Many products and services continue to receive time and budget each year without providing much value to customers or profit to the company. These spectators either mindlessly react to the competition’s moves, or they sit passively by and watch competitors continue to grow at their expense. A manager, by the very definition of the term, is someone who has control of and responsibility for the direction of their business. An important but often neglected part of this responsibility is to disengage from offerings, markets, and customers that are no longer providing value and profits to the organization. During his tenure as CEO of Exxon Mobil, Lee Raymond had a requirement that 3 to 5 percent of the company’s assets be identified for disengagement every year.9 Having this type of requirement in place can reawaken people’s mindset and discipline to make real trade-offs.
In my experience providing strategic counsel to senior leaders around the world, there are two types of disengagement: active and passive. Active disengagement involves reviewing areas of resource allocation on a monthly basis and jettisoning activities, projects, reports, and tactics that are either are not working or not providing value. As noted earlier, research has shown that the number-one driver of revenue growth is the reallocation of resources from underperforming initiatives to those with greater promise.10 However, because in most organizations strategic planning is an annual event rather than an ongoing dialogue of key business issues, passive disengagement is much more common. In passive disengagement, managers tend to wait for planning season to arrive to make changes. And typically, the changes they make aren’t significant enough to make a difference. A study of more than 1,500 companies over a 15-year period showed that a full one-third of businesses received almost exactly the amount of capital in a given year as they did the year before.11
Are all the hours your team invests in the strategic planning process resulting in significant changes in resource allocation? For most leaders, there are changes in their market, changes in customer value drivers, and changes in the competitive landscape from year to year. Yet, the areas they allocate resources to and the corresponding amounts see little, if any, change. Unless you as a leader are involved in active disengagement on a regular basis, you are most likely wasting a significant portion of your people’s time and budget. As Twitter co-founder Evan Williams said, “When I meet with the founders of a new company, my advice is almost always, ‘Do fewer things.’ The vast majority of things are distractions and very few really matter to your success.”12 The discipline to do fewer things—to focus—begins with your ability to disengage.
If you find your product or service in a spectator role, it’s time to honestly answer the following five questions:
- 1. Why are we in this category?
- 2. Is this offering contributing profits to the business?
- 3. How can we redesign or reposition the offering so that it brings unique value to key customers, resulting in greater profit?
- 4. Would the customers we value most miss this offering if we discontinued it?
- 5. Could we bring more value to the market if we discontinued this offering and focused our resources on more profitable offerings?
Taking into account your position in the market when developing strategy means it’s conditional. Not taking into account your position in the market when developing strategy means you’re ripe for getting beat. Are you a leader, challenger, or spectator? Who are you, and what are you going to do about it?