Strategic Leadership: The Strategy of Saying No

In the world of business, good strategy is as much about what you don’t do as it is about what you do, and good leadership is knowing when to say “no” just as much as knowing when to say “yes.” It’s an important component of your strategic focus and alignment—in order to give your full attention to the “yeses” you’ve outlined in your business strategy, you may need to deliberately say no to other things. That might be saying no to a potentially great idea, or no to customers, even at the expense of turning down new business. You may need to say no in order to prioritize other parts of your business strategy.

Below we illustrate three examples in which saying no helped companies to focus on what was most important and ultimately achieve their business goals.

Saying no to good ideas

Steve Jobs famously said, “I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things.” This mantra continues to be one of Apple’s driving philosophies, with Tim Cook now leading the helm of the most valuable publicly traded company of all time. Apple is currently worth more than $900 billion, yet they sell only six core products. As Tim Cook explained at a Goldman Sachs tech conference in 2009: “We say no to good ideas every day. We say no to great ideas in order to keep the amount of things we focus on very small in number, so that we can put enormous energy behind the ones we do choose, so that we can deliver the best products in the world.”

It can be extremely difficult to know when you may have to say no to that potentially game-changing idea. After all, it’s fresh new ideas that allow companies to innovate and prevent them from becoming stale. The trick is to know exactly what you’re saying “yes” to. As part of your yearly strategic planning, define (or redefine) your company’s core competencies. Review your vision and mission, identify your top products and services, and list your key differentiators. Now challenge your top-level managers to do the same to see if your lists line up. You might be surprised to find that not everyone is on the same page. This is where the root of your problem lies—when it comes to growing companies, focus is nothing without alignment. When you say no to a certain idea because you feel it doesn’t align with your overall strategy, it needs to be communicated clearly, and your management team should understand why. As Cook clarifies: “And so I think that this is so ingrained in our company that this hubris that you talk about which happens to companies that are successful but then decide that their sole role in life is to get bigger, and they start adding this and that and this and that. I can tell you the management team of Apple would never let that happen. That’s not what we’re about.”

Saying no to clients or customers

Susan Bishop, founder of the executive recruiting firm Bishop Partners, started her business by saying yes. A lot. Yes, because companies were expected to “delight their customers.” Yes, because as a female she was taught to be polite and a non-confrontational “good girl.” Yes, because the pressures of running a company meant taking whatever business could pay their rent for the month. For Bishop, saying “yes” did help her get the initial business off the ground, even if it meant taking on clients with big red flags–Clients that were out of her field of expertise, clients that were too demanding or had unrealistic expectations, and clients that were too time-consuming with a low profit margin. After a few years, she realized that her company revenues had plateaued. Her profit margins were lower than average, and growth was slowing. That’s when Bishop realized she had to learn how and when to say no.

She decided that her business model should be much more selective: instead of making her happy customers the top priority, they would focus on finding the right customers. That meant operating as consultants within their fields of expertise (media and entertainment), working only with growing companies that wanted to fill senior-level (not junior-level) positions, and staying away from problematic clients that expected their company to “perform miracles.” This shift wasn’t an easy one at first, as it meant turning down a $250,000 opportunity from Coca-Cola, which no longer fell within their defined client list. But Bishop stuck to her guns, and within a year she had used her free time to target and create the business she really wanted. And ultimately, Coca-Cola came back to her when they needed a general manager for its entertainment complex in Las Vegas, a project that did fall within her defined scope.

Turning down revenue opportunities can be one of the hardest decisions that a business owner has to make. As author David Maister explains, it offends our sensibilities and our natural desire to be liked by everyone. To be successful, however, you must accept that you cannot be good at everything simultaneously. Instead of prioritizing growth and size, consider making differentiation a priority—become known for your specific expertise and beloved within your target audience, and the success will follow.

Saying no, for now

Brian Halligan, CEO of Hubspot, prided himself on being a “yes” man. Like Bishop, he was quick to say yes to new ideas and projects during early startup stages, as they were trying to figure out the right product-market fit for their customers. As the company transitioned from startup to “scale-up” however, Halligan found that saying yes was starting to backfire. It often lead to half-baked projects, dissipated energy, and diminishing returns. In his attempt to unlearn his “yes-man” ways, he implemented a new tool called MSPOT. This document articulated the company’s Mission, who they Serve, the Plays they’re going to run this year, the plays they are going to Omit, and how they will Track progress. The Omissions are inevitably the most painful section, as they are typically excellent ideas, but “necessarily omitted because we are better off doing a few things very well,” according to Halligan.

One such Omission was deferring the opening of the company’s first international office, which they decided to temporarily say “no” to so that the company could instead prioritize another business strategy. Is it possible the company have done both in one year? Theoretically yes, but the energy required to undertake two huge initiatives in one year would have divided the management’s attention. Productivity experts have long touted the importance of only doing one thing at a time to maximize efficiency. This applies just as much to large-scale business strategy as it does to day-to-day tasks. Halligan’s bet paid off. By being able to focus the entirety of their resources, efforts, and dollars into their new target buyer strategy, they were able to increase their customers by 42% year over year. In the next year, on the heels of that success, the company opened its first international office in Dublin.

A version of this post originally appeared here.

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