It's not enough to want to do well; you've got to know how
Lots of start-up entrepreneurs confuse good intentions with a strategic plan, because either -- when combined with hard work, capital, and luck -- is enough to get a company started. But over the long haul, the difference between building a company on good intentions and building one on a strategic plan is the difference between erecting one house on sand and another on rock: good intentions won't sustain a company's growth.
Take the income-tax-preparation business, for instance. It's easy to get into. All you need are two chairs, a desk, a sign on the door, and an adding machine. Forms you can get free from the Internal Revenue Service. Tax preparation you can learn from a night-school course. Every year hundreds of well-intentioned people start their own companies in this business. In August 1982 John Hewitt did -- against some stiff competition, to be sure.
With more than 20% of the entire retail tax-preparation market, H&R Block Inc. is the biggest company in the industry. But all any entrepreneur has to do to filch a little bit of Block's business is find a more convenient location, put up a nicer-looking sign, serve better coffee, and smile a lot. Customers will come, and if the service really is friendlier than Block's, they'll stay and the business will grow. "See," you'll say, "friendly service pays off. That's my company's strategy -- being friendlier than Block."
But that's not a strategy; it's only a good intention unless you've thought of some way to keep your service friendlier as the company grows. Here's the difference: Good intention describes the desired result -- friendlier service. The strategy, or strategic plan, has to include the means for getting there. It's simple to say that you're going to be friendlier -- or faster, or better -- when the company is small and young. But without a strategic plan, your good intentions will be impossible to sustain as the company grows.
The thing that sets Hewitt's company, Jackson Hewitt Inc., headquartered in Virginia Beach, Va., off from the crowd of H&R Block wanna-bes is that John Hewitt started with a strategic plan. His happens to rest on the application of computer technology -- technology that does not necessarily make his service better, although he claims it does -- but keeps it friendlier. Follow his logic.
The tax preparers that H&R Block hires have to know a great deal about taxes to do their jobs well. With every single customer who comes in, they have to ask questions and make decisions that can change the client's tax liability. So when Block hires an individual, says Hewitt (who used to work for Block), it does so with his or her tax-preparation abilities in mind.
But, Hewitt reasoned, if he could create an expert software system that would ask all the right questions and make consistent decisions, then Jackson Hewitt tax preparers could simply act as go-betweens, in effect operating the computer for the customer. Employees would have to know something about taxes, of course, but they could be hired primarily for their charm.
So Jackson Hewitt not only has good intentions -- to give friendlier service -- but has a strategic plan to achieve them.
Just as interesting as what the Jackson Hewitt plan does is what it is not intended to do. You'd think that if Hewitt's expert system is as good at figuring taxes as he claims it is, Jackson Hewitt would be touting its greater accuracy to attract clients. The company is not, even though accuracy would seem to be another strategic advantage.
Accuracy, Hewitt says, is not a characteristic that clients can appreciate. "Most tax-form errors," he says, "are errors of omission -- a deduction, for instance, that the preparer failed to mention." So customers don't see the mistake, and neither does the IRS. Even if Jackson Hewitt is more accurate, no one knows it, so accuracy confers no competitive advantage.
The expert system does give Jackson Hewitt's 299 franchised and 12 company-owned offices, operating in 12 states and Washington, D.C., a leg up in several other respects, though. It allows preparers to work faster, says Hewitt, saving what he estimates is 15 minutes of payroll time per tax return. And it means that the returns Jackson Hewitt prepares are already in the appropriate format for electronic transmission to the IRS. The competition still has to send handwritten forms to a keypunch operation before dispatching returns by computer to the government.
Both of those are primarily productivity advantages, although because a step is saved in the filing, Hewitt thinks his clients get their refunds faster.
Hewitt's principal assumption remains, however, that if customers can't judge the quality of the work, they can easily judge the worker. If an experience with one tax preparer is pleasant and one with another preparer is not, Hewitt reckons, people will come back to the place where they're made to feel good -- and he uses technology to make that happen.
A strategic plan built around expert-system technology doesn't guarantee Jackson Hewitt will surpass Block in the tax-preparation business -- not any more than Block's strategy guarantees that it will remain on top. Hewitt and his team might not execute the plan well. And even if they do, the strategy has limitations.
"This window of opportunity when we have the technical edge won't last forever," Hewitt acknowledges. Block or another competitor could put its own technology to work. But successful or not, Hewitt's strategy rests on the rock of a plan, not on the sands of wishful thinking.
ON BEING STRATEGIC
Simple but important points
Here's what makes a strategic plan strategic, and what does not:
* It includes both the ends and the means. It's not enough to say your company is going to do something faster, better, or cheaper; the plan has to say how. Jackson Hewitt Inc. expects to appeal to clients by being friendlier and faster, but to achieve that president and CEO John Hewitt built the company around expert-system technology.
* If you worry about someone stealing it, what you have is an idea, not a strategic plan. A strategic plan depends on execution for its value. Sure, competitors can read about Hewitt's plan, but to adopt it a company would have to change the whole way it's organized to do business.
* If you are the only one who can execute it, it's an extension of your personality, not a strategic plan. Anyone with similar drive, talents, and resources should be able to carry out your plan. The success of the Jackson Hewitt strategy doesn't rely on John Hewitt's personal ability to make people smile.
* The improvements or distinctions your plan aspires to must matter. If customers can't tell that you're more accurate, then achieving greater accuracy gets you nothing. Jackson Hewitt strives instead for friendlier, faster service, which should be immediately apparent.