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Strategy Sucks!

This article considers your approach to strategy. Strategy is one of the most over-used and yet misunderstood words in business. As a result, managers and consultants have struggled to 'do' it properly.

 

Strategy is a subject that people like to refer to, but often they don't really know what they mean by the word. We should not be surprised that many people find it difficult to actually think strategically when they are unclear about what strategy is all about.

The main complaints about the strategy process are:

• There is little agreement about what strategy actually is and what it does
• It gets lost, unco-ordinated, frustrating, messy and unfinished – there is lack of focus and clarity
• Most people involved either question their own ability to contribute, or, arrogantly dominate and suffocate the process
• No SMART goals are achieved (SMART is an acronym that is used to remind us that goals should be specific, measurable, attainable, realistic, time-based)
• Fear of the future, combined with fear of failure, makes the team behave like reindeer freezing on the road when blinded by the headlights of the oncoming lorry, and
• Management 'speaking in tongues' parades as science – the tools are not helpful – they are superficial, confusing and too theoretical.
  

1) Types Of Thinking

Managers often fail to differentiate between business unit strategy and what is referred to as 'corporate centre' strategy. The reason for this is that business schools and consultants normally talk about big business/corporate centre strategy when they are talking about strategy.

Business unit strategy is for single product/market players or 'strategic business units' of conglomerates; corporate centre strategy is for conglomerates that are planning the future and the relationships between the centre and its various subsidiaries. The distinction is crucial; this is where so much of the confusion comes from.

Business unit strategy is good – it gives you insights into where and how you need to do things differently. It helps you to see the business through the customers' and through the competitors' eyes. Both today and tomorrow. It shows you your strengths and weaknesses and where and how you should be expending your efforts.

There is a time and a place where corporate centre strategy is beneficial. Examples include where there are brand benefits, regional or global economies of scale, overcoming technological barriers and so forth. You only need to think of Apple, Coca-Cola, Microsoft, Sony, and Toshiba. But this type of thinking is pretty irrelevant if you are running a business unit employing say 500 people.

Moreover, for the multinational/conglomerate, the ability of the centre to generate strategies that have little to do with the needs of specific business units is awesome. Couple this with the centre's (and the board's) lack of contact with the territories and you can see the potential for disastrous decisions. Corporate strategies constantly frustrate and bamboozle the managers of regional business units.

2) No Clarity Of Purpose

Put simply, business strategy is planning while being aware of the business environment.

Strategic thinking is not the same as strategic planning. In fact strategic planning is an oxymoron like 'friendly fire', 'fun run' or 'fighting for peace' – planning and thinking are totally different activities requiring different skills. Strategic thinking is the role of the strategy team – those
beneath them should carry out the (strategic) planning.

Strategic thinking must be used to improve understanding of the environment and the options available to the business. Any analysis must help the decision-making process. There is no room for using models that are simply intellectually attractive. The task at hand is to shed light on options and directions and find evidence to support decisions about the future.

3) The Use Of Theories

At the business unit level, the tools of analysis are relatively straightforward. The only real barriers to a successful strategy are intimidation by the so-called 'professionals' and their jargon.

Rogue management consultants have been known to blind their clients with science; BCG matrices, Value Chain Analyses and differential equations are used to bully the innocent client into agreeing to a strategy that they may not fully understand or appreciate… but are too timid to
admit their ignorance. Despite this, the manager may well understand their business and industry with a clarity and perspective that the models are unable to detect.

It is notably at the corporate centre level that the jargon takes over and so often the process turns into Frankenstein's monster - you have a much more sophisticated list of tools (product portfolio analyses, discounted cash-flow, BCG matrices, three-dimensional modelling). A whole industry has grown up around corporate strategy – it is here that the business school hype runs amok – 'Long live the emperor and his new clothes'.

More complex is almost always worse, and yet the corporate centre has a propensity to complicate things!

Most of the models of analysis, some good and some bad, are over thirty years old; few people in business honestly know how to use them effectively and appropriately. For today's business, the relevance and value of the models must be questioned.

The Solution

In order to work, the whole strategy process must be effective and practical; highfalutin' theory is not the order of the day!

To be effective, strategic thinking tools must satisfy the following conditions:

1. Reflect the business needs of today and tomorrow
2. Start with the customers – be rooted and immersed in market understanding
3. Be Practical (not theoretical)
4. Be Specific (not superficial)
5. Encourage a longer-term view
6. Be Measurable

who develops Strategy?

For business unit strategy, each of the operating managers should be involved; for corporate Centre strategy, the Chairman, CEO and a few close colleagues should be involved. In both instances, a cross-section of operational managers should be involved to influence, double-check and approve the thinking process.

The next-best solution is to involve a firm of management consultants who can bring a process and system to the proceedings. The Senior Management Team or MD must choose carefully otherwise the consultants will bring in over-complex tools and theories. The MD needs to be able to stop them from doing that by giving them a clear brief of what is wanted. A good relationship will pay dividends as consultants can facilitate the process or give the right tools to work out the way forward.

Where To Start?

If strategic thinking is a creative process then the best place to start is with where you would like to be, and work backwards to where you are now. Then you can work out how to get there. (The Big Hairy Audacious Goal school of thought) Or… if strategic thinking is a systematic, analytical process then start with where you are now and work out where you think you can get to.

The snag with this second approach is that constant use of linear thinking stifles your creativity. If you believe that 10% growth in sales is realistic then you will plan away the idea of faster growth and the need for more unusual approaches to achieve a truly stretching goal.

In reality, you need to combine both approaches.

At The Business Unit Level:

These are the crucial questions that you need to be able to answer:

• What business are you in?
• Where do you make the money?
• How good are your competitive positions?
• Is this a good industry to be in?
• What do your customers think about you, your product and the market?
• What do your competitors think about you, your product and the market?
• How do you raise profits quickly?
• How do you build long-term value?

At The Corporate Level

Be clear that corporate centre strategy is flawed because the centre rarely represents or reflects the needs of the outposts. The centre has a life of its own. Few corporate centres are small. Most do not add enough value to justify their cost. Most destroy more value than they add.

Corporate centre strategy must be approached with a great deal of scepticism and caution.

Strategic Thinking

• Be clear about what you want to achieve from the strategy process. Is it business unit or is it corporate centre strategy that you are working on?
• Decide your goals and be prepared to pay the price – after all strategy, by definition, is about trade-offs.
• Do not undertake 'strategisation' unless a system is in place that allows strategy implementation - otherwise the whole process is counter-productive.

It is imperative that the strategy process is not seen in isolation of other processes. Strategy is not a 'black box', a one-off activity, carried out at annual awaydays – to think strategically is an art form.

Summary

Working on strategy is not so very difficult if you focus on understanding what you are trying to achieve. Do not get confused by the way that some parties have tried to make strategy sound highly convoluted and highly complicated.

About The Author

Robert Craven is a keynote speaker and author of the business best-sellers 'Kick-Start Your Business' and 'Customer Is King'. He has recently been described as 'one of the UK’s leading marketing specialists' and the 'entrepreneurship guru'. He runs The Directors’ Centre, helping growing businesses to grow.
For further information, contact Robert Craven on 01225 851044. (rc@directorscentre.com) www.directorscentre.com

©2006 Robert Craven, European CEO

publication details

First published in European CEO, July 2006.