We recall a rather depressing conversation with the CEO of a medium-sized company several years ago. We were trying to stress the importance of articulating a strategic agenda when he effectively shut down the conversation by asserting, “we have a three-pronged strategy: operational efficiency, organic growth and acquisitions. People need to stop asking questions and get back to work.”
Regular readers will note that this fails all of our tests for a strategy. Equally troubling in this case was how horribly disconnected this perspective was from the way the organization actually worked on a day-to-day basis. As we got to know the mid-level managers, it became clear that while many of them were focused on short-term financial targets, they mostly tried to look busy while preserving some discretionary time so they could react to the next random move from the CEO – a couple even admitted as much over a beer.
This reinforced for us that strategy is not just something you prepare once a year for the board of directors, it is also a necessary requirement for a healthy organization. As this story illustrates, if you don’t have a strategy, your organization is probably hungry for one. If you have hired competent people (not automatons) they are looking for reason in the actions your company takes. The most talented executives and managers want to understand how they might best contribute to the success of the organization. If the stated strategy doesn’t provide these answers, people tend to make things up. The result is a seemingly endless stream of initiatives and a confused organization that doesn’t live up to its potential.
Some signs that your organization is hungry for a strategy are:
- ‘Flavor of the month’ syndrome – leadership announces new ‘strategic’ initiatives so frequently that the organization learns to pay them lip service but not really change
- Weary managers bounce from one of these ‘urgent’ projects to another without being able to show any consistent results
- Senior leadership is constantly intervening in disputes as functional initiatives are pulling in different directions and surfacing unresolved conflicts
- Staff are grumbling about the lack of consistent direction, speculating as to the ‘real’ reasons behind announced changes and left guessing at what will happen next
For too many organizations, the result is like eight-year-olds playing soccer – everyone chasing the ball and no one thinking through their position and the best way to contribute to the whole. But unlike youth soccer, where this can still be enjoyable (or at least good exercise), your employees will quickly get burnt out or check out – in either case, they will not be inclined to give that extra discretionary effort that distinguishes the highest performing companies.
To understand how to avoid this, start with our two definitions of a strategy:
A clearly articulated view of the distinctive capabilities that will enable you to win in the relevant markets
A framework for management decision-making that creates outcomes that are more than the result of a series of marginal decisions
While both definitions are necessary to successfully implement a strategy, the second one is most critical in aligning the organization. To get your organization pulling consistently in the desired direction, a strategy needs to help them prioritize. People face trade-offs and so a strategy must provide a perspective on not just what is good (efficiency, growth, etc.) but how to make trade-offs amongst these goods.
If you have only a notion of a strategy, or are at a natural point to revisit your strategy, how can you achieve this clarity? There is no simple answer, but here are a few key principles:
- Articulate your strategy – Your strategy needs to be clear about what you Must Do, Will Do and Won’t Do. Our ‘strategy on a page’ framework built around these categories has proven to not only align specific initiatives with a strategic direction, but to clarify expectations and force organizations to make trade-offs rather than accept platitudes. Often the most difficult part is the ‘won’t do’ column – what are those specific things that others in our industry might do, but we will not?
- Describe the rationale – Make sure you can articulate the logic behind your strategy. Your organization needs financial targets, but they also need answers to the ‘why?’ questions that are in their heads: why did we choose that direction? Why don’t we expand in Asia? Why can’t we win in that segment?
- Communicate the strategy – It is critical toallow the organization to ask questions. Exactly how to do this depends on the size and culture of your organization, but it is critical that communication is a two-way street. If people do not have a way to get their questions answered, the questions do not go away, they just get driven underground, waiting to resurface the first time your implementation stumbles (or worse yet, provide ammunition for those factions who might even want to see the strategy to fail)
- Walk the talk – Lastly, and perhaps most importantly, you have to live the strategy – every decision that contradicts the strategy undoes hours (if not months) of communication. One example stands out – we were working with a company that sold production equipment for the food and beverage industry. They prided themselves on providing technical support that was capable and responsive. Their customers valued this since if their client’s equipment failed, their client’s line was shut down. As we worked through the strategy process, they struggled to put anything in the ‘won’t do’ category. After much debate, it was decided that they would no longer support the ‘model 400 series’ machines – these specific machines were old and slow and they had a powerful value proposition to get these customers to upgrade to newer machines. About a month after the strategy was rolled out, the company got a service call from a model 400 customer. Fearing that they might lose a customer, they sent a service team out to get them back up and running. While this may have been the right decision for that situation, it served to undermine the strategy. The organization looked at not just that pillar, but the entire strategy, with renewed skepticism and went immediately back to trying to guess what leadership ‘really’ wanted. It was a depressing experience when we started the strategy discussion a year later, and realized that the company had made no progress at all on the strategic initiatives from the prior year.
If you are deep into your annual strategic planning process, or if you are looking ahead to the process for next year, it would be wise to keep this in mind. Strategy is not some optional exercise that can be disconnected from what the business does. Rather, done well, it is a necessary part of aligning your organization and achieving your potential. An organization without a functioning strategy is akin to what Umberto Eco said about atheists, “When men stop believing in God, it isn’t that they then believe in nothing: they believe in everything.”
Just like your body needs specific nutrients (even if you don’t always like the taste), you organization is hungry for a strategy!