Do poker and business leadership have anything in common? At first flush, erm, I mean blush, they do not. Poker players must play the cards they are dealt. They bet, they fold, and they bluff based on their cards and the cards of their competition.
Business leaders, on the other hand, have the benefit of assembling their own hands. Building your hand, your strategy, your plan to compete, is the leader’s bet. Often, leaders thoughtfully forge their strategy. Sometimes it comes from trial and error, and sometimes leaders build a successful hand with dumb luck, but a winning strategy is required for a leader to win in business.
You can be charismatic, you can know your competition, you can have good judgment, you can hire the best people, and so on and so forth, but strategy always comes first.
All of the world’s most influential companies made headwinds off of a big strategic bet. Originally, Microsoft’s big bet was on the personal computer itself. Steve Jobs turned Apple around when he made a bet on digital devices and consumer entertainment. Marie Kondo bet people care about cleanliness and less clutter. Costco bet on the concept of a membership warehouse.
Big or small, profit or nonprofit, companies you know and companies you have never heard of, no matter where you are in the world or what industry you’re in, it all comes down to building a winning hand by making the right fundamental bet. If you make the right bet, you still must do many other things right to be successful. And that includes the other critical components of great leadership. But if you make the wrong bet, it doesn’t matter what else you do: Your business will fail, and you will fail as a leader.
It is hard and challenging. As a leader, it is impossible to know for certain if your hand is a winning hand or if someone else has something better. But there is a model to help you think about what bet to place, what hand to assemble. I call it the Strategy First model. It is a twist on Einstein’s famous E=mc2 equation: Strategy = E∗mc2. (sorry my blogging software does not support exponents/superscript)
E∗mc2 represents the three key components of strategy. The "c" stands for customer value. Sometimes, when used in the vernacular, value means price; in my model, customer value is much broader. It is the worth or the usefulness of something; that is, the perceived benefits in comparison to what you paid. In most strategies, the value you provide your customer is most important, which is why it is squared.
The second component, "m," is market potential -- how much profit can be made in your business. Last is execution, or "E" -- how you run your business every day. Some people try to argue that execution is not strategic, but if strategy is your plan to compete, then execution must be central to strategy. The right bet won’t win you the hand if you don’t execute on those bets.
Just like winning in poker depends on your hand relative to the other players, core to the Strategy First model is that the effectiveness of your strategy depends not on the quality of your strategy independently, but on the quality of your strategy relative to your competition’s strategy.
Leaders can assemble and reassemble their hand as conditions and competition change. Twitter started as the side project of a podcast publishing platform before concluding it had to reinvent itself. Starbucks was struggling in 2008 before Howard Schultz returned as CEO and reset the strategy to return the company to its coffeehouse experience roots.
In Kenny Rogers’ iconic song, the Gambler exclaims: "For a taste of your whiskey I'll give you some advice. ... If you're gonna play the game, boy. You gotta learn to play it right.” To play it right as a business leader means putting strategy first, assembling a winning hand and making the right bets because, unlike poker, you aren’t stuck with the hand you are dealt.
I’ll take a bottle of that whiskey now...