20 min. read

A Question of Strategy

The Prologue

Strategy is a word of our time, a word that is frequently tacked on to ordinary decisions and activities to convey an impression of importance they don’t deserve.  Strategy is overworked and misapplied.  Overuse has helped reduce the idea of strategy to the ranks of the everyday.  This paper sets out to help redress the balance by outlining what strategy is and providing practical guidelines for its development.

In order to be effective strategy has to be simple.  Simplicity, however, is very difficult to achieve.  The only point of managers setting strategy is to provide clear guidance to everyone, themselves included, who needs to take action in order to secure its implementation.  Strategy provides the overall decision-making framework for those whose job it is to deal with the day-to-day tactics.  That doesn’t just make strategy important, it makes it vital.  If everyone involved does not have a direction and purpose clear in their minds how can they be expected to decide what action to take in the heat of the daily battle?  And if that view of direction and purpose differs from one to another, there is little hope for mutually consistent implementation.

Several academics and businessmen believe that companies are good at strategy, but bad at implementation.  David Kearns and David Nadler take that view in their book ‘Prophets in the Dark’ that chronicles the rescue of Xerox from virtual bankruptcy.  They say, “One of the shortcomings of American corporations is that they have focused far too much on good strategy and not nearly enough on good implementation.  There’s often plenty of strategizing, but no hooking that strategy to what’s do-able.”  Undeniably, Kearns and Nadler are correct in their claim that good implementation is essential for strategic success.  Indeed, implementation is where 90 per cent of the time will be spent.  In contrast, developing good strategy takes 90 per cent of the thinking.   However, I believe that Kearns and Nadler are mistaken in their view that there is too much focus on ‘good strategy’.  Companies may appear to focus on good strategy because they may appear to do a lot of it, but quantity never did signify quality.  There is an awful lot of strategy apparently being done, or rather, a lot of awful strategy.  Almost inevitably, if the strategy is poor it cannot be rescued by implementation, however good.

 

Part of the reason for strategy failure is simply a lack of understanding of exactly what strategy is.  This lack of understanding is made worse by confusion about the terms used: a common language is vital to ensure a productive dialogue, a point to which this paper returns.  These problems are compounded by a reluctance on the part of some managers to make their intentions clear.  A lack of clarity, whether deliberate or accidental, kills the chances of developing useable strategy and may increase complexity and cause confusion.  If complexity and confusion reign, it is much easier for anyone to justify that their actions are reasonable.

If we look at the bland statements which are frequently presented in annual reports as the company’s vision and mission, we can be fairly sure that if these accurately reflect what the senior executives think, then the company has no clear direction.  A statement of strategy ought to represent the distillation of complex business realities into a few relevant, concise, clear and simple phrases capable of being written on one sheet of paper.  Of course this is difficult to achieve and the process for arriving at an agreed and generally understood position can be tortuous.  However, the fact that it is difficult should not prevent us from making the attempt.

At its heart effective strategy has to have a single, non-financial objective and single strategy which is both necessary and sufficient to achieve that objective.  This singularity of view results in a focus that can help achieve extraordinary results.  These notions would not be news to military and political strategists of the past and indeed, to military strategists today.  However, in business we seem to have lost sight of the fundamental need to do sufficient work and to think hard enough to make strategy simple.  The basic ideas and concepts of strategy have been known for many years and proved highly effective in the political and military domains.  The distillation process required to produce an agreed, understood and actionable strategy may be time-consuming and difficult, but is essential if the result is to be successful in guiding the business forward.

This paper presents a framework of questions for the practical development of effective strategy.  These questions help to focus the strategic thinking of those responsible for strategy development.  The framework can be used in the early stages of the strategy development process where it can be used to create a working hypothesis which provides guidance for subsequent investigation and analysis.  Following this initial stage, a second iteration, using this framework, based upon additional information will considerably improve the quality of the emerging strategy.

Coping With Everyday Pressures

The pressures on company managers and boards from corporate parents, banks and the stock market are both immediate and considerable.  Observation suggests that under pressure, organisations frequently throw the baby out with the bath water and abandon any serious attempt at thinking strategically.  True, a downturn in a sector focuses attention on the short-term.  For companies under real pressure immediate survival is sometimes the sole aim.  There is, however, considerable danger that actions taken under short-term pressure may make long-term success difficult or even impossible.  Ironically, the relative failure of strategic planning and the vicissitudes of economic cycles make strategy even more important.  In good times, short-term strategic mistakes can frequently be overcome fairly easily, but in bad times they may well prove fatal.  Good, clear strategic thinking is essential to sustained success.  Potentially damaging short-term measures can be resisted if there is a clear, consistent, sensible and generally well understood strategy.  Even while they are absorbed in the short-term crisis, managers need to keep in mind the ultimate objective in order to minimize possible damage.

A distinction needs to be made between strategic planning and strategic thinking.  Having a well thought out strategy is not the same as having an elegant strategic plan, although a well-crafted and presented document may make its proposals easier to sell to others whether they are the corporate board or the City.  However, the essence of a strategy should be capable of being presented on one sheet of paper.  What we are seeking is clarity and simplicity of expression based upon rigorous analysis and critical thinking that results in a fundamental understanding of the business.  This, of course, takes time.  Frequently, the clearest, simplest statements are the ones which have taken longest to develop.  Often too, they prove to be the most enduring.

Understanding Strategy

Underpinning good strategy is understanding: understanding what customers want now and what they will want in future, understanding what is going on outside the company in the various markets and legislatures or in terms of cultural and demographic shifts, understanding the nature and relevance of technological change, what competitors are doing and what the company’s real competitive strengths are.  A company also needs to understand what is going inside the business and how to manage change effectively.  Understanding is also vital to successful implementation.  If people know what is being asked of them there is a greater chance that they will actually deliver.  Above all, understanding requires that everyone involved in the strategy formulation and delivery process has a common view of what the strategy is and what it means.  Such understanding is not easily acquired.  Considerable skill, experience and effort is needed to collect, analyse and interpret the necessary data and present it in a digestible form.  Rigorous interrogation of the resulting information is an essential element in strategy development.

Lack of clarity, lack of understanding and lack of focus bedevil managers and workforce alike.  Complex and ambiguous statements of strategy are like spiders webs that ensnare unwary managers in a labyrinth of confusion.

Confusion often arises because people use different terms interchangeably.  Mission, purpose, vision, objectives, strategies, plans, targets, aims; these and many more are used by different academics, consultants and managers.  No common, single vocabulary exists.  At best this causes needless argument; while at worst it means that managers may be using the same or similar terms whilst talking about quite different things without realising it, so confusion reigns.  An essential part of the strategy-making process is, therefore, that managers have a common language that allows them to communicate effectively.  In practical terms managers need to agree a set of terms to be used and agree precisely what these terms mean: common understanding cannot be assumed.

This paper sets out an approach to help clarify the strategic picture.  Strategy is explained by taking the whole concept and breaking it down into its component parts.  Each component is presented as a question, which if answered rigorously, clearly and consistently, will go a long way towards cutting through the fog of complexity, confusion and mystique that surrounds strategy.  The answers to these questions form the building blocks of strategy and may be reassembled in any form the company chooses in order to be presented.

Once formulated, strategy should guide and inform all subsequent actions.  The logic of what to do should be inescapable.  Wherever a strategy is viewed from, it should be consistent.  The words used are vitally important.  If people are expected to take action to help implement the strategy, attention has to be paid to what is written and said.  The words used must be unambiguous and not capable of accidental misinterpretation.  The understanding has to be consistent and actions required and permitted should be apparent as should those actions that are discouraged or prohibited.

In this paper as few terms as possible are used to convey the meaning of strategy.  The attempt is made to use words clearly and distinctly.  Even so, the word strategy is used in two senses.  It is used in a macro sense to mean the overall purpose and direction of the organisation and in question 8 of the framework that follows, it is used in the more limited sense of a business strategy, which is the route chosen to achieve the business objective.

A Strategy Development Framework

What follows is an attempt to define a set of terms which cover the main elements of strategy.  Each term is presented as a question which needs to be answered as clearly and precisely as possible.

It is not absolutely necessary to answer every question religiously in order to develop a viable strategy.  In any particular circumstance some questions will be more critical than others.  However, four are regarded as absolutely essential as they represent the minimum requirements for a coherent strategy.  These are questions 5, 6, 7 and 8 from the following list and they are asterisked in the notes.

The whole proposition of strategy, which is defined as the overall direction and purpose of the organisation, is divided up into three parts:

  • The Strategic Context
  • Strategy Development
  • Planning and Implementing Strategy

The Strategic Context

The following six questions could be considered as a pre-strategy development stage in the process.  They provide the context for the subsequent development of a business strategy.  Generally the province of very senior management, this part of the process helps define boundaries by articulating some of the more conceptual elements of strategy development.  In large, complex organisations in particular, this part of the development process is especially useful as it acts as the glue between different operating divisions.

1          What are the values, philosophies and beliefs?

In business and organisational terms, what is it that the senior team believes in and holds to be important?  Do they have a set of values they wish to communicate to the rest of the organisation and the wider community which are to be maintained as the guiding principles upon which the company will do business?  This question of ‘what we believe in’ underlies the issue of culture – that system of codes of behaviour which circumscribe or direct actions.  It is important to understand the culture and underlying values or philosophies of an organisation because strategy needs to work in harmony with them.  It is essential that subsequent behaviour is totally consistent with explicitly stated values.  Failure to maintain this consistency breeds distrust and cynicism.

2          What is it that the key senior individuals want to achieve?

An organisation will often take actions that are designed to achieve some personal goal of the CEO or important member(s) of the senior team.  This goal may be entirely consistent with the interests of the organisation or maybe not, but the overriding driver is personal ambition.  Sometimes difficult to determine, it is nevertheless helpful to understand whether there are any personal ambitions that might constrain or otherwise influence the strategy.

3          What is the purpose of the business?

It is sometimes argued that the only purpose of a business is to make money.  If that were the case then many businesses would simply not exist.  In the majority of cases people work for some purpose other than just making money.  This question is aimed at getting senior members of an organisation to ask themselves why they are in this particular business and why they feel motivated to come to work.  A valid answer to this question will often reflect a deeply held emotional response.

4          What is the vision?

Do the senior managers (or does the CEO) have a clear, shared mental picture of what the organisation could be?  To what extent is their vision understood by others in the organisation?  To be most effective, this needs to be stated in terms which are motivational and lift thoughts above the day-to-day routine of business.  Ideally, the vision needs to be long-term, inspirational and capable of being communicated throughout the organisation.  It needs to be viewed as ‘stretching, but possible’.  The vision will generally reflect the values and ambitions of the key players in the organisation.  A ‘vision’ is something to be sought after, not necessarily attained.

5*        What business is the company in?

The answer to this question defines where the businesses is now: an absolute necessity before deciding where it wants to get to.  The answer may be expressed in whatever terms managers find most useful.  Answering this question can sometimes prove surprisingly difficult and in the attempt it might be helpful to list what activities the business currently undertakes: organisations sometimes do a collection of things for historical rather than business reasons.  Frequently, at this stage in the strategy development process, the answer to this question will be in very conventional terms that tend to describe the product or service produced.  Whilst this answer may not prove to be useful in the long-term it does provide a starting point for the debate.

6*        What business should the company be in?

This is an absolutely critical question.  Given an understanding of the external environment, the company’s capabilities, the personal ambitions of the senior team and their vision, how is the future business to be defined.  In arriving at an answer to this question, it will be important to consider future demands by customers especially in terms of the needs they may have and the benefits the business intends to provide.  This is an important question because the answer sets the scene for the future.  Management teams really do need, therefore, to be as imaginative, creative and as clear as possible when trying to arrive at an answer.  Important elements include consideration of things that the business is not doing, but probably should be doing if it is to succeed and what is not going to be done.  This will either mean stopping things which are currently being done or not starting things which fall outside the new definition.

It is preferable to try and avoid defining the business in the conventional product terms of the sector such as bankers, paint manufacturers, hotel operators.  Try to think about what actually needs to be done and what is being provided to customers: what is it that you do or will do, that delivers value to customers?  What customer need is your product or service aiming to fulfil?

Strategy Development

Together with the answer to questions 5 and 6, the answers to the next two questions form the core of an organisation’s strategy.  The remaining questions put flesh on these bones.  The answers allow an interested and informed reader to understand the intentions of the organisation by outlining its direction, purpose and market place position.

7*        What is the business objective?

This is the single point to which all activity in the business is directed.  Contrary to popular opinion, there should only be one objective if a business wants to be successful.  Trying to go in several directions at once may be tempting and even fashionable, but it is also foolhardy.  It results in lack of focus and dilution of effort.  Multiple objectives also relieve management of the responsibility of making difficult choices and allows them to fudge.  It avoids the necessity of setting priorities and focusing upon what is really important.  Deciding what not to do is at least as important as deciding what to do.

The term ‘business objective’ is used deliberately to make the point that the objective needs to be expressed in non-financial terms.  It can normally be taken as read that a business wants or needs to make profits.  Profits provide a convenient way of keeping score.  They let everyone know how well the business is being managed, how efficient it is, how much growth it is getting and, therefore, how it is progressing towards its real objective.

Setting a financial objective and sending everybody off to achieve it gives no guidance about the way in which success is to be achieved.  One way to achieve a 25% return on capital might be to cut R&D spending.  Objective achieved, but at what cost?  As a result, it may be that in five or ten years time there is no business.  Strategy development and formulation should leave no-one in doubt as to the desired market place position, the issues which must be faced and the manner in which opportunities are to be assessed over the longer term.  Apart from any other consideration, an objective set in financial terms is rarely motivational: making more money for shareholders or directors does not tend to inspire the troops.

With the vision in mind, the business objective defines it in more concrete terms and brings it closer and more sharply into focus.  If achieved, it should be sufficient to ensure significant progress towards the vision.  Although not stated in financial terms, the business objective should point the way to the achievement of whatever financial targets have been set for the business.  It is the ‘what?’ of strategy development.  In order to be understood by everyone, the business objective should be expressed briefly and in simple language – preferably in one short sentence of no more than 12 words, which normally starts with, ‘To ….’.

8*        What is the business strategy?

This is the ‘how?’ of strategy development.  It is the means by which the objective will be achieved.  A useful test of the validity of a strategy is that it will be both necessary and sufficient to achieve the objective.  Again, it should be stated briefly and simply so that it can be readily understood and recalled by everyone in the business.  A business should only have a single strategy.  Multiple strategies lead to confusion.  The statement of strategy needs to inform and direct all subsequent actions of the business.  If it cannot be expressed in one short, simple sentence it is not clear.  Ambiguous statements of strategy are a recipe for corporate confusion and ultimately, death.  A useful house rule for statements of strategy is that they should not exceed twelve words.  With many management teams this is a contentious point.  They often refuse to believe that a statement of strategy for a large and complex organisation can be reduced to a single sentence without being either a catch-all or absolutely bland and therefore useless.  It is hard to prove this point before the event.   However, experience shows that it is not only possible, but vital.  It is also very time-consuming as it forces choices to be made and then expressed with absolute clarity.  In order to help distinguish between strategy and objective, try starting the strategy sentence with, “By ….”

9          What is the competitive position?

This is where the company is or wants to be in the market.  It is the essence of an organisation: what the market recognises as distinguishing the company from its competitors.  The definition of competitive position again forces managers to make choices.  By deciding the basis upon which the firm will compete, a management team is avoiding the ‘everything to everybody’ trap which leads inexorably to mediocrity.  Instead, it is deliberately choosing to concentrate effort and resource where it judges they will be best used.  By doing this well a firm will distance itself from its competitors and improve performance.  At the same time managers are also saying what the competitive position is not and what the business will therefore not do.

A statement of competitive position needs to be based upon an objective analysis of the company’s own, and its major competitors, strengths and weaknesses and an understanding of the external environment of the business.  Critical to the development of a defensible competitive position is a clear view of the market needs being served and the ways in which competitors attempt to address those needs.  It is a relative position and forms the cornerstone of any marketing programme.

10        What are the sustainable competitive advantages?

In order to compete successfully over time a company needs to have, maintain and develop competitive advantages.  These are the key competitive strengths which will allow the business to compete in the long-term.  What other advantages could be built?  What will the business have to do in order to maintain and improve its competitive advantages over time?  The identification of these advantages and an understanding of the extent of advantage conferred will follow from an objective analysis of the market, major competitors and the company itself.

11        What are the organisation’s resources and capabilities?

This requires an internal assessment of the organisation in order to identify possible areas of weakness or difficulty and key areas of actual or potential strength.  This analysis needs to be related to an assessment of what are going to be the critical abilities for the future.  Therefore, while it is internally focused, it needs to be related to an assessment of what will be required to win in the market place of the future.  It is useful to evaluate these attributes in relation to competitors as strength is a relative proposition when considered as a competitive weapon.

Since the 1990 HBR article by Hamel and Prahalad, resources and capabilities have tended to be described as ‘Core Competences’.  Core competences are derived from combinations of skills, experience, knowledge and technical capability that provide a company with unique qualities.  Many of these qualities are in the heads or hands of the workforce, may take many years to build and are very difficult for competitors to replicate even if they have been recognised.  It is important for the organisation to consider how these competences need to be maintained and developed in future?

An assessment of competences should be carried out to determine the extent to which they are compatible with the ambitions identified as they may need to be changed, developed or new ones acquired.  The question of organisational fit is relevant here as is the whole question of resource-based strategy.  In simple terms, organisations may be constrained by their competences or lack of them, and ‘fit’ suggests working on the basis of limited ambitions.  This is quite contrary to the idea expressed in the vision question which stressed the inspirational and stretching qualities inherent in the statement.  Lofty ambition requires innovative ways of overcoming obstacles and enhancing resources in order to scale new heights.  It is the difference between walking and flying.  Nevertheless it is very important that a management team understands the resources it has available and what additional resources it would need to develop in order to execute its strategy successfully and move towards achievement of its vision.  Resource-based strategy does not necessarily mean that a firm has limited ambitions.  However, there is a danger that by focusing unduly on existing resources and capabilities a business rules out innovative ventures that require new resources.  And, of course, a resource-based approach to developing strategy, which is essentially internally focused, is insufficient by itself.  No organisation can deny the importance and indeed pre-eminence of the market.

What Next?

The questions posed above need to be answered clearly and consistently.  If this is done, the answers can be interrogated to determine what actions need to be taken and where there are information gaps.  This is achieved by asking another series of questions including:

  • What do these statements actually mean? For example, if a company wants to be the world leader:
    • how is the market defined?
    • what is the market size?
    • what share is implied by the ambition?
    • who are the current competitors / leaders?
    • what timescale is proposed and what growth rate is implied – is it achievable?
  • What needs to be done by the business if the ambitions are to be realised? – specifically and in detail
  • Do we have evidence to support the answers? If not, where and how can it be got?
  • Are there any significant information gaps?

 

Planning and Implementing Strategy

Strategy development without well thought out and executed implementation is merely idle dreaming: it is interesting, fun even, but ultimately, useless.  Strategy development requires good information, dedicated time and a great deal of hard thinking.  However, 80 – 90% of the time, effort and resources that go into effective strategy need to be directed at making it happen.  During the planning and implementation stage of the process it is vital that a robust and actionable implementation programme is prepared in order to ensure that the hard work of developing the strategy is not wasted.  Short-term milestones can be identified at this stage and used to monitor performance against the plan.  This helps to ensure that the process remains on track and provides the basis for a feedback process that allows all involved to monitor and assess their performance.

 

12        What are the tactical plans and how will they be implemented?

Tactical plans can be prepared using the same framework of questions as just mentioned, simply taking the high level strategy as the starting point.  These plans translate the strategy into detailed actions.  They also need to highlight milestones and measurements so that success can be charted.  Tactical plans are unlikely to look further ahead than one or two years and will generally cover the main operational or functional areas of the business.

Three sub-sets of these questions are particularly important:

  • what resources are needed?
  • what is the time scale?
  • who will be responsible and accountable?

Communications

One of the most critical elements of an implementation plan is communications.  Everyone who is affected by the strategy or who will need to take action as a result of it needs to know what it is and what it means to them in their job.  This may seem to be a daunting task, but strategy often fails through poor communication.  As a general rule, it is impossible to communicate too much.

What Should It Do For Us?

Objectors to this approach often argue that it is too precise: it locks managers into what appears to be a rigid set of words.  Their case rests upon the fact that the precision of the statements is unnecessary; it constrains people and limits their personal contribution.  In practice, the opposite happens.  A well thought out strategy with an ambitious and inspiring vision and objective clearly articulated, is liberating.  It frees-up the creative energies rather than constrains them, by providing a framework for individuals to reveal their talents secure in the knowledge that they are contributing to the overall success of the enterprise.  Also, because brevity and clarity are at its heart, it lightens the dead hand of corporate bureaucracy and encourages flexibility, which enables rapid response without the risk of going completely awry.  Senior management can delegate secure in the knowledge that their subordinates know what is required.  This really is delegation and not abdication and it facilitates the empowerment that many talk about, but so few achieve.

In recent years, great emphasis has been placed on taking layers out of organisations and delegating responsibilities down to the lowest possible level.  Commendable in many ways, but in the absence of an understood and agreed strategy, is potentially a recipe for chaos.  It is also demotivating as middle and junior managers become frustrated as their attempts to make progress are thwarted by their inability to get simple, unambiguous guidelines as to what is required.  All too often they are covered by a layer of corporate cotton wool, which stifles their initiative.  A well thought out, articulated and communicated strategy removes this cotton wool.  Of course, this also has the potential disadvantage that it removes the comfortable cushion between ‘us’ and ‘them’.

How Do We Assess Strategy?

It is vitally important that the answers to the strategic questions are consistent.  It should be possible to trace the logic of the strategy down from the vision and up from the tactics.  The strategy should then inform all subsequent decisions.  If something which does not fit the strategy arises, then either it cannot be done or the organisation must revise the strategy.  However, if the strategy has been well thought out then it is unlikely to require frequent change.  A strategy is not immutable, but it should be robust and enduring.  This does not mean that it cannot be challenged, rather that it should be capable of withstanding all but the most fundamental challenges emanating from the business environment.  Most certainly, it is not something that requires changing on a weekly, monthly or even annual basis.

In order to evaluate the strategic process and the resultant strategy we can test against the criteria presented below:-

  • Clear: a statement of strategy must be clear and unambiguous. It should not be capable of accidental misinterpretation.  Each individual who hears or reads the statement has to understand the same message.
  • Concise: statements of objective and strategy need to be brief: simple sentences of no more than twelve words each.
  • Consistent: a vital ingredient in strategy formulation and implementation is consistency. Even if they are not the very best, a consistent set of ideas well implemented are likely to succeed.
  • Communicated: the best possible strategy is of little value unless those who are required to operate it know what it is. Ideally, everyone in the organisation should know what the strategy is and what it means for them in their job.
  • Credible: ambitious and lofty, inspiring and motivational a strategy should be, but it should also be just within the bounds of possibility. Overly ambitious strategy emanating from a poorly performing business tends to inspire derision not commitment.  At every level the gaps between words and deeds are soon spotted.
  • Capable of implementation: if we can’t do it, it’s no good. In part, this means that it must not be so complicated that we cannot work out how to make it happen.
  • Choices: both created and forced. Good strategy forces us to make choices in its development and once developed, allows us to exercise our choice of action within its bounds.  Importantly, these choices enable us to decide quite easily what we will not do.  One client described this as the in-tray test, “I got back to the office and binned half of my in-tray because it was not relevant to the strategy.”
  • Quantifiable: although the objective is stated in terms other than financial it must still be capable of measurement. This allows short-term milestones to be set to help monitor progress.

Another important test is, “Does it feel right?”  Unscientific it may be, but it is undoubtedly valid.  Experienced managers instinctively know when something is right.  This is also an argument in favour of an iterative process of development that allows versions to be tried on to see if they work.  No matter how clever, if managers don’t like, believe or understand a strategy they are unlikely to make it work.  A client described this element in the process as, “A blinding flash of the obvious.”

A caveat: things that are important are not necessarily strategy.  Many things need to be done in a business, but that does not make them strategy, it just makes them important.  A classic example of this arose in the BT Payphones business in the late 1980s.  BT was attracting a great deal of public criticism because only around half of all payphones were working at any time and it became vital to fix the problem and restore public confidence.  In late 1987 Sir Ian Vallance BT’s Chairman, promised publicly that by March 1988 BT would have 90 per cent of payphones working.  The first step was to institute an emergency programme of remedial work: essential yes, strategy no.  Whilst this operational imperative was being achieved work started on developing a strategy using the approach outlined in this paper.  The resulting strategy was highly successful for BT and remained in place essentially unchanged, for almost ten years until mobile telephony really started to take off in the UK.

Clear ideas simply expressed help the company’s cause inside and outside the organisation.  Financial investors and analysts tend to respond favourably to straightforward statements of organisational policy.  They too recognise that trite mission statements and bland, catch-all objectives are products of woolly thinking that signals an absence of rigour in the decision-making process.

Ultimately, the test of strategy is, ‘does it work?’  The only problem is that we don’t usually know the answer to that question until it is too late, so we are left with having to rely upon a robust and rigorous process, which is what this paper sets out to present.

One final point: the approach presented here may not be entirely consistent with the academic theory presented in most text books on strategy.  In part, that is because the approach was not developed from existing theory.  Rather, it arose from attempts over many years to find strategic solutions to real problems: it is in essence, an attempt to find a practical solution that really is capable of delivering robust, workable strategy.  The acid test is does it deliver?  Evidence from consulting work over the last 30 years suggests that the answer to that question is, yes it does.

© John Marti 1986 – 2017

Winchester Strategy Group

10 min. read

Accelerated Change

Many senior managers find the prospect of large-scale change daunting to the point of complete paralysis.  To avoid contemplating such an unattractive proposition, they will simply ignore the warning signs and hope to escape to another, more successful company or into retirement before judgement day dawns.  Unfortunately, this course of action often results in the problems getting worse rather than better.  Eventually, the company will slide into oblivion or will be forced into drastic action under what may be the most unfavourable conditions.  Apart from the generally recognised difficulty of carrying out major change, the reluctance to act stems from a lack of confidence in handling the process, or a recognition that it is a very long haul – longer often than the likely tenure of many senior executives.

Fortunately, several companies have been brave, or foolish, enough to undertake major change programmes and have blazed a trail others can now follow.  Although the approaches described here can be used to prevent extinction, they can also help any company improve performance significantly and gain considerable advantage over their competitors.

Essentially, the approach described in this paper adopts best practice ideas from companies and academics around the world, notably in the USA, the UK and Japan, and from initiatives in the UK such as the Royal Society of Arts ‘Tomorrow’s Company’ enquiry.  By looking around to see what works, we can benefit from the experience of pioneering companies such as Xerox and Hewlett-Packard in the USA and Unipart, British Airways and BAA in the UK.  What the experience of these companies shows is that there are four common themes which run through successful change programmes.

1          Focus

  • By the CEO and senior team on the key issue
  • On the change process and programme itself

2          Visibility

  • Constantly expounding and explaining the vision and strategy
  • Making the whole programme very open and all elements public within the company
  • The change team and CEO being seen to lead the programme

3          Ownership

  • Ensuring ownership at every level by allowing people to define their own contributions
  • By recognising success publicly

4          Consistency

  • By ensuring that all actions support the realisation of the vision
  • Ensuring horizontal and vertical links

Most of the elements of the approach proposed here can be found in books and articles on topics such as strategy, change management, TQM, BPR, culture change and policy deployment.  This deliberate attempt to take the best from previous approaches and learn from the mistakes and successes of experience means that we have a much better understanding of the consequences of our actions.  It also means that we are not attempting to reinvent wheels when perfectly good ones already exist.  We are working with clients to exploit what is known rather than explore the unknown.  The evidence from successful, rapid change programmes such as Southern Pacific Railway is that it is not so much a question of trying to discover wonderful new techniques to revolutionise management practice, but of using existing, proven management tools imaginatively in combination with one another.

These cases also highlight the critical importance of six factors:

  • A clear, simple and explicit vision which can be linked to specific actions throughout the company: a vision which is based upon a sound understanding of the business environment and of competitive threats
  • From the vision,  the identification of a key goal which become the sole focus of the business
  • At the outset of the project, the establishment by the managers concerned of agreed plans to reach their targets
  • A concentration on managing the process rather than the outputs
  • A highly visible, rigorous and disciplined approach to managing the project
  • The absolute and explicit determination of the chief executive to prevent anyone from impeding progress

This approach can be considered as having two parallel streams of activity.  The first concentrates on the hard elements of strategy and turning a well thought out and articulated vision into specific actions right through the organisation.  The second stream concerns the softer elements to ensure commitment and includes the provision of training necessary to support the change process when it is needed, the development of appropriate reward and recognition systems and the implementation of recruitment policies which support the future needs of the business.  The implementation of the specific actions required is not left to chance.  In both streams, the programme is very actively managed by a process of regular reviews led by the chief executive.  Also, there is a continuing process of negotiated dialogue between senior management, middle management and the implementation teams to establish and agree specific targets and appropriate measures.  Individuals and teams must be regularly monitored and held accountable for the achievement of their programmes.

The Programme 

i        Defining the vision and setting goals 

  • Establish an inspiring and stretching, but achievable vision of the future
  • Develop a coherent and robust strategy capable of delivering the vision
  • Set strategic goals that will contribute to the realisation of the vision.  Establish these on the basis of a competitive audit and good information.  You have to be at least as good as the average in all areas
  • Create a ‘change team’ staffed by the most able people to manage the programme
  • Change is a hearts and minds process – facts and emotions are both important – use hard data and war stories
  • Translate the long-term strategy into medium-term and short-term targets
  • Develop financial plans to support the strategy and to illustrate the benefits
  • Let each department or division develop its own local vision and strategy to contribute to the overall vision and strategy.  Ensure that these are consistent.

ii        Developing Commitment

  • Run a ‘headline’ event, facilitated by professionals, to disseminate and discuss the vision, long and short-term strategy and financial plans: you need to involve people
  • Run workshops in each department or division to debate and agree their local contribution
  • Managers of each operating unit need to identify their own performance criteria and indicators
  • Review horizontal as well as vertical linkages to ensure consistency of purpose
  • Publish each manager’s list of criteria and key performance indicators
  • Recognise the power structure which exists.  If you have unions, involve them from the start and continue to communicate
  • Ensure that the whole process is open and honest – don’t try and hide mistakes.

iii        Managing the Process

  • Each manager needs to agree, with the change team, benchmarks and measure for local criteria
  • Establish milestones on the way to achieving the target performance
  • Let managers form improvement teams to work out how to achieve targets.  Links between improvement teams – KPIs – strategic plan – vision, lock everyone into common overall purpose
  • Start teams on their own: simple improvements before moving to complex process improvements
  • Publish an ‘accountability matrix’ which includes:
    • the corporate objective
    • the department objective
    • measures to be taken
    • who is responsible
    • the KPI impacted
    • the benchmark
    • date for review
  • Establish regular reviews to create and maintain urgency – top management involvement via change team.  Focus reviews on process and learning
  • Share best practice: encourage peer group learning
  • Change team must review KPIs and financials monthly
  • Progress towards targets is reflected in managers’ pay
  • Aim at improving KPIs at 25% a year, year-on-year
  • Be prepared to modify or add performance indicators and targets – some will have been based upon guesswork
  • Well into the project try and convert improvements into monetary values
  • Process problems will impede some performance improvements.  Prioritise and allocate to manager responsible.  Aim at over 50% improvement a year.

iv         Involvement of Senior Managers

  • The CEO must be seen to lead the programme by:
    • introducing it
    • appearing at all training courses
    • chairing the change action group
    • having the manager leading the change team reporting to him
    • allowing change team hiring, including external specialists
    • firing those who obstruct progress
    • conducting the review process, getting involved and asking questions
  • The change team must comprise senior, experienced people.  Recruit the best into the team, including external resources.

v          Training and Stealing

  • Use the change team to train others – you will need well-trained, internal facilitators
  • Resist the temptation to invent everything for yourselves: steal good ideas from wherever you can.
  • ‘Borrow’ tools and techniques and training programmes
  • Actively seek new approaches, but evaluate them before using
  • Use the ‘action learning’ approach to training and make it ‘just-in-time’
  • Invest in training for key project staff to help manage the process.

vi         Telling the World     

  • Maintain a constant flow of information on progress internally
  • Tell suppliers early on.  It’s very hard to improve if they don’t.  Work with them to improve their performance
  • Make sure you can deliver before you tell customers.  Don’t raise expectations before you can satisfy them.

vii        Making it Stick

  • Maintain an active role by the CEO – leadership of the process cannot be delegated
  • Recognise the enthusiasm will wax and wane.  Be prepared to re-invigorate.

Most managers will recognise much of what has been outlined here and either be doing it or have already tried it.  But this is not from the ‘been there, done that, got the t-shirt’ school of management.  Of course, the various elements of the process should be familiar, that is the point.  It is like using a recipe where many of the ingredients are familiar, but their use in that particular way and in that combination, is not.

An important difference between the approach outlined and conventional approaches is that the whole programme is planned end-to-end at the outset.  It is not designed as a series of stop-start stages which are reviewed and decisions made regarding what to do next.  The essence of this approach is that it is planned as a smooth curve, necessarily slower at the start while the whole programme is planned, but accelerating as it progresses.  Reviews take place regularly, but without slowing progress.  The pattern is illustrated in Figure 1 below.  Curve ABC shows what is often assumed – constant change.  ABDE is closer to what normally happens with progress being halted while reviews are held and decisions on what to do next are made.  Time is wasted and momentum lost.  Curve AF, of course, represents an ideal picture, but is close to what can be achieved if the whole programme is planned in advance.  Progress is never exactly as planned, but small adjustments can be made without slowing the programme.

Accelerating Change

Figure 1: The Extent of Change

 

The proof of any pudding is, of course, in the eating.  This one is no different.  I know from a great deal of evidence and my own previous experience that major, transitional change is difficult, dangerous and takes a long time.  Where this approach has been used, change which might have been expected to take five to ten years has been completed in two or three: that’s something worth making an effort for.

10 min. read

Managing Strategic Change

John Marti discusses how senior managers can facilitate and drive significant corporate change.

‘Managing change is easy, most of us do it most of the time’.

This is not the commonly held perception of change, but it is true, or at least, it can be true.  Although we may not recognise the fact, most of us are changing constantly.  Generally, this change is something we initiate or we regard as favourable to our interests, so we accept it. What we don’t like is someone else’s change, especially when it is imposed upon us.  Typically, our reaction is to resist in some overt or covert way or to go along reluctantly with the intention of reverting when the opportunity arises.  I know of many meetings to explain change over the years where no-one argues, but they leave muttering “over my dead body”.  Why?  Because it is not their change, they don’t own it and whilst they might understand the logic, they don’t really believe that it is necessary or they don’t buy-in emotionally.  Of course, it may be that they do believe, but “nobody asked me so I’m not going to do it”.

The lesson here is quite obvious.  If we can find ways of involving people in deciding the change which affects them, they are much more likely to accept it and make it work.  In particular, we need to let them question the ‘what’ and decide the ‘how’.  Don’t plan everything for them, but do create a favourable climate.  We have to give people a reason to change, beyond “do it because I say so”.  Creating the climate is a ‘hearts and minds’ process which involves two important elements:-

1          Generating dissatisfaction with the status quo.  In some cases, this is very easy where the performance of the organisation is obviously poor:  the business is losing money, there are large numbers of customer complaints or workplace morale is very low.  In other cases, dissatisfaction is not so obvious.  This is especially true when a company has performed well historically and although the signs of decline are becoming evident, it has not yet reached the edge of the cliff.  The ‘boiled frog syndrome’ is much in evidence.  If you place a frog in cold water and heat it slowly the frog dies, but place it in boiling water and it jumps out.  Without unavoidable signs of crises, many managers prefer to ignore the evidence of their eyes on the simple basis of “if I can’t see it, it’s not there”.  Many of us will know about the near disasters of Philips, IBM and Xerox.  Huge companies worldwide, all with a very successful past, but very nearly no future.  All could have avoided their crises.  Managers in each one knew of the problems besetting them, but it took a new leader to galvanise them into action – almost too late.

Corporate memory is important and useful, but “the way we do things around here” can easily turn into corporate sclerosis.  As I have said before, nothing gets in the way of future success as much as past success.  Quite often, managers need to be shocked into believing that change is essential to survival, let alone future success.  Ideally, we need evidence that appeals to both logic and emotion and clearly shows that all is not well.  This can come from many sources, external and internal:  customer surveys, competitor reviews, operational reviews, staff surveys.  A way then needs to be found to ensure that the responsible management team can accept the validity of the information provided and debate and agree the likely consequences of failure to change and improve.  One way which I have found to be effective is to prepare the factual evidence in considerable detail covering all important aspects of business performance.  This information is analysed and presented to the management team without conclusions.  It then becomes the first task of the team to debate the information and agree its conclusions and the implications for their business.  In this way, the managers generate and take ownership of the problems confronting the business.  Also, the debate centres upon facts and problem resolution rather than opinions.

The important needs to be separated from the critical: too often I find managers attempting to tackle an impossibly wide range of issues, all of which could be classified as important and many as urgent.  Few, however, have the power to fundamentally affect the long-term success of the business.  These are the handful of critical things which must be done to ensure survival and success.  These issues have to become the primary focus of attention.

2          Understanding that something better is possible.  Making sure that people are dissatisfied with the status quo is essential, but it is not sufficient.  Unsettling and destabilising people may be necessary, but if we leave them like that, we will be worse off than before.  People in organisations need to know that someone can see a way through the problems and can articulate a brighter future in a way that they can understand and relate to.  That future must not seem to be the product of idle day dreams:  it has to be relevant, it has to be possible and it has to be inspiring.  As I have said in a previous issue of ‘Talking Points’, this vision of the future has to be part of a clear, coherent strategic framework which everyone can understand.  This facilitates the sorting of issues into the important and critical categories.  In terms of strategic change, this is an essential step as it removes much of the deadwood from the path of progress.  Suddenly, we know what we are not going to do because it is not critical.

So who generates dissatisfaction with the status quo and who provides this vision of a better future?  The specific answer depends upon the particular circumstances of the organisation, but in general every major change effort has to be led.  Strategic change needs a leader who galvanises people, provides them with a compelling picture of a more desirable future, breaks down barriers and creates a climate for change.  As I said in a previous ‘Talking Points’, “…. the vision is achieved by aligning people ….. gaining their trust and creating coalitions”.  The key here is trust.  Leaders need to have many qualities, but if they cannot inspire trust then people will not follow them and without followers there is no leader.

The role of the leader in the strategic change process is vital.  Leaders articulate the vision and they also grant permission for the process – they act as the process sponsor.  With a clear vision and good sponsorship, the change may succeed: without it, it will certainly fail.  But in order to lead effectively, the leader has to engage in the process: it has to get to the top of their agenda.  What leaders can’t do if they want the change to work is to indulge in baton passing.  Saying, “I have a vision of a better future and I empower you to go off and create it.  Let me know how you get on”,

doesn’t work.  Strategic change is not a relay race.  It is more like a marathon where we all run together, but we are pretty sure that some won’t last the distance.

When we think about change, we tend to consider the outcome rather than the process.  Having a vision of an inspiring and idyllic future is one thing – making it happen is another.  There is a very natural tendency to look out across the valley to the green fields on the other side and imagine ourselves there.  What we often ignore is the difficult climb down from where we are and the arduous climb up the other side. And what about the river at the bottom – very deep and fast flowing?  Also, when we look across the valley, the distance is foreshortened.  What is in reality a considerable journey looks quite short and we find it hard to imagine that it can possibly take very long.  But unless we are prepared to think about the detail of the journey we expect to face, we will certainly underestimate the length of time it will take and the difficulties we are likely to encounter.  We need to consider potential hazards, plan to overcome them and accept that we will face as yet unknown problems.  Without good implementation, an inspiring vision remains just that, an inspiring vision which eventually fades and dies.

Strategic change programmes usually involve several functions and are often implemented via multi-functional project teams.  If project teams are used, it is vital that the rules of engagement are clearly defined.  Firstly, each individual project must be clearly specified so that no-one is in any doubt about the intended outcome.  Secondly, the project client or sponsor and the project manager must be identified – individuals not committees.  These individuals must have clear, distinct, single-point accountability for delivery of their respective roles:  simplicity, clarity and accountability are essential to success.

Implementing strategic change in this way reflects the holistic nature of the change.  Whole system change with its built-in interdependencies, means that one part of the system cannot be changed without affecting other parts.  Many ‘Business Process Re-engineering’ (BPR) projects, for example, have foundered on the rocks of unanticipated consequences.

It is essential that implementation is planned and monitored.  Clear goals need to be set with a timetable for achievement and well defined accountability.  Short-term milestones must be identified during the detailed planning stage and then used to monitor performance.  This helps to ensure that the implementation remains on track and provides the basis of a feedback process which allows all involved to assess their progress.

One of the most vital elements of implementation is communications.  Everyone who is affected by the proposed change or who will need to take some action as a result, needs to know what it is and what it means for them in their job.  This may seem to be a daunting task, but failure to communicate will only serve to feed the rumour mill.

Below is a summary of the more important elements of the change process:-

i           Information: use all the relevant information you can to create a desire for change and to reinforce commitment.  Provide a strategic framework; a context for the change which allows people to see something other than operational difficulties.  Remember that most strategic change occurs in response to external pressure.

ii          Behaviour:  out with the old and in with the new.  New ways have to be demonstrated – symbols are important.  Reinforce and praise new behaviour; make a fuss.  Ignore or let go minor mistakes, they will be made.  Work to get obdurate people on-side, but punish persistent intransigence or sabotage.

 

iii         Leadership:  without the people at the top being seen to be leading the change, it simply won’t happen.  Overall leadership can’t be delegated, but you can have and indeed you need, leaders at all levels managing the change process throughout the organisation.

iv         Communication:  you can’t do too much!  It needs to be simple, regular, repetitive and honest.  Not too taxing one might imagine, until you’ve explained something for the fortieth time to the same group and they still don’t (won’t?) believe you or give every appearance of not having heard or understood something which to you is blindingly obvious.

v          Control:  you have to be prepared to let go of the reins.  Apparently, your control diminishes, but you have to have faith in your vision and your educative and persuasive powers – there is no other way.  You cannot control every detail, so don’t try.

vi         Influence the Influencers:  in most change programmes you need helpers: disciples who help to spread the word.  But they must understand and commit to the new vision and be able to communicate it clearly and simply: you want and need evangelists.

vii        Politics:  they’re there whether you like them or not.  They have to be managed; if not, they may derail the process.  Identify key groups and get them on-side: if you can’t, isolate them.

viii       Parallel working:  don’t be tempted to do everything in sequence.  Many things will need to be done at the same time.  This puts a premium on the ability to manage disorder – you need jugglers, not just a safe pair of hands.

ix         Constants:  some things need not and will not change.  Identify them and create sanctuaries, ‘safe areas’ where people can rest from the pressures of change.

x          Results:  as with R & D, your lemons tend to ripen before your plums, so be patient.  Everything will take longer than you want.  In large, complex organisations strategic change often takes five to seven years before you see real results.

xi         Review and revise:  monitor what is going on; check against the plan, review regularly and revise if necessary.

xii        Constancy:  you will certainly need to make minor adjustments to your course, but that does not mean you alter course completely.  With your vision in mind, don’t waver: just keep going until you get there.

One final warning:  things will go wrong, so hold your nerve.  There will always be people who tell you that what you are attempting is impossible, or stupid, or both.  They may have a point, but if your team believes in the change, then go for it.