This week in the Master B2B Friday 15 Podcast, Andy and Brian talk about the balance between sticking to a plan, and reacting to external factors – and how do you know when to make a change to your plan.

Andy talked about the difference between the 3 year vision, the 18 month strategy, and the constantly evolving tactics.

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Brian Beck: Good morning, Andy Hoar. Welcome to the Friday 15 on April 12, 2024. We’ve got an action-packed section for today, Andy.  We had a crazy, crazy week, Andy. We were all over the country.  And we’ve got some exciting news to report from the field about some things that are happening around the industry, but before we do all that, let’s get into our new music. Actually, I just hit the wrong button, Andy. 

Andy Hoar: Are we getting a new studio too or just new music?

Brian Beck: We’ve got some breaking news here from the Master B2B world. I don’t know if you saw this, Andy, but Andy Jassy, the CEO of Amazon, released just two days ago, I think, that 2023 letter to shareholders. And what’s fascinating is, this is a long letter. You read it, yeah? 

Andy Hoar: I did. And some things really surprised me. I had no idea that Amazon had satellites. Did you know that? 

Brian Beck: Yeah, actually, I didn’t know about the satellite effort. It’s just incredible. The number of businesses they’re going into. It’s incredible. 

Andy Hoar:  I didn’t know about the satellite. So one stat released it out to me, which I guess I sort of knew, but it just hit me is a wow, wow, statistic, which is that I think I, 85% of global IT spending is still on-premise. Despite all of this work in the cloud, all people moving to AWS or Azure or the clouds or whatever, it’s still only 15% of all global IT spending. The other 85% still on-prem. On-prem still! 

Brian Beck: Yeah, wow. Yeah, I actually missed that. I missed that stat. That’s interesting. That’s incredible. I didn’t realize that. And well, that’s that’s addressable market for AWS now, isn’t it? 

Andy Hoar: They always repeat the same thing about retail – I think they quoted 20% of retail sales are online, but 80% is offline. And then this AWS TAM, like you said, only 15% penetrated. I was like, wow, amazing. 

Brian Beck: Well, it struck me and for those you watching, I have a quote up here from the letter, but I’ll read it. What struck me about this, Andy, was this concept. They have what they call Primitives, which has been sort of, it’s almost the operating system of Amazon. And he described in great detail, really an interesting read. He described in great detail how Amazon breaks down their business and it’s not just technology. It’s the fulfillment side. It’s how they built marketplace. And the whole notion was almost a precursor in some ways to this whole notion of composable commerce – where you need to be really flexible and break things down individual units in order to be nimble, which is a great precursor to our conversation today. But let me read what’s on the screen here. Sometimes people ask us, this is Andy Jassy speaking. What’s your next pillar? You have marketplace, you have Prime, you have AWS. What’s next is that this, of course, is a thought provoking question. However, a question people never ask it might be more even more interesting is what’s the next set of primitives that you’re building that enable breakthrough customer experience. And he said, Gen AI, as the answer. And so he spent a lot of time in this letter talking about Gen AI as a next frontier for Amazon as a huge new addressable market. But again, what’s fascinating about these primitives, the way they just define them, the raw parts or the most foundational building blocks, they’re indivisible. They’re meant to be used together rather than as solutions in and of themselves. And you think about FBA, fulfilled by Amazon, you think about the way that marketplaces, the actual third party selling marketplace is built. If they’re well done, they actually accelerate a builder’s ability or creator or seller or business’s ability to innovate. And I think that speaks a lot to the business planning and strategy conversation we’re about to have. So let’s keep that in mind as we dive into this, but it was a great reading. We recommend it. 

Andy Hoar: I’m just saying one thing about that is that I think Amazon, I think they’ve known this. They’re just now telling the world. They’ve become a platform. You will no longer building for yourself, you’re building for the community that sits on top of your infrastructure, which is where the real money is. We all know from the Amazon marketplace when they sell their stuff directly, that’s one business model, but when they have other people in their marketplace and they make a percentage commission and they’re doing the fulfillment and all the rest, that’s a whole new level. Tthe total cost to serve is much lower. All the work is done by the people in the marketplace. It’s a way of scaling yourself. And I think what Amazon is not telling the world is we’re going to build a foundation, the building blocks to let you scale your business. And we’ll just take a little piece of every little transaction. 

Brian Beck: They’re applying this agile model to everything they go into. I’m curious how they’re going to do this for satellites and rockets But it’s really the operating system. So our topic today, you know, is talking about how often should your digital strategy be revised. How much do you need to stay on course, keep your resources focused and stick to the plan versus paying attention to business changes that can come from many different areas and we’ll talk about those. But I was at the, this week, Andy, we had a roundtable in Dallas. Beautiful, beautiful facility. We were on the 49th floor of this building in downtown Dallas, the Tower Club, just incredible, you know, you see the sunset. It was just, it was awesome. It was about 30 practitioners there, people from, from Eaton and Primesource building products, a fascinating, fascinating group. We asked this question, how often should your business plan be revisited? Andy, half the room said, you know, hey, well, what plan? We challenge your assumption that the companies even have a plan because these are VPs of commerce. Andwe had a couple CEOs and some kinds of different folks in the room who were managing e-commerce and digital. It was funny to hear that from the room. And in fact, it bears out in the data. But while the comments heard, we’re like, hey, when business conditions change, if I’m not meeting my plan or something happens to the business. Oh, hey, a global pandemic will do it, right? Once a year was common- we have this planning process and we revisit once a year or hey, when the CEO says so, that’s when we revisit it or, hey, we got to stick to the plan. So I heard a lot of different things. I think there’s some confusion, but also some consensus came out of it. And we’ll get into that. 

Andy Hoar: I think there’s good news and bad news here. The good news is this in a way, I think this unintentionally reinforces the idea that the digital strategy reinforces the business strategy. And they’re really one in the same because the digital really is a means to the end for the business. So the question is, how often do you revisit your business strategy? The bad news is we’re not 100% there yet. And digital is still organized as a separate entity. And so it can’t be treated fully as embedded part of the business strategy. So the good news is it is part of the business strategy. The bad news is it still needs individualized attention. 

Brian Beck: What’s fascinating though, and I found some statistics, Andy, from Forrester, that came out a couple of years ago, that said that only 61% of B2B decision makers said they have a formal digital strategy in place, which really goes to the point in the room.  They were saying – hey, we don’t agree with your assumption that everyone has a proven or written kind of documented strategy. I found this article here and I’ll read a bit of it for the folks on the podcast from the Harvard Business Review, which talks about, and it’s from McKinsey, they’re citing some McKinsey data. “What holds most leaders back is they don’t translate vision into a structured plan that they keep in focus over time.” Of course, leaders know how to set goals, create KPIs, use dashboards, keep people accountable, et cetera. When change efforts require years, however, tracking it often gets fuzzy and it requires constant adaptation to produce day to day results. So they’re saying it’s important to have a plan. This Journal of Management Studies found companies with written business plans grow 30% faster. They did a study of all thousands of companies and found there’s a significant correlation between those that have a plan and their business results. And this is, you know, to the McKinsey information in the Harvard Business Review, they can fall away from the plan, but it’s important to have one. What are your thoughts? 

Andy Hoar: I think the challenge here is the short term versus the long term. A plan is by design over the long term, but these companies, many of whom are public companies, they don’t have the opportunity to set the three to five year plan. So even an 18 month plan and then just wait 18 months to look at it, they have realities of weekly, monthly, and especially quarterly, quarterly, deliverables. And they’ve got to produce numbers. And so that’s really the art and science is how do you balance the quarterly expectations with the multi year plan? You can’t just have quarterly plans and say, okay, at the end of the quarter, this is it and we start a whole new plan, and next quarter you can’t just set it and forget it for an 18 month or three year strategy and then just, hey, we’ll revisit it in three years. So that’s kind of the challenge here, but it is a bit disturbing to think that such a high percentage of companies don’t even have a plan. It’s crazy.

Brian Beck: So this may be a case where a lot of those companies don’t yet think of digital as a real business yet. And maybe that’s the case. So I pulled this from Jeff Bezos, the CEO of Amazon in 2016. He famously talked about day one versus day two companies. And this is a quote from his shareholder letter in 2016. It says, good process serves you so that you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You have to stop looking at outcomes and just make sure you’re doing the business process, right? Goal, right? He says, you know, becoming a day two company, slave to process. It’s stasis followed by irrelevance followed by excruciating painful decline followed by death. Who wants that? 

Andy Hoar: This is so true. Most companies are built for stasis. They’re built for stability. They’re built to execute. But they’re not built for disruption. They’re not built for self assessment. And that’s what he’s talking about here. Day one companies don’t have any of this stuff. So they’re not beholden to anything.  Day two companies put a bunch of processes in place, which are intended to help them execute and stabilize the company, especially for public markets. But then they become beholden to that. And all of a sudden they’re executing for the sake of executing the classic statement goes having meetings about meetings. 

Brian Beck: There’s a real balance here and our practitioners struggle with that. Ultimately where we walked away in Dallas at the roundtable was that  a plan is important. But there are change signals that are important also to pay attention to. You can’t stick your head in the sand and just follow the plan. That said, you have limited resources, right? You can’t necessarily take your resources and pivot them 180 degrees in an instant and you have to give up. This is what Rob Howl said, CDO at Reserve Bar. He said, hey, listen, when the CEO says to me to change direction. Do this thing. He says, well, what am I not going to do to do that?. Show me the data that says we need to do that. That’s what Amazon would say. What I care about is what are the customers telling me, but that’s another discussion for another day. Here are some potential change signals when you have your plan: What if you miss your goals? What if you miss your profit or sales goals that tell you you’re doing something incorrect and you need to adjust the plan? Emergence of new channels, marketplaces. I see this all the time with Amazon with B2B companies. Should I pursue an Amazon business program? Change of leadership. Hey, the CEO presenting a shiny object or maybe you have a new CEO or a new boss that needs to weigh in and wants you to change your plan. Competitive pressures. What if your competitor launches something new, a new product line, new features, new website, new new channels, new technologies, AI. Customer requests, with the customer saying, I want you to launch this feature so I can do business with you more easily. Macro changes, acts of God. Hey, a pandemic, anybody that can happen, right. How about a merger and acquisition? These are all things that can signal that you need to revisit your plan. The conclusion that the room came to in Dallas was that there needs to be a balance between having a plan, a structure, and being agile. It’s almost like it’s getting back to the primitives of the Amazon world, maybe not as extreme as Amazon goes where everything’s broken down into components and agility, but it’s almost being composable about your business plan, about how you approach your strategy. 

Andy Hoar: I would use an analogy of having a game plan for a game. We had a national championship last, this week, or, yeah, this week. And both coaches came with agame plan and they decided this was the best path for them going forward, but they made adjustments throughout. So, maybe that’s a good analogy here is to think about minor adjustments you make through the first quarter and the second quarter at half time, you step back, you take a breather, you go, okay, what have we learned? Sometimes you make some major changes. You take some people out, you change the offense, you change the defense. And then the goal is to win the game. What the challenge is Simon Sinek said is there’s no end to the game. So, there isn’t a fourth quarter, there’s not a countdown saying the game’s over in 20 seconds. That said, I think companies tend to be more reactive than proactive, and they use these changes in the market that you cite – all of which are legitimate as excuses to do things. I’ll give you a quick example. On the merger and acquisition front, somebody whose company recently acquired another company, and it took them completely off what he was working on. Now, maybe that’s the right thing or maybe it’s not, but it’s just like a coach with a game, if a player gets injured, you just throw the whole plan out and say, okay, now we’re going to, we’re going to move from man-to-man to zone and I’m going to have the center point point guard? No, you figure out how to accommodate that, but you don’t start completely over and I think too many companies, because they’re about stability and process, all those things you describe create disruption, and they react to that almost like the antibodies in your system to a virus, they attack it. Let’s attack the new technologies. We’ve got to do something to destroy these things, put them down and as opposed to saying, okay, this is part of our longer term business plan. It takes us in a slightly different direction, but it doesn’t change what we’re doing here. 

Brian Beck: To me, the conclusion of this is, it’s important to have a framework for a plan. You don’t know what’s necessarily coming. I did this for a long time. You don’t know what’s coming. You have to leave some margin to be agile. You can have a plan. You have to have a structure. You have to have something to march against. You have to have a vision, and some of the articles talked about some of the B2B leaders who every year, they put out a vision, and this is how we’re going to work against our vision. But you have to have a structure to start with, but it’s really important to be flexible. And this is one other point I’ll make and then we’ll wrap up here in a second. But in my book, I cited a study by Korn Ferry a few years ago that talked about the successful digital leader is one who is not necessarily a driver, as much as a collaborator and someone who can accept that information is not perfect. You can be at 80% and you’ve got to make a decision. And they have to be able to align the organization. And when you’re working in this kind of environment and to be flexible with your strategy, you have to take an approach that’s a little more flexible. 

Andy Hoar: There’s three things I would separate here. There’s a vision, a strategy, and tactics. The vision should not change that frequently. If it does, you’ve got really big problems. That’s the north star. And how do you rally people around something that’s constantly changing? The vision should be fairly fixed. Maybe revisit that once every couple of years. We look at Amazon. Their vision doesn’t change dramatically over the years. Every couple of years, they revisit it. And maybe they change a few things here, but it’s the same idea, right? Customer obsession, etc. The strategy should be like 18 months. And that should be fairly fixed, but you should be looking at making changes based on things in the marketplace. But that one should change a little bit more than the vision, but not as much as the tactics, which is the last piece. The tactics can change depending on the circumstances, but I get nervous when I hear about companies reacting to another company and changing their vision. I get just as nervous when people say, these are the tactics we’re doing and we’re locking down on them and we’re not going to change them. So there’s a spectrum here. And you’ve got to realize that it’s the vision and tactics. They’re not the same.