The trouble with strategy
A friend of mine recently dropped me an email with a link to Kim Warren’s new book “The trouble with strategy.” Being a strategy consultant myself, such a title was bound to arouse my curiosity.
The book is certainly worth reading although I do not agree with its conclusions.
Bad strategy affects us all
Warren justifies his writing by emphasizing that everyone is affected by strategy. When the strategies of large corporations fail, common people and entire communities are severely affected. Warren claims that the recent recession can be entirely subscribed to the failure of strategies applied by private enterprises, not to consumer behavior or government policies. Therefore we (you, me, communities, everyone) need to do something about the traumatic inability of the corporate world to define and implement strategies that maintain growth, employment and values.
Warren gives numerous examples of how bad strategies killed huge enterprises (Enron, Swiss Air, Northern Rock, General Motors, Lehmann Brothers etc.) and how other enterprises suffered dramatically from poor strategies. In the process of reviewing how companies fail to define and implement strategies supporting steady growth and profitability he also manages to slap the entire strategy consulting industry (McKinsey & Company and others) who have been involved in defining the failing strategies.
Strategy is “voodoo”
He claims that defining strategies currently is a “voodoo” type exercise, where two strategists/consultants will not arrive at the same conclusion even if they had the exact same data. He also claims that the focus on short-term financial results takes priority over (long term) strategic issues and thus is responsible for many of the failures.
The book is a goldmine of examples on how various companies have fared over the last 50 years. Getting this overview and insight makes reading the book worthwhile.
But then come the conclusions.
Warren believes we need to build a “strategy profession.” We need to develop strategy professionals who are certified by an authority securing that they have the fundamental qualifications required to develop (and implement – I assume) strategies that will work. Just like we authorize doctors, dentists, engineers, accountants, plumbers etc. we also need to authorize strategists. He even discusses who could assume the role of an “authorization body.”
I agree that there is an awful lot of bad strategy out there. I also agree that bad strategy has consequences for “innocent” people who lose their jobs and for whole communities where increasing unemployment and decreasing tax revenue is a poisonous combination.
I also agree that there is a need for a more systematic approach to educate “strategists” who are familiar with defining and implementing strategy.
But I think we have a few challenges:
- Is “strategy” the same exercise for all organizations (Small, Medium, Large, New, Established)?
- How can we motivate organizations (Small, Medium, Large, New, Established) to actually use qualified strategy expertise?
- How can we reduce the time and cost associated with applying good strategy
What is strategy?
Kim Warren offers a very simple definition:
“An organization’s strategy is how it tries to reach its objectives”
This implies that “strategy management” includes the following:
Choosing objectives for the organization. Objectives may be financial, such as cash flow, or non-financial, such as reaching some number of customers by some point in time. Objectives can be ambitious, but do not have to be, and they may need to be adjusted as conditions change.
Selecting what the organization will do compared with other organizations. In business cases, this means deciding which customers to serve, with which products and services and how this will be done.
Steering progress over time. Having decided a position that offers the potential for success, management must continually build the necessary resources and capabilities and develop effective policies to steer its strategy and performance as circumstances change. This is more than simply the sum of good decision-making in each function of the business. Decisions on produce development, pricing and so on must work well together and adapt so they continue to do so as circumstances change.
Good performance over long periods of time suggests that executives do all of these tasks well. Failure to make progress, serious setback, or total collapse imply that one or more of them has been done badly.
The definition and explanation sounds straight forward, but there are some fundamental challenges.
Known or unknown business model
Strategy and execution differs dramatically depending on the business model you are executing. Are you executing a known and tried business model or are you looking for a new business model?
Will an authorized strategist need to be specialized in the various types of business models?
Setting objectives – the human factor
Setting the objectives is probably one of the most difficult elements in the strategy process. The owner-executive will normally be very ambitious with cash flow as his primary constraint. Hired executives may be bold and ambitious, cautious or anything in between. Setting objectives are closely related to the human factor.
Will an authorized strategist be able to provide any guidance in setting the “right” objectives?
Defining the how
There are thousands of smaller but interrelated decisions to be made in defining the value chain, which can find, win and keep customers happy.
How can an authorized strategist provide guidance in defining and selecting the most productive value chain?
Circumstances are all the external (and internal) factors, which you cannot control (in the short term), but will impact the outcome of your strategy implementation. As we have yet to see a plan, which is exactly on target, your corrective actions will depend on your interpretation of the “circumstances.”
Will an authorized strategist be helpful interpreting the “circumstances”?
Using the competence
There is actually a lot of specialist expertise in the market today, but many companies don’t see a need for applying this expertise or are not prepared to pay the price currently asked. Why not? Because they believe they already have adequate expertise in the management team or can get access to adequate expertise through their personal network or board of directors.
To most small and medium sized companies strategy is considered an “academic” exercise, which consumes too much time, costs too much money and shows too little value.
I think they are right.
The “strategy process” may have developed over the years, but the way strategy consultants (internal and external) “execute” the strategy process hasn’t changed much. There haven’t been any “productivity” improvements in using “professional” strategy methods during the last 100 years.
Disruption is required
I don’t see a need for “authorized strategists”. I fear this approach will conserve the current academic style and maintain the expensive approaches applied by the established strategy communities.
I believe the “productivity” issue to be the biggest obstacle at least for small and medium enterprises.
We need someone to disrupt the application of professional strategy methods. Applying professional strategy methods should be faster, less expensive and show immediate value. If we can drive down the cost, increase the speed and improve value visibility, then I believe more organizations will apply strategy expertise and keep this expertise engaged in their ongoing business management process.