The Strategic Planning Trap: Guinness' African Lesson Learned

Like Sherlock Holmes' 'the dog that didn't bark,' corporate executives sometimes learn that it's the question you don't ask that holds the key to a problem. Strategy planning and execution are among the non-financial value drivers that consistently score highest in surveys of business leaders. However, those processes are of sub-optimal utility if the assumptions underpinning the planning and execution are too limited or tied too closely to traditional assumptions. This is especially true as the impact of internet access becomes broader. For instance, despite the thousands of analysts whose job it is to monitor global developments, virtually no one predicted the Egyptian revolt.

In the corporate realm, the surprise success of the iPad and the surprise failure of New Coke are iconic cautionary tales. In the following Business Week article, Leonard Fuld discusses Guinness Brewery's experience in Africa when beer sales began to decline despite the company's sophisticated marketing planning apparatus. As Fuld tells the tale, the answer to the problem came from outside Guinness' experience - and imagination:


"We didn't see it coming." That's what a marketer for Guinness told me when the Irish brewing company and its competitors saw a 6 percent drop in its African beer sales around the turn of the millennium. Not because of brilliant moves by its rivals, but due to—of all things—cell phones.

It was a scary moment. Beer sales on the African continent provided 17 percent of the parent company's worldwide sales. The marketer said the slump had come out of nowhere. In fact, it had not. Like a lot of companies, Guinness got blindsided as a result of its own untested assumptions.

Since the early 19 century, Guinness had ranked as the leading brewer throughout most of the African continent. The product had become known as an aphrodisiac, particularly among its chief consumers—young males—who had taken to calling it "black power" and "Viagra." When Guinness management asked itself about competitive threats, it focused on a developing beer war with rivals like South African Breweries (known as SAB) and French brewer BGI.

Meanwhile, young males had begun to shift their spending toward mobile phones, which had become a sexier purchase than beer. Mobile sales were exploding, and Vodafone (VOD) even developed revenue-sharing schemes to sell more phones in the same stores that carried beer. Like recording companies who, until iTunes (AAPL) came along, assumed they were competing only with each one another, Guinness considered just its most obvious competitors, not the entire landscape in which they were operating.

Eventually the blinders came off, and Guinness cut deals with phone service providers and retailers. In Nigeria, for instance, Guinness arranged with the four mobile phone operators, MTN, VMobile, MTel, and Globacom, to own a special short message system (SMS) code. Guinness would then place print-media ads for the beermaker's special prize contests and promotions. The ads would invite the mobile phone subscribers to respond by texting Guinness and including the SMS code. Guinness managed to therefore co-opt this new mobile technology. As a result of this and other marketing efforts, Guinness regained much of its lost share. The company learned a lesson at an unnecessarily steep price.

Strategy Formulation
The company could have saved itself a lot of time and revenue by running a war game. A powerful technique of strategy formulation that has existed since the 1950s, the war game is finding even greater favor in our age of almost continuous market disruption. Where such exercises used to take place in only the C-suite, they now have spread across business units and divisions.

A Guinness war game might have pitted the company not only against SAB and BGI but also against one or more grocery retailers that sell beer. Each team, staffed by Guinness employees representing the various players, would have had to declare a strategy and defend it, stress-testing their plans. They would have had to confront plausible disruptions long before they materialized. The game also would have challenged management to address and react faster to long-held market assumptions that were no longer valid.

War games force executives to step outside their comfort zones and address their blind spots. Consider the experience of a medical equipment company that had seen one of its rivals rapidly grab market share, threatening the company's majority position. In the course of a rigorous war game, the team representing the rival demonstrated how it had ascended in the market by bypassing medical specialists and building a Web-based community around afflicted patients. The patients shared information with one another as well as with the doctors who joined the community, helping the rival dramatically build market share