Here we will discuss why choosing a single dominant “win metric” for your business is vital. Choosing one win metric over another can have huge ripple effects in your business. Let’s have some fun with pondering these issues from the viewpoint of professional competitive golf to see how changing the win metric in competitive golf can have huge repercussions. The same relationships apply to business in my view.
For those not familiar with professional, competitive golf the Objective is to Win, which is measured by the fewest “strokes” played over four “rounds” of golf. Each round is 18 holes for a total of 72 holes. One “hole” is a piece of land ranging from 90 to 600+ yards long. A stroke is one swing at the golf ball. The player who takes the fewest number of strokes over the 72 holes is declared the winner. Professional golfers walk the course (with their caddy) and one round normally takes about five hours to play, but there is no absolute minimum requirement for duration of play.
The Strategy to win has a clear definition:
Leverage the golfer’s strengths and minimize their weaknesses to Win.
The corresponding Strategy Framework is the connecting and blending of course knowledge and data (long vs. short course, tree lined vs. wide open, hilly vs. flat, fast greens vs. slow greens, etc.). Next it is crucial that the player takes an honest assessment of his/her strengths and weaknesses in the context of the course knowledge. Is the player a long vs. short hitter, good vs. bad chipper of the ball, have left vs. right propensity for ball flight, have mental toughness, etc.? How aggressive should the player be? Be cautious and safe and wait for others to make mistakes or be aggressive and try to make others deviate from their strategy framework and then they make mistakes?
The game I just described is called stroke play. Another form of the game is called match play but it does not change the mandates required above. Both stroke and match play allow the player and caddy to walk to each succeeding next shot, as long as the player finishes each round in an acceptable time.
Now suppose we changed the rules of the game altogether and the players need to run to each succeeding shot because time to complete the 72 holes is included in the win metric. The corresponding metric to win would be changed to the fewest number of strokes taken over 72 holes divided by the time to complete all 72 holes. This changed context and changed set of rules cause profound changes in the Strategy Framework and its elements and their relative priority, linkage and blending.
Extreme cardio vascular training and its place in the Strategy Framework to win would be crucial. So would diet management and little or no alcohol consumption (darn). Shoe technology and its part of the strategy framework would be highly valued. And toting or pulling a heavy bag for speed would need to change as well. The planning of water or hydration breaks during summer rounds of golf would be crucial. And probably the biggest, bulkiest and out of shape golfers and could not win at all in this context, win metric and strategy framework change.
Changing Business Contexts Will Cause Changing Win Metrics
I feel this kind of situation is what is going on the business world, and will continue into the future.
Changing rules of the game and win metric(s) cause changing priorities and capabilities for your firm. For instance the widespread advantage China has in low manufacturing costs has created a win metric of low cost manufacturing and low cost service. This caused two key changes in capabilities for US firms:
- A forced move to innovation, with higher costs, but allowing higher prices to be charged to position against the new metric or
- A move to outsource manufacturing as well to align with the low cost metric
The changed Win metric, low cost, mandated the changes.
What should your firm do given that the rules of the game and win metrics will likely change frequently in our lifetime and beyond? In my view it is a focus on firm valuation. Nearly all other win metrics can be gamed. For instance:
- If the win metric is to increase revenue, the sales force can just cut prices if not monitored
- If the win metric is quality, firms usually end up being slower in key parts of their businesses as the need for checking and control becomes key
- Alternatively, If the win metric is speed and first to market, quality can suffer
I could go on. But firm valuation balances a variety of competing win metrics, gives you one metric that can withstand changing contexts. I will discuss more next month.
Bill Bigler is Director of MBA Programs and associate professor of strategy at LSU Shreveport. He spent twenty-five years in the strategy consulting industry before returning to academia full time at LSUS. He is involved with several global professional strategy organizations and can be reached at email@example.com and www.strategybest.com