The shortcomings of making tactical decisions
In today’s economy, business owners stay clear from excessive spending, long-term investments or commitment, and are more conscious as buyers than ever before; all in the name of lowering risk and overheads. Quick gains are their mantra and this approach tends to work well for a certain period of time, after which they find themselves back at square one.
A myopic business culture
It’s in our human nature to prefer receiving smaller rewards sooner over the bigger ones that would arrive later, and the longer it takes, the smaller its perceived value. This comes from the age where short-term tactics allowed our kind to survive another day. After all, would you prefer to have a small meal now, or wait for a few days to hunt down a big mammoth that could feed an entire village for a month?
It’s not our inherent selfishness, but the level of risk that pushes us towards it. We generally prefer to take smaller risks for smaller gains, and that’s okay if you plan on surviving just another day.
No wonder that tactical marketing, one-off discount offers, and carpet bombing audiences with unimaginative advertising are in the top five ways of attempting to attract customers. Contrary to popular beliefs, these activities are quite expensive and work for a short period of time. Before you know it, your budget will be drained, marketing reach will disappear and your audience will be stuck with a resentment due to that one opportunity they missed.
Many businesses don’t take this issue seriously. They just want the end result, trying to somehow navigate around the realm of hard labour and thoughtful solutions. By sticking to quick wins they want to prove their success as soon as possible, as if someone was about to take their candy away. The inherent culture of money-making and the scarcity mindset lead to deterioration of permanence, as all things around us becomes temporary and disposable.
Trust is at the all-time low, and brand loyalty means also very little to customers. Younger generations become more resilient to traditional forms of marketing. All this has made us more defensive and now genuinely helpful products and services have a hard time surfacing above the noise level created by “get rich quick” schemes.
Or, is it really that bad?
Tactical Thinking = Reactive Thinking
I believe that running a sustainable and profitable business is the key to living a happy and balanced life, both as an individual and as an organisation, but you can’t be sustainable by making decisions in favour of short-term gains.
Growing the business too quickly without appropriate planning (i.e.: turning on the faucet) is arguably not a great problem to have. The outcome still leads to a lack of sustainability, as you need to scale your operations rapidly to sustain the demand. You need a great dose of luck and experience to get yourself out of that kind of situation without external help, and as we know luck doesn’t grow on trees.
Generally, the quicker you grow, the more difficult it becomes to keep everything in check. A few examples:
- Hire too many people in a short span of time and you’re suddenly looking at having to bear a lot of responsibility for their income, training, and overall happiness. Churn may also become an issue.
- Acquire too many customers too quickly and you’ll be spending days and nights at the office, trying to cope with an overwhelming volume of orders coming through the door.
- Book too many projects back-to-back, and you may find yourself scrambling for additional time required to complete a project if you run out of buffer.
There are many more examples of this short-sightedness. It looks similar to putting out fires right after you’ve created them, and it can quickly get out of hand if unnoticed.
Tactics are a great tool to use when you’ve planned out something bigger and you need to find a way to advance your position, or when the circumstances suddenly change forcing you to make a decision on the spot. To cite Wikipedia:
The terms tactic and strategy are often confused: tactics are the actual means used to gain an objective, while strategy is the overall campaign plan, which may involve complex operational patterns, activity, and decision-making that govern tactical execution.
Tackling issues as they appear is certainly a potential way to get to your goals, but it also involves taking huge gambles on things that you’ve not been able to plan for or anticipate ahead of time. With increased risk comes anxiety, stress, and other issues that will have adverse effects on your ability or willingness to complete what you started. The adrenaline rush is the only upside, but even this is a temporary effect.
How can you avoid making risky decisions based on circumstances? The one solution that has been paying dividends for my clients over the years is to start by figuring out your long-term game plan, or otherwise: a strategy.
Play The Long-term Game
Imagine that in three years time you’re sipping your favourite drink at a sunny holiday; you feel a sense of accomplishment and happiness. What took place during these three years that has made you feel this way about your progress? Hold onto it, because you just discovered your goal for the next three years.
What currently keeps you from reaching that goal? Poor monthly recurring revenue, dwindling sales, or maybe increased cost of customer acquisition? With all this in mind you can create a plan, a roadmap, a strategy. However you’re going to call it, it’s a set of steps in a particular direction that you need to take to reach your goal.
It’s not as easy as it seems. Strategy requires a comprehensive diagnosis beforehand to determine the true cause of the issues keeping you away from your goals. Most businesses are ill-equipped or unable to diagnose themselves, mainly because they are biased and sometimes unwilling to admit to their mistakes. That’s right, it takes serious guts to tell a stranger “we failed with X, help us,” while there’s absolutely nothing wrong about it. We’re just wired to always try and save our face.
There are no out-of-the-box solutions to most business problems. Each business is unique and as such its problems will also be unique. A lot of issues that I’ve diagnosed and worked on over the years stem from a lack of focus or avoiding long-term commitment to a plan. Everything is “a project” or “a quick fix”, but no one stops and asks about “why do we need this?” or “what are we hoping to achieve?” When you don’t have a specific target to aim for, all you do is throw your weight around. In some cases, asking a few pointy questions can help you uncover issues that the knowledge of in itself will pay dividends in the long-term.
Take A Step Back
One client asked me about design improvements to his website. The website turned out to be mostly fine as it was, while his real problem was with a PPC campaign siphoning his money away because it wasn’t set up correctly and targeted the wrong crowd. He unknowingly tried to solve his advertising problem by improving the design of his website, which would cost him far more than hiring a PPC specialist to recalibrate the AdWords campaign.
Instead of working on the website we agreed to run diagnostic workshops to uncover the real issue with his poor conversion rate, only once he could demonstrate that a correctly set up PPC campaign targeting people potentially interested in his product instead of everyone, doesn’t improve his top line in a few weeks.
My advice helped him plug the leaking bucket with his PPC campaign and save quite a bit of money (about £20k per year). In the end, he decided to improve his website anyway, to make sure he could capture most of those correctly targeted leads coming from paid advertising, ensuring his ROI on PPC is maximised.
What a change a 30-minute conversation can make!
The moral of this short story is that making tactical decision can be very costly and still might not fix your issue. Taking a step back, figuring out the why of your problem, and only then proceeding to define the what and the how is the correct approach to overcoming complex business challenges.
Unless, you have a ton of VC cash to burn and can’t figure out what to do with any of it! 😉
I have once received a piece of advice from a wise locksmith: “Don’t wait until your locks break. Fixing a lock is always cheaper than a full replacement.” That advice cost me and my landlord £500 in service and parts to replace a lock on our front door. It also left me wondering why we’ve decided to ignore the little signs of the lock slowly giving in…
As is with door locks (and other mechanical items), a sustainable and profitable business is a well-oiled machine that needs some love and care from time to time, if you want it to work reliably for years. Put together a service plan for your business, and in return, it will take care of everyone working in and on it.
The effects of the rule of reciprocity can be incredible.