for “help” is in some ways a great way of really seeing whether they’re a good client or not. It really is a testament to your own business if a client can say, “I understand Jay. I want YOU to do this work for me, so I can wait an extra couple weeks.”

posted on May 30, 2006

Anonymous said:

Dave,

I’ve paid some attention to your attempt to make sense out of consulting and law practice work for many years, and have the books on the shelf. I occasionally even try to apply some of it.

Your article made me think of a sign have had in my office for much of my two decades of first consulting, and now law practice. (its on the back of the door – because in a big law firm it would cartainly offend people…) But I have it up anyway:

GOOD FAST WORK IS NOT CHEAP

GOOD CHEAP WORK IS NOT FAST

CHEAP FAST WORK IS NOT GOOD

I recognize this isn’t the whole point. But its remarkable how many people, both customers and suppliers, don’t even get this much…

posted on June 7, 2006