By Jo Whitehead, Felix Barber and Rebecca Homkes
Enterprises face a host of challenges today, including digital disruption and changing global trade patterns. In such an environment the need for a flexible strategy and a flexible strategy function is high. In this article, the authors present a clear step-by-step approach to getting the best value from the strategy function based on their research in over 50 companies with Heads of Strategy, CEOs, CFOs and advisors.
In recent years, companies have been creating high-powered strategy functions to help develop, communicate, and execute their strategies, and to track progress. Part of the value of the Head of Strategy – as we refer to the role in this article – is that there is no standard job description. Heads of Strategy typically have fewer routine responsibilities than do other functional heads. Although they manage the annual planning process, that isn’t a full-time job usually; companies don’t entirely overhaul their strategic plans every year. In the Head of Strategy, a CEO therefore has a skilled and seasoned resource on tap, which can be invaluable in an unpredictable and fast-changing world.
All the data show that there are wide variations in the work that Heads of Strategy perform. For instance, a 2008 Accenture survey found that the average Head of Strategy was responsible for as many as 10 different activities while 25% were responsible for 17, or more activities.1 But precisely, because the Strategy role is so flexible, companies and their CEOs find it difficult to hire the right Head of Strategy and get full value from their strategy function. The Head of Strategy needs to be able to play so many roles that even talented executives find it difficult to do well across the board. The Head of Strategy must possess a difficult-to-find mix of strategy-related skills, industry knowhow and the ability to develop close relationships with senior executives. Defining the type of individual required up front is made more difficult because it evolves over time. CEOs load up Heads of Strategy with pressing tasks whenever necessary, so much of the Head of Strategy’s work is opportunistic. Several of the CEOs and strategists we interviewed described how previously successful Heads of Strategy lost their job when the challenges facing the organisation shifted – for example from growth to margin improvement – something that Heads of Strategy have in common with CEOs and which distinguishes them from other senior executives.
Heads of Strategy studies, such as the annual survey conducted by the University of St. Gallen and Roland Berger since 2011, find that one in seven Heads of Strategy is, sooner or later, asked to quit – comparable to the one-in-six rate at which CEOs were forced out in 2016.2 Only a third of them remain in office for over three years, and just one in ten stick around for over five years, so most Heads of Strategy don’t stay long enough to see the results of their efforts. In our research, about one in five Heads of Strategy failed to have an impact on their companies or were rejected by top management teams.
It seems logical that it would be particularly valuable for CEOs to have some guidance about how to pick the best individual for a role that varies so widely, for which a strong track record does not guarantee future success and for which the failure rate is high. However, to date there has been little clarity about how to do this. Prior studies even disagree on what are the possible roles.3
Our research begins to prize open that “black box”, using 55 interviews with Heads of Strategy, CEOs, CFOs and advisors to understand what they thought made the role a success, and comparing examples of particularly successful and particularly unsuccessful Heads of Strategy.
How to get the best from your Head of Strategy
Our research demonstrates that success comes when the capabilities of the Head of Strategy are tailored to fit the situation. To achieve this, CEOs and Heads of Strategy can go through two cycles of tailoring (see Exhibit 1). The first cycle involves finding the individual whose capabilities best fit three factors: the corporate strategy work to be done, the capabilities of the rest of the senior team and the context. In the second cycle, the role is fine-tuned to get the best possible fit. Also, in the same way that a good tailor will support their client through further adjustments and repairs, a good CEO will find a way to provide a new Head of Strategy with ongoing support to help them settle in and evolve their role as the situation develops.
This tailoring process also suggests a prescriptive approach to defining the role of the Head of Strategy and getting the best value from the function.
The first cycle: Finding the best fitting candidate
The best way to start is by drawing up all the major tasks required to develop and execute the company’s strategy. Our research suggests that, to be successful, any Head of Strategy has to have the capabilities required to contribute to the particular corporate work to be done.4 While this may seem obvious, this can mean that the best person for the job is someone who may not even have a background in strategy. For instance, Vodafone’s Head of Strategy between 2006 and 2016, Warren Finegold, led its charge into global markets through M&A. He worked, in his own words, “… on more than $300 billion in acquisitions and disposals that helped build Vodafone into one of the world’s largest telecom groups spanning Europe, India, and Africa.”5 His background was not as a strategist but as an Investment banker at Goldman Sachs and UBS.
The work to be done. The range of possible work is very wide, as described in Exhibit 2 (a more detailed description of this and other parts of our research can be found in our extended report).6
Capabilities. In designing the role and the ideal candidate, the most important fit to think about is between the corporate work to be done and the capabilities of the Head of Strategy. Because the work varies widely between companies, so do the capabilities required. If the work required is primarily in corporate development, change management, or in business units developing better strategies, for instance, the ideal candidate should, respectively, have an M&A background (as Vodafone’s Head of Strategy, Warren Finegold, did); senior line management experience (HP’s Head of Strategy Mohamad Ali was a former CEO); or be able to set up an internal consulting function – several Heads of Strategy we interviewed were previously partners at global consulting firms.
A company may sometimes find itself with a Head of Strategy with unique capabilities, for whom it is worth creating a special role. If the candidate has a particular set of capabilities of great value to the company, it can be worth the company’s while to fit the role to the candidate. For example, Walgreens Boots Alliance’s Rick Mills has been the group strategy officer for 20 years. He was initially hired to work on the integration of Boots and Alliance and worked together with Stefano Pessina, the company’s executive chairman so well that gradually Mills become more and more of an integral member of the senior team. He has accumulated a unique mix of deep knowledge of the organisation, the industry, and how to work with Stefano Pessina, the company’s executive chairman. These attributes have allowed Mills to develop his initial strategy “staff” role into becoming a critical member of the senior team, working closely with Pessina to identify and execute deals that have propelled Walgreens Boots Alliance forward on both sides of the Atlantic.
Successful Heads of Strategy have capabilities that are not only particularly valuable but are also complementary to those of the rest of the senior team. This provides both challenges and opportunities. In terms of challenges, if the CEO believes that the senior team already contains individuals with adequate skills, there may be no role for even a well-qualified Head of Strategy. As described to us by Simon Bax, CFO for Steve Jobs when he led Pixar, Jobs did not employ a Head of Strategy, because he believed he had enough strategic capability as an individual and in his senior team. He believed that a Head of Strategy might not bring enough to the table. “Steve valued very specific knowledge – not analysis and consultant-type thinking. I could help him because I had worked in LA with (Fox) studios.”
Context. A Head of Strategy is more likely to be successful if he fits in with the broader context. Several factors can have a bearing. Family businesses may want a member of the family to head the strategy function, for instance. The company may have a strong engineering culture where having an engineering background helps the Head of Strategy build relationships. The CEO may have personal preferences that have a significant impact on the Head of Strategy chosen.
The frameworks laid out in Exhibits 1 and 2 can be used to think through how to get the best out of a Head of Strategy, a thought process which is best illustrated by an example of how our thinking was applied in the case of a new head of strategy at a large B2B company (see sidebar).
Corporate Strategy Work to be Done.
The key strategic issues perceived by the CEO related primarily to coordination. The various businesses, the central production function, and the national-level marketing and sales units all operated quite independently. But customer offers and prices needed to be harmonised across countries to improve negotiating positions with the company’s increasingly centralised customers. Similarly, sales contracts needed to be written such that the batch sizes and delivery dates met the needs of not just customers, but also those of production. And investments in new manufacturing plants and plant upgrades had to be better coordinated, so they reflected long-term patterns of demand and ensured efficiency across the network of factories. Consequently, there was a crying need for greater coordination between the company’s functions and thus, a new system of cross-country and cross-functional coordination would have to be created and executed across the company. This would be too much work for the CEO and the CFO to carry out alone, another senior executive would have to take responsibility for setting up and coordinating and monitoring the new system to ensure that it was effective and efficient (see Exhibit 3). In addition, the CEO and the CFO believed that the corporate strategy could do with some blue-sky thinking beyond the issues of coordination; the global economy, Europe, and the automotive industry were all changing rapidly.
Capabilities of the senior team.
As the next step, the CEO evaluated the company’s top executives to see if any of them had the skills to deal with the work that needed to be done. A well-respected internal candidate, who had experience in working across functions, would have been ideal for the Head of Strategy position given the nature of the task. However, after conducting an analysis, the CEO reluctantly concluded that the existing team didn’t have the requisite skills.
Capabilities required of the Head of Strategy.
The company needed to make a new hire with the skills to: understand customer needs and integrate them into marketing and sales strategies; update customer offers; develop new contracting approaches; and draw out the implications of all of this for manufacturing and capital expenditure. In addition to some experience in developing corporate strategy in industrial companies, and preferably in automotive, the new hire would have to be credible and persuasive. In the medium term, he or she would have to challenge the beliefs and practices of the production management team, which had been the dominant function in the company for decades. Crucially, the newcomer would need to earn the trust of the CEO and the CFO quickly, as well as the key players running business units and functions such as production. After reviewing the list of potential candidates provided by an executive search firm, the CEO created a shortlist of two: a marketing specialist and a management consultant. The marketing specialist had worked in several industrial companies; operated in large, global organisations; and was used to coordinating customer-offer strategies across countries. He had spent his career focused on marketing, particularly on go-to-market issues in business-to-business settings. He was dynamic, able to make decisions rapidly, and promised to deliver results. However, he didn’t have much experience with production-related issues, or in working with this company. Moreover, he was stronger in marketing than strategy. By contrast, the management consultant was a partner at a major strategy firm. She had, coincidentally, worked with the company on a few assignments, and earned the respect of several executives in the business units and at the corporate center. However, although she had consulted with several companies on marketing-and sales-related issues, her go-to-market expertise was not as deep as that of the marketer.
Context: organisational background and CEO preferences.
A new hire was likely to meet some resistance from the incumbent top management team. While the marketing specialist was an unknown quantity to them, the consultant had worked with the top team in the recent past.
Choice of the Head of Strategy.
The CEO eventually appointed the consultant as his Head of Strategy. While the marketer would have brought more global go-to-market expertise, the CEO felt that he might be too focused on implementing customer-centric solutions that didn’t reflect the production function’s constraints. The CEO believed that the management consultant would take a broader view of how, for example, the selling effort and the customer offer should be coordinated with the production function to maximise the value created by the company. While any new hire was likely to meet resistance from the top management team, the consultant had worked with the company over the past few years, reducing the risk of friction. The CEO also felt that the consultant was better qualified to help develop the company’s future strategy.
Fine tuning the role of the new Head of Strategy.
The next step was to fine tune the role, and the strategy function, to fit the new hire. To compensate for the comparative lack of experience in customer relations, the new Head of Strategy was encouraged to hire managers with marketing expertise for her team. Those executives provided support in the specialized world of business-to-business marketing while the CEO helped the new hire grow into the role.
Ongoing support for the new Head of Strategy.
The new appointee was first given oversight of a project to restructure the go-to-market strategy, a relatively self-contained and important effort. After its successful completion, she began discussions with the production function about how the company should make decisions in the short run about investments in existing and new facilities. With the new hire settling in at the automotive components-maker, she told us that her next step would be to persuade the CFO and the CEO to give her a larger role in driving decisions about where, when, and how to invest in new production capacities in the long run. She believed that the company’s production function evaluated investments using overly simplistic assumptions about the revenues from a new plant; they, typically, assumed that the product was a commodity that would return the same price per unit. However, she believed that small changes in design, batch size, and delivery could boost the prices they could demand from manufacturers. If that was accounted for while evaluating investment decisions, it would favor the creation of a larger number of smaller, but more flexible manufacturing plants. That would entail higher investments, but the new factories would generate higher margins and shareholder returns. It was only after she had spent some time in the company that this fact had dawned on her, and she felt that she was getting to the point when she could challenge the CFO and the CEO about what was, all said and done, “their baby.” When that happened, we felt, the CEO’s choice of Head of Strategy would have been vindicated.
The reasons for success and failure
Our research suggests that failures often occur quickly, and such cases are caused by a misfit between the capabilities of the Head of Strategy and any one of, or a combination of, the work to be done, the capabilities of the senior team or the context. The most common problems were an unforeseen clash with the senior team, or not fitting in with the overall organisational context. Occasionally the capabilities required did not match the work to be done.
Some failures occurred after the Head of Strategy had been successfully in post for some years. These were largely due to a change in corporate strategy and the work to be done, for which the incumbent Head of Strategy was not well suited. Such changes were often concurrent with a change in CEO, and sometimes the preferences of the new CEO played a role.
In nine out of the ten examples of failure, a poor fit was the cause. In the other example, a capable individual fell out with an important joint venture partner and had to be fired.
Successes were universally the result of the individual having difficult-to-find and highly-valuable capabilities that made a significant contribution to the work to be done. This might not last long – for example, Mohamad Ali’s successful tenure at HP lasted just 2 years 4 months. However, if the work to be done remains similar over a long period of time, or evolves slowly, then a valuable Head of Strategy may be in post for a very long time. For example, Hein Schreuder was in strategy roles for 20 years at DSM, a Dutch company active in health, nutrition and materials, including 15 years as Executive VP of Corporate Strategy & Acquisitions. During this time, he was involved in developing and driving five “Corporate Strategy Dialogues”, a periodic process which reviewed and refreshed the corporate strategy, and which was useful for the company throughout his tenure. His capabilities remained relevant and deepened over time as he became more experienced.
The second cycle: Fine tuning the role to the individual
Referring back to Exhibit 1, choosing the candidate who best fits the situation is a major step, but only the first one. Typically, it is not possible to get a perfect fit and so the next step is to tailor the role, and the strategy department as a whole, to compensate for any weaknesses and utilise any unexpected capabilities that the new appointee might have.
A common issue is that the Head of Strategy lacks certain technical skills. She or he may be stronger in executing strategy than developing it, a common problem. One way out is to hire people for the strategy function that can plug the gaps. For instance, Vodafone’s Head of Strategy, Warren Finegold, knew that his expertise was in M&A, so he hired a more process-focussed executive to handle the strategy planning process.
Another option is to juggle the roles of the executive team to compensate for the Head of Strategy’s capability gaps. For example, when the Head of Strategy is inexperienced in handling acquisitions and disinvestments, that responsibility can be assigned to the CFO.7 In some companies, the Head of Strategy plays a role in developing the strategy-related capabilities of the organisation; in others, the Human Resource head manages that task. If the Head of Strategy is good at analysis, but not at sparking debates, the CEO may need to get involved.
The first few months of a Head of Strategy’s tenure is a critical time when the risk of failure is particularly high. Thoughtful CEOs (or whomever the Head of Strategy is reporting to) should have a clear view about where the fit might need a little more tailoring over time and look out for problems. Some Heads of Strategy need encouragement, whereas others need reigning in, or feedback about how their current approach is not working. To develop and retain them, CEOs look for opportunities to give successful Heads of Strategy more responsibilities.
When the strategy work changes enough, CEOs typically appoint a fresh Head of Strategy. Even incremental changes in priorities can demand personnel changes. For example, different kinds of Heads of Strategy were involved at Rolls Royce over the years. Miles Cowdry, its director of corporate development from 2008 was particularly good at challenging assumptions and perceived wisdom, valuable skills whatever the situation. He initially hired a director of strategy who was skilled at working with the CEO to peer into the future and generate creative ideas. As Rolls Royce’s strategy changed from growth to extracting value from the businesses, a new director of corporate planning, who was particularly strong at project management, was brought in.
What makes a strategist a great strategist?
In the course of our research, we came across many competent strategists who fitted the design principles described above. We also came across a few really special strategists who were more than that. They were a part of the leadership team, taking an active and pivotal role in driving the company forward. They came in two basic models.
The first is the “hired gun”. A good example is Mohamad Ali who was Chief Strategy Officer at HP, reporting to Meg Whitman, HP’s Chairman and CEO. He was only in post for 2 years and 4 months, but in that time his previous experience in corporate turnarounds and as CEO of a technology company allowed him to play a leading role in developing not just the strategy – but driving through a corporate transformation programme involving cutting a fifth of the workforce and splitting the company into two.8
Some strategists become “corporate assets”, developing in post over a period of many years and acting as one of a very few executives supporting the CEO or Chairman. An example is Walgreens Boots Alliance’s Rick Mills, described earlier, who has been the top strategist for over 20 years.
What these two examples illustrate is that the most critical requirement to being a top strategist is to have hard-to-find capabilities that meet the current needs of the organisation. There is also an interesting contrast between these two – illustrative of the importance of context. In Ali’s words, “…even in a strategy role, you’re not respected unless you’ve actually run operations or a business. Corporate strategy is not just about projections, market trends, cloud, mobility – well, at some companies it is, but at HP it’s really about tying in operations to the strategy.”9 In contrast, Mills has been a strategist virtually all his working career, starting out in consulting and becoming Group Strategy Director in 1997 – the only change being that his title is now Chief Strategy Officer. His success is partly down to having developed a strong relationship with the Executive Chairman, Stefano Pessina. So, while having valuable capabilities is the key to success, a secondary requirement is to fit in. If the role involves a lot of work with the organisation, then fitting involves being a credible individual in eyes of the organisation, as with Ali. If the role involves more working with one or two key individuals, it is likely to be more about having and building strong personal relationships and trust with those key individuals, as with Mills.
Whether they are looking for a super star or a competent analyst, to get the best value from the strategy function, the CEO needs to invest substantial time and effort in defining the role they want their Head of Strategy to fulfill, finding a candidate with a good fit and then communicating the role to the top team and onboarding the Head of Strategy. Having a clear step-by-step approach, like the one we have laid out and illustrated with an example, can help to get this done successfully.
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About the Authors
Jo Whitehead is a Director of Ashridge Strategic Management Centre. His research is in strategic decision-making, business unit strategy, corporate strategy and the role of Chief Strategy officers and their departments. Jo’s other professional interests include running and providing management programmes and consulting to client companies.
Felix Barber is a Director of the Ashridge Strategic Management Centre. His work includes directing research projects and running the ASMC Corporate Member Program. The long-term focus of his research is on the ownership, governance and organisation of large corporations. His current work targets how to harness and profit from Artificial Intelligence.
Rebecca Homkes is a Director at the Ashridge Strategic Management Centre as well as a Fellow at the London Business School’s (LBS) Department of Strategy and Entrepreneurship and its Centre for Management Development, where she is co-directing a global initiative on executing strategy in turbulent markets.
References
1. R.T.S. Breene, P.F. Nunes PF and W.E. Shill. “Rise of the chief strategy officer”. Outlook, no. 1 (2008): 1-8
2. The Strategist’s Change. How successful CSOs transform their companies – Key findings of the Chief Strategy Officer Survey 2014. Report from Roland Berger and the University of St Gallen. November 2014; PWC annual report on CEO turnover, accessed via https://www.strategyand.pwc.com/ceosuccess#VisualTabs2
3. See, for example, N. Kachaner and S. Stewart. “Understanding the Role of the Chief Strategy Officer”. Report by The Boston Consulting Group, (December 2013) and M. Birshan, E. Gibbs, and K. Strovink. “Rethinking the role of the strategist”. McKinsey Quarterly. (November 2014)
4. While the work of a strategist can be very broadly spread, as described earlier, our research suggested that the most value is generated when working on corporate priorities. When asked to describe their role interviewees typically provided a long list. However, when asked to identify which of these were, in their opinion, most value creating, they universally identified roles that involved supporting or leading an initiative to address a significant and current corporate priority.
5. D. Thomas. “Vodafone’s Finegold to retire” The Financial Times, March 30, 2016 viewed at https://www.ft.com/content/df928b8c-f66f-11e5-803c-d27c7117d132?mhq5j=e7
6. https://www.asmcstrategy.com/head-of-strategy-report
7. The CFO often plays an active role in developing and executing strategy and may sometimes have the Head of Strategy report into them. One survey found that 83% of CFOs are engaged or heavily engaged in strategy formulation and even more in strategy implementation (J. Karaian, The Chief Financial Officer: What CFOs do, the influence they have, and why it matters, (Economist Books, London, 2014)). Recent trends may have swung things in favor of the Head of Strategy (E. Qualtrough. CIO 100 shows CFO losing power to strategy directors. CIO UK. April 23 (2015), viewed at https://www.cio.co.uk/it-leadership/cio-100-shows-cfo-losing-power-strategy-directors-3607589/
8. Hewlett-Packard to split into two public companies, lay off 5,000. Reuters. 6th October, 2014
9. http://www.open-siliconvalley.org/index.php?option=com_easyblog&view=entry&id=5&Itemid=499
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