In a conference call yesterday to discuss a reduction in its year-on-year second quarter profits, Verizon Chief Operating Officer, Denny Strigl, said that “These are challenging times,but we stay focused on our strategy of growing revenue and taking market share, and improving profits. The state of the economy may make it more difficult in the short term, but we are doing what we do best, which is managing our businesses and reducing costs.”
Now, this is a transcript of a conference call and the words may not have been chosen as carefully as they should have been, but there are a number of worrying issues in this brief extract:
1) The stated “strategy” is, in fact, three goals. They describe what Verizon would like to achieve. A strategy should explain how these goals will be achieved. A test of a good strategy is doing something different to your competitors that makes potential customers more likely to choose you. As this is a post about Verizon, let’s use a telecoms example: the Apple iPhone. It redefined the market in a great example of blue ocean strategy (as described by Kim & Mauborgne in their book (Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant
).
They aren’t even very good goals; how many businesses are not seeking to improve profits and while they are not universal, many businesses are focused on growing revenue and market share.
2) Let’s assume they are goals and Strigl simply misspoke. We can also learn from this brief statement that they are not doing very well at implementing this stated policy. Just to be clear, the statement says they are focused on top-line profit improvement i.e. by growing revenue and taking market share. So, why, in the very next sentence does he claim they are actually focused on reducing cost.
3) Even allowing for the fact that this was a call and not a PR-screened release, How can a senior executive with one of the world’s leading corporations get away with doing nothing more than stating the obvious when trying to explain how they will stem the decline in profit, beat their competitors and emerge even stronger on the other side of the downturn?
The rest of the call went on to talk about specifics, and maybe it is unfair to expect a COO to cover strategy, after all this is more the domain of the CEO, but this quote is a great example of someone appearing to say the right things while actually giving nothing away. Ultimately all strategy is attempting to increase long-term economic profit, and every business wants to increase revenue and control costs – those are the other two variables in the profit equation.
Ultimately, the investors will decide what to make of this and the results will tell, but if I had a financial interest in Verizon I would hope that this was a deliberately opaque performance to hide competitive information from the competition rather than a sign of an executive team that doesn’t know the difference between goals and strategy.
What do you think? Is this reasonable criticism or am I being unfair? Please feel free to comment.
