“To get lucky is not a business model.”
An unknown author
Some years ago, I was invited to participate in a one-day strategic meeting arranged by a major company. As the company’s CEO explained, the business units’ strategies had already been formulated earlier, and the meeting was a kind of final presentation. They invited me as an independent observer, and my role was to challenge these strategies.
There were four business units in the firm, and the head of each took the stage for an hour to present the unit’s strategy. All the presentations looked similar – they began with mission statements and corporate values followed by long-term goals, market analysis, and key strategic initiatives. Listening to the first speaker, I was confused by the vagueness of the latter. According to the presentation, the unit was going to “create value-added solutions for the customers” and launch “highly profitable cutting-edge products.” No details about the products and solutions were provided. I thought they would be described in some supplementary materials, but there were none. Finally, the head of the unit left the stage accompanied by applause.
The second presentation was a copy of the first. The head of this unit used a little bit different wording presenting the strategy and also informed the audience that the unit was about to start “a large-scale cost-cutting program” and an “efficiency enhancement project” without mentioning any particular details. When she was about to finish and to receive her share of applause, I raised my hand and asked where and how I could look at a more nuanced version of the strategic plan. She answered that this version didn’t exist and that it was the “strategical” meeting, not a “tactical” one. “All the details will be elaborated along the way of the strategy implementing process.” I looked around, but nobody seemed concerned or surprised.
Goals and ways to them
On the one hand, strategic documents shouldn’t look like day-to-day action plans. They have to reflect the direction in which a company will move. In today’s world, “a step-by-step long-term plan” sounds like an oxymoron. Any organization needs to adapt its operational action plans to fast-changing reality nearly on a daily basis. On the other hand, if a company proclaims long-term strategic goals, its leadership must ensure the strong cause-effect relationships between the goals and the actions they will take. Otherwise, there is no way to believe that these goals will be achieved.
Being formulated this way, the strategy becomes a good intention. The CEO and executives make everyday decisions hoping they will help the business reach long-term objectives. But it may happen only by chance, as even a broken clock is right twice a day. A strategy is not a list of intentions, such as to reduce some costs or to launch “highly profitable cutting-edge products”; it contains the answers to the particular questions:
- What customers (or customers’ segments) the organization plans to win, and why?
- What needs do they have?
- What values will the firm create for the customers through products and additional services? How will these values help the company to win the competition?
- What place will the company take in the market value chain, and how will it help create new values?
- What inner changes should the company make to provide customers’ values?
- Why and how will it help the business reach its goals?
The strategy must be coherent. It provides consistency and integrity, helping the heads of different departments work in unison and moving the company towards its long-term objectives. The strategy is a sort of social agreement between all the governance process participants, from the board members to the middle-level management. It maintains a shared understanding of goals and actions to be taken among them. And this is what strategy exists for.
