Strategic Learning: How to be Smarter than Your Competition

and Turn Key Insights into Competitive Advantage

by Willie Pietersen
Copyright © 2010 William G. Pietersen

9
Execute
Implementing and
Experimenting in the
Strategic Learning Cycle

One must learn by doing the thing, for though you think
you know it, you have no certainty unless you try.
—Aristotle

H ow many times have you heard the following claim: ‘‘The hard
part of a strategy is getting it done; the rest is easy.’’? No one
will disagree that it’s actions that make the cash register ring. Effec-
tive implementation is vitally important. But just beating a drum
about implementation misses the larger point: Strategy creation and
strategy implementation are mutually interdependent. The one can-
not work without the other.
Implementation, like the bottom line, is not a thing apart. After
all, the entire Strategic Learning process—Learn, Focus, Align, and
Execute—is a challenge of implementation. Each stage of the pro-
cess has its own set of hurdles and rewards, and when done effec-
tively, each stage builds on the previous one to generate a powerful

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172 APPLYING STRATEGIC LEARNING TO CREATE ADAPTIVENESS

Figure 9.1 Leading through Strategic Learning: Execute

momentum behind your strategy. Every step helps to bridge the gap
between doing and excelling.
If all of the components of the Strategic Learning process are in
place, then this cohesion will help you to execute your plan rapidly
and successfully. But the implementation of your strategy will only
be as effective as your insight, focus, and alignment, and the quality
of those outputs will depend on the rigor of your discipline as you go
through each of these steps. If an organization constructs its strat-
egy in a piecemeal fashion, fails to build it on solid insights, or ne-
glects to consider how it will align the levers of its business system
behind its strategy, then its chances of success are slender.
That’s why implementation should be seen as part of the contin-
uum of the Strategic Learning cycle (Figure 9.1). It represents both
its successful culmination and a source of learning for the continua-
tion of the cycle.

Learning through Experimentation

Great execution is not just about doing. It is also about learning
from what you do, so you keep doing it better. The gap between
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doing and excelling is a learning gap. Strategic Learning is essen-

tially an insight-to-action-to-insight cycle. It is about learning your
way to excellence.
One of the most crucial activities involved in the Execute stage
of the cycle is experimentation. Experimentation injects a different
kind of divergent learning. The Situation Analysis is an intellectual
voyage of discovery. Experimentation adds to this the dimension of
learning through action.
We can’t figure out everything that will and won’t work through
pure analysis or market research. A hypothesis is a good starting
point, but then we often need a proving ground of some kind—for
example, to determine the optimal price point, customers’ response
to different product features or what it takes to succeed in a new
market.
Strategic choices are all about risk and probability. Just because
you make a strategic choice doesn’t mean you can’t say, ‘‘This is the
strategy we’re going to follow. We had to make a choice and we
made it according to our best judgment. However, one of the alter-
native choices also looked promising. So while we’re going to go full
steam ahead on implementing our chosen strategy, we’ll explore
that other possibility through a controlled experiment in a small
area, see what we learn, and then scale up those lessons.’’
For example, as I wrote this book, consumer products giant
Procter & Gamble was taking a hit on Tide, its top-selling brand in
the United States. Cash-strapped consumers were switching to
cheaper brands, even if they lacked some of Tide’s cleaning capabili-
ties.1 The big issue P&G faced was this: ‘‘With so many consumers
buying less-expensive, private-label brands, it is obvious that there
is lots of business to be had at the lower-cost end of the price spec-
trum. If we introduce a cheaper version of Tide, will it pull volume
from the competing brands or will it cannibalize the mother brand?’’
Analysis alone can seldom find a good answer to a question like this.
The right thing to do is conduct an experiment. And that’s exactly
what P&G did in testing Tide Basic, a lower-priced version, in 100
stores throughout the South.
A readiness to experiment, to learn from the results, and
to adjust your strategy accordingly is a hallmark of adaptive
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organizations. It mitigates the tendency for thinking to become nar-

rowed within a set of fixed mental models, and it helps stamp out
the complacent ‘‘If it ain’t broke, don’t fix it’’ attitude I’ve warned
against.
As we have seen, rigidity can be fatal when the environment
shifts. Charles Darwin showed that the success with which life on
earth has evolved to fill almost every conceivable niche in widely
varying environments is based on nature’s continual experimenta-
tion—the generation of an endless stream of variations through the
random mechanism of the genetic lottery. In effect, nature places
millions of unpremeditated bets on a proliferating array of new vari-
ations. Most fail and die out. Those that survive multiply and eventu-
ally dominate. Any species that stops adapting is doomed.
The adaptive organization employs a similar methodology. By
continually experimenting, producing ‘‘mutant strains’’ of new prod-
ucts, processes, methods, and strategies, the organization maxi-
mizes its chances of developing favorable variations that are
capable of responding to the next change in the environment.
But as I noted in Chapter 3, this method is different in a crucial
way from nature’s blind process. Being human, and therefore capa-
ble of reason, analysis, insight, and memory, the leaders in an adap-
tive organization can learn from both their mistakes and their
successes, and thereby improve their odds of success.

Learning from Others

As the twin forces of globalization and the Internet have made the
world smaller and sharpened competition, it is self-limiting to con-
fine yourself to your own experiments. Learn also from other peo-
ple’s experiments.
That’s what P&G did when it realized that its famous research
and development operation was no longer up to the task of supply-
ing enough ideas for the future. Historically, the company had been
very reliant on internally driven innovation. But by 2000, wrote Larry
Huston, then P&G’s vice president for innovation and knowledge,
and his colleague, Nabil Sakkab, senior vice president for research
and development, in an article in Harvard Business Review (March,
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2006), ‘‘It was clear to us that our invent-it-ourselves model was not
capable of sustaining high levels of top-line growth.’’4
They came up with a revolutionary idea: create an open innova-
tion system by harnessing talent and ideas from outside the
company. The basic premise: What if P&G took its 7,500 R&D people
and added to that the 1.6 million R&D people outside of the
company in its areas of interest? That would create a talent pool
of 1,607,500 R&D people at P&G’s disposal. Huston wrote, ‘‘We
knew that external connections could produce highly profitable in-
novations. Betting on these connections was the key to future
growth.’’
Within five years, the resulting Connect þ Develop model had
furnished innovations from the outside to more than 35 percent of
P&G’s new products being sold in the marketplace, up from 15 per-
cent in 2000. And some 45 percent of the initiatives in the product
development pipeline had key elements that were discovered exter-
nally. P&G estimates that its R&D productivity has increased by
nearly 60 percent. As Huston wrote, ‘‘The model works.’’

Learning from Mistakes

Experimentation can’t proceed without mistakes. The problem is,
successful organizations are, by definition, organizations that do
things right. They are filled with people who are justly proud of their
technical, administrative, and managerial prowess, and who have
risen within the organization largely because of their ability to make
things work—usually the first time. Such people set and meet high
personal standards of success; they consider failure a mark of
shame and do everything possible to avoid it.
All of this is natural, and even admirable. Yet multiplied across
the breadth of an entire company, these human qualities can pro-
duce an organization that is risk-averse, shunning uncertainty and
error in favor of repeating only what has worked in the past. The
measurement and reward systems used by many companies encour-
age the same tendency. In an organization where punishment, dis-
approval, career stagnation, or even discharge are the likely
response to mistakes, people quickly learn to avoid mistakes when
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they can and cover them up where they can’t. Of course, concealing
a failure ensures that no one will learn from it.
Learning from experimentation requires a culture that is both
open to risk-taking and capable of learning from mistakes. Risk-
taking and mistake-making are, after all, opposite sides of the same
coin. The key is to make smart mistakes, rather than stupid ones.
Smart mistakes are those where the value of the learning is bigger
than the cost of the mistake. This is crucially dependent on an orga-
nization’s ability to analyze and distill the lessons from its experi-
ments and rapidly share and apply them.
Smart mistakes are a hallmark of cultures that are open and
adaptive, like the high-performance cultures described in Chapter 6
that are characterized by collaboration, teamwork, and rapid
responsiveness to the needs of customers. Rather than waiting to
react to changes in the competitive environment, these organiza-
tions aren’t afraid to experiment and learn from the results of those
experiments so that they can respond swiftly and successfully. Like
firefighters who train to deal with a variety of different emergencies,
organizations that have ‘‘trained’’ through experimentation will be
better able to manage volatility, uncertainty, complexity, and ambi-
guity, and lay the foundations for long-term success.
One organization that has built experimentation into its DNA is
Ideo, the award-winning design firm. ‘‘Fail early and often to suc-
ceed sooner,’’ is its motto. As Tim Brown, Ideo’s CEO, writes in his
recent book, Change by Design, ‘‘Leaders should encourage experi-
mentation and accept that there is nothing wrong with failure as
long as it happens early and becomes a source of learning. A vibrant
. . . culture will encourage prototyping—quick, cheap, and dirty—
as part of the creative process and not just as a way of validating
finished ideas.’’5

Experiential Learning: The After-Action

Review
Learning from experiments has three basic components: conducting
the experiment, studying the success or failure of the experiment,
and transferring the lessons learned throughout the organization.
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To methodically pursue all three steps requires a great deal of

discipline. Many companies are stuck in the plan/act mode and de-
vote little time to reflection, analysis, and self-education. But when
the learning is done right, it adds immeasurably to an organization’s
effectiveness.
One of the most powerful techniques for harnessing the power of
experiential learning comes from the United States Army.6 The idea
of learning from experience presents a peculiar dilemma for the lead-
ership of the Army. After all, the ultimate form of competition for
which the Army was created and which provides the true test of the
Army’s methods and strategies is an event that no one wants to expe-
rience—namely, a war. But in the new global environment, produced
by the end of the Cold War and the emergence of new kinds of inter-
national threats and challenges, the American military needed ways
to test new weapons and tactics without waiting for a war to erupt.
In response to this challenge, the U.S. Army developed several
new tools for generating and disseminating knowledge. At the
National Training Center in the Mojave Desert, the Army began fight-
ing virtual wars, large-scale combat exercises pitting one high-tech
battle unit against another, with every soldier, tank, helicopter, and
plane tracked by satellite and computer. The contests are extreme,
and sometimes chaotic, hewing as closely to reality as possible with-
out incurring casualties. The data generated by these simulated wars
are then fed into the computer at the Army’s Center for Army
Lessons Learned (CALL), where they are synthesized and then
shared throughout the Army’s ranks worldwide.
In this process of action learning, the after-action review (AAR)
is a key component. An AAR is usually conducted immediately after
a military engagement (simulated or real) in order to drive out les-
sons learned as the basis for continuous improvement. In the course
of an AAR, the participants’ subjective interpretation of events and
the computers’ objective data are compared, producing insights that
are often eye-opening.
An AAR typically focuses on four questions:

! What was the intent? What was the intended strategy at the
time the action started? What role was supposed to be played
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by each unit? What was the desired outcome and how was it
supposed to be achieved?
! What actually happened? In Army parlance, what was the
‘‘ground truth,’’ the actual events as they played out in the
heat of battle, with all the misunderstanding, disruption, and
confusion that inevitably occur when two armies clash?
! Why did it happen? This is the root-cause analysis. How did
the commanders’ intent, the adversaries’ actions, changes in
the environment, and the decisions of individuals combine to
produce a specific set of outcomes?
! How can we do better? What lessons can be learned from the
events of this action that will enable Army units in similar fu-
ture actions to carry out their missions in such a way as to
more closely achieve the commanders’ intent?

An AAR isn’t an open-ended feedback session. Rather, it’s a

highly structured process designed to ferret out the crucial insights
to be gleaned from the battlefield experiment. It normally includes
commanders from at least three leadership levels within a given
unit, as well as their counterparts from other units who were in-
volved in the action. The AAR dialogue is facilitated by an experi-
enced officer who is trained to help the participants sort out their
various and often conflicting viewpoints, arrive at the ground truth,
and drive out the learning.
The Army’s AAR manual recommends that the time spent on the
AAR be divided this way: one quarter to reviewing the ground truth,
one quarter to discussing why it happened, and fully half to discuss-
ing how to improve. It is crucial to conduct the meeting with hon-
esty, frankness, and mutual respect among all the participants, and
it is just as important to learn from successes as from failures. That’s
why the Army follows five simple guidelines in conducting AARs: no
sugarcoating; discover the ground truth; no thin skins; take notes;
and call it like you see it.
The AAR is a powerful tool for generating organizational learn-
ing from experiments and actual experiences. Every action that you
take in implementing your strategy is also an opportunity to learn.
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By that definition, everything you do is actually an experiment, even

if you don’t call it that. No wonder the AAR is now being used at
world-class organizations such as British Petroleum (BP), Bechtel,
and GE, among others. Consider holding an AAR in the aftermath of
any key event, such as:

! A major new-product launch or market test

! The opening of a new manufacturing facility, retail outlet, or
website
! A corporate reorganization, merger, or spin-off
! An external or internal crisis or turning point, such as an un-
expected public relations challenge

In short, any significant event that has the potential to produce

valuable learning could be a suitable occasion for the AAR exercise.

Strategic Learning 365 Days a Year

To enjoy the full benefits of Strategic Learning, don’t let the process
slip into dormancy between planning sessions. The lessons learned
from experimentation and implementation feed directly back into
the Situation Analysis. The organization updates its insights by
examining its own actions and by rescanning the environment, and
then modifies its strategies accordingly. As you go through the learn-
ing loop and repeat the Strategic Learning cycle, the discipline of the
AAR is a powerful tool to help you examine what you have learned
from your actions so far.
The process of discovery and renewal should never stop. In-
stead, take deliberate steps to make the Strategic Learning method
an active part of your business culture, so that the cycle of Learn,
Focus, Align, and Execute is constantly at work, helping your orga-
nization adapt to the ever-changing world in which it operates.