When requested to design a marketing strategy to overcome a specific problem, we (marketers) often confuse goals with strategy. We start with goals, and we stop with goals – without formulating clear diagnosis, guiding policies and actions. Or we nicely jump on tactics without even thinking at the guiding strategy.
This article presents an overview, and some practical applications, of one of the most simple yet powerful strategy models: the “Strategy Kernel”, by Richard Rumelt, author of the seminal book “Good Strategy, Bad Strategy”.
A summary of the article:
- Three scenarios – What is Strategy – The Strategy Kernel – Marketing Strategy Kernel – Content Marketing Strategy Kernel – Back to the Tree Scenarios – A dual-speed model – Conclusions.
Let’s start with 3 typical marketing scenarios.
1. Three Scenarios
It wasn’t a good day for Emma. Emma is a marketing director for a B2B industrial company. Mid-size, astonishing sales team, products and services that customers love, but very traditional marketing model and limited presence on social media platforms (“we prefer hiring sales managers than wasting money on those social things!” that was always the message from the leadership team), which hasn’t seriously affected company’s performance.
A the last company meeting the CEO has dedicated one entire session to “going digital”. It looks like competition is becoming popular on LinkedIn, posting videos, interviews and other content, and the company cannot miss the opportunity. Emma knows that marketing is going to have a relevant part with the company “new” digital focus. Emma is a digital-savvy marketer, but decides to contact her comms agency and ask for support. The agency has been working with Emma’s brand for some time and suggests a “solid social media strategy”: first paid media plan for LinkedIn and Twitter, and then content, content, content, with videos, video explainers, interviews and infographics. Emma suggests adding Instagram to the mix: some of the competitors have a regular presence on Instagram and this could become an interesting new channel of distribution. The agency suggests opening a blog too, and starts working on the editorial plan.
Mike and Greg are respectively CEO and COO of a SaaS startup operating in asset management. This year, for the first time, they have established company’s OKRs (Objectives and Key Results) process to reflect company strategy. OKRs are an exercise in goal setting and measuring progress towards those goals. The process typically looks like this: once a year, each department head is asked to come up with their own departmental OKRs, which are supposed to be connected to company goals. Then each department breaks down their OKRs into sub-OKRs for their teams to carry out, which are then broken down into sub-sub-OKRs for sub-teams and/or specific individuals, and so on and on down the chain. Mike presents company strategy to the entire team, which is now reflected by the OKRs. The overarching company strategy look something like: increase revenue, decrease costs, become leader in the space. Mike is happy that strategy has been finalised and even more happy because it has now been shared with (and cascaded to) the entire company.
Charles is President and COO of a 7-years old startup in the martech sector. The company has enjoyed impressive growth rates in the first 5 years of life. Then, sales has started to slow down, and for the first time ever, the company has closed 2019 with a flat growth (well, this is no growth). Pushed by the board Charles moves all marketing budget away (actually: he suggests the CMO to put all budget away) from branding activities and focus completely on online demand gen. Charles is convinced that pushing demand gen will help boost sales and will move back the needle to the growth space.
Here we go. The three scenarios look so different. Many of us have faced similar challenges. Truth is, all scenarios have something in common. Their total lack of strategy. Better, a wrong approach to strategy, what Richard Rumelt calls “Bad Strategy” in his seminal book “Good Strategy, Bad Strategy”. It may be time for a summary of the strategic marketing process before proceeding any further.
2. And so, what is Strategy?
Strategy starts with identifying changes. Said in a different way, strategy is designing a way to deal with a challenge. Strategy is working out how your existing assets can overcome the challenge and be used to flip the board and then crushing your competition as a result. A good strategy, therefore, has to:
- identify the challenge to be overcome, and
- design a way to overcome it
To do that, Rumelt suggests using a simple yet powerful model, the strategy kernel. The kernel of a good strategy contains three elements: a diagnosis, a guiding policy, and a set of coherent actions. His methodology of the kernel has been multiple times mentioned by prof of Marketing Mark Ritson on his writings and public speeches. Yet, it’s Rumelt who has defined the kernel.
3. Rumelt’s Strategy Kernel
First, we diagnose the situation of our company or brand via audience and market research and understanding the context. Then, we use that diagnosis to build a clear marketing strategy. Finally, we select the appropriate tactics and channels to deliver the strategy. A good strategy might consist of more than the kernel, but if the kernel is absent or wrongly defined, then there is a serious problem. The kernel does not split strategies into corporate, business, and product levels. It is very straightforward.
I like simplifying further the model as a Why-What-How approach. We’ll use diagnosis to clarify why we are facing a challenge, the guiding policy will finalise what should be done, and then we will select how to execute the policy, with a set of coherent actions.
A diagnosis is an explanation of the nature of the challenge. A diagnosis defines the challenge. What’s going on? What’s holding you back from reaching your goals? A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as being the critical ones. A good deal of strategy is in fact understanding the situation, not just deciding what you should do. The diagnosis for the situation should replace the complexity of the reality with a simpler story, a story that calls attention to its crucial aspects. This simplified model of reality allows one to make sense of the situation and engage in further problem solving.
A guiding policy is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis. “Like the guardrails on a highway, the guiding policy directs and constrains actions in certain directions without defining exactly what shall be done.”
As Rumelt explains, the policy is “guiding” because it routes actions in certain directions without defining exactly what shall be done (this will be finalised by the coherent actions). Good guiding policies are not goals or visions or images of desirable end states. Which is what happens in scenario two, with Greg and Mike confusing goals for a company strategy.
Finally, the tactics. A set of actions dictates how the guiding policy will be delivered. The actions should be coherent, meaning the use of resources, policies, and maneuvers that are undertaken should be coordinated and support each other – not fight or be independent from one another. The coordination of action provides the most basic source of advantage available in strategy.
The overall kernel is supposed to be a simple description, not a complex 100-slides deck.
4. Marketing Strategy Kernel
Now, in our own world of marketing Rumelt’s strategy kernel model comes down to being able to answer few basic questions: who is my audience? What are the market and the competitive scenario? What is my position to that target audience? What are my strategic objectives and goals for that target market? We should then formulate our guiding policy and answering these questions long before we have started spending time and money on tactics, on Virtual Reality utilisation plans or opening new shining Instagram and TikTok accounts.
5. Content Marketing Strategy Kernel
What about Content Marketing? Well, as you can expect, similar approach.
It’s basically answering the question: what’s going on? Better, it’s:
- Answering the question: what challenge are we trying to overcome? Is it a brand awareness or a demandgen problem? Or both? Also, understanding your audience, and the preferences in term of content by phase of the journey, eventually your audience’s psychologic profile, and the distribution channels where content is consumed – online and offline.
- Understanding competition, competition’s audience and market dynamics
- Eventually running a content audit, to understand if and how much the content you’ve generate so far resonate with audience’s preferences, challenges and pains.
You should define your objectives and goals for that target audience. Also, what’s your position to that audience and what macro-themes (content pillars) are critical to engage that audience.
Set of Coherent Actions
It’s basically the editorial and the distribution plans.
6. Back to the Tree Scenarios
It should be clear at this stage what are the strategic mistakes made within the three scenarios. If that’s not evident enough, here is my view – then you can add your thoughts and comments.
Scenario One. It is clear that the agency is suggesting a set of actions without first understanding the challenge, and without a clear diagnosis. This is what Mark Ritson calls “the risk of tactification”. Tactification has always been a marketer’s obsession, but has grown with the arrival of social media platforms and the capability to measure real-time results. “Instagram marketing,” “Social media strategy” are not things. Instagram is a marketing channel. “Social media” is a collection of marketing channels.
Scenario Two. It’s the typical situation where leaders make confusion between goals and strategy. Goals are important, but they are not strategy. How many times you have seen slide decks with strategy statements like “we will grow triple digit and beat competition in the next 3 years”. This is surely a wonderful vision, but not a strategy; unless someone of the exec team will explain how you’re supposed to grow triple digit in a market that grows 5%/year. New offering? Changing organisation? Enlarging the target audience? As Rumelt explains, good guiding policies are not goals or visions or images of desirable end states. Which is exactly what happened in scenario two, with Greg and Mike confusing OKR goals for a company strategy.
Scenario Three. Scenario three needs some more thoughts. Let me introduce the “two-speed marketing model”.
7. The Two-Speed Marketing Model
I recently wrote about the two “natures of marketing”, long-term brand awareness and short-term sales activation. The latest seminal research of Les Binet and Peter Field, Effectiveness in Context, inspects hundreds campaigns of the IPA Databank, with a focus on marketing effectiveness, and well clarifies the dual model.
How do Field and Binet define (slow) brand-building and (fast) activation marketing disciplines?
- Activation is marketing that evokes an immediate behavioural response, without necessarily affecting long-term memories or behaviour. It’s leadgen, as we B2B marketers are used to call it. It’s PPC. It’s limited time promotion (think about Amazon’s daily deals).
- Brand-building is when you create long term memories that influence behaviour over the long term. It’s big broad reach campaigns. It’s TV ads or campaigns that people remember for years.
ALL marketing activities have both brand and activation effects. But the mix varies, depending on targeting, copy, medium etc. Evidence suggests there is a trade-off between brand and activation effects. Activity that is good at one tends to be poor at the other. It is not too hard to divide marketing activities into those that work primarily by brand effects and those that primarily work by activation. Note the word “primarily”. The last few years have seen short-term marketing techniques as enterprises’ first priority, in many domains, including B2B and Financial Services. Enterprises have invested most of the marketing money in short-term, fast-return campaigns driven mostly by online paid media programs and related content, in the hope to lift sales for the next few quarters.
Always according to Binet and Field, “short-termism” is, in many ways, the reason of marketing effectiveness decline over the last years. What happened? As I have mentioned, marketers are increasingly short-term in their focus. They spend money on fast/immediate marketing programs rather than on slow and longer-term brand building campaigns. They opt for bottom-of-the-funnel tactics because in a three months period that will pay better in the majority of the cases. But in one of the most important sections of their research, Field and Binet demonstrate that over the longer term this short-termism will rapidly deteriorate the overall impact of marketing. Too much time spent picking the low-hanging fruit means less time watering the tree. Eventually the tree stops growing.
“Online brands need a higher percentage of their spend going to brand building because they already have direct channels to conversion. Digital realisation is leading to increased distribution efficiency, so more emphasis needs to be on brand.”
Brand building and sales activation are not choices or alternatives – they are mutually interdependent and both are essential to long-term success.
At this point, it should be clear why the company on scenario three has a problem. Without a clear diagnosis and a proper guiding policy, Charles has moved all marketing focus (and budget) to demandgen. He needs results, and demandgen/activation will provide results, soon.
Unfortunately those results won’t be sustainable, long term.