Guest post by Jimmy Brown, Ph.D.
Business leaders have a lot on their plate. There are administrative chores like budgeting and logistics. There are people development tasks like encouraging, coaching, and what we’ll politely call correcting. Then there are the big picture and forward thinking undertakings that help set the vision and define the mission for the organization. The exact nomenclature for this last set of responsibilities can vary from organization to organization, but what we are talking about is finding the right strategy.Finding the right strategy can be the difference between a leader’s success and failure. Just look at Léo Apotheker’s brief tenure as CEO of Hewlett-Packard. He made several strategic missteps that not only led to his quick dismissal, but also drove value erosion and a loss of market position that the company is still trying to recover from. While the Apotheker example is one of the more recent, public, and dramatic, it is far from the only one. You can’t open up the business pages of any newspaper without reading about the negative impact of a leader’s poor strategic decision making. So why is this so hard? Our research suggests that one of the drivers is that leaders are approaching strategy the wrong way.
Most leaders take one of three approaches. The first is to use what we’ll respectfully call intuitive synthesis. This is a fancy term for guess work and gut-feel. The second is to use intuitive synthesis, often augmented by a couple days of management meetings, to come up with three or four options. Then, the accounting department will run a bunch of financial models to figure out which option is the cheapest. The third approach is to use some established strategic planning model to come up with the options, run the financial models, and then pick whatever is cheapest.This third approach is actually good progress towards better strategies because using a standard model helps leaders structure their thinking in a way that reduces the risk of overlooking important inputs. More importantly, if we consistently apply a standard model over several cycles, we can begin to see trends in the data. These trends can allow for even better decision making. The challenge with this approach, however, is that most of the standard models tend to only look at one domain (typically competitive data) and the analysis is still focused on whichever option is the cheapest.
Leaders in top performing organizations take a much more systemic and holistic approach to strategic decision making. In particular, they incorporate data from three specific domains:
· Capabilities – What we do well and how we can do it better
· Customers – Who we serve, or who has a need we can meet
· Competitive Environment – What inhibits our success. This includes both direct competitors (i.e., other organizations), and other indirect factors in the external environmentArmed with this full view of their ecosystem, leaders are now better equipped to decide how to best position their organizations for success.
Another important differentiator of top performing leaders is that they do not make decisions based solely on which option is the cheapest. They approach these decisions in terms of how much return they will get on the investment, not just the cost. More importantly, that investment decision is not purely financial. Top performing leaders also engage in a sense-making process that considers their Organizational Orientation, as well as their organization’s Process Preferences.Organizational Orientation is about the mental models that people in the organization use to get their jobs done. Are they more longitudinally focused and stick to their guns despite changes in the market, or do they actively react to every change? Do they take their mission and vision into account for every decision, or are they more concerned with day-to-day numbers? This orientation is closely related to the culture, the brand, and the example set by the organization’s leaders. A strategy that is aligned with the organization’s orientation is much more likely to be embraced by the people who have to execute it.
Process Preference is about how the people in the organization choose to execute their tasks. Do they prefer a more centralized command and control structure, or allow each unit to operate more independently? Do new ideas only come from the top, or do they look for the field to come up with new solutions and bubble those up? Regardless of which approach a particular organization prefers, good leaders stay aware of those inclinations, incorporate them into their strategies, and then leverage those to maximize the efficiency of the implementation and execution.To be honest, what was just described is an oversimplification of a very robust methodology. Each of the three data domains has several sub-levels of data that need to be collected to fully understand the organization’s ecosystem. The Organizational Orientation and Process Preference considerations are subsets of a larger sense-making process. It includes sorting through the mounds of data from the three domains to determine which particular data points need to be considered in each strategic cycle, and what kinds of analyses should be conducted. Starting at a high level like this is okay because good leaders know how to begin with the big picture, work with their teams to drill down to the details, and then make decisions based on complete information. And that is what strategy is all about.
About the author:
Jimmy Brown, Ph.D. is the author of Systems Thinking Strategy: The New Way to Understand Your Business and Drive Performance. He is also the Strategy & Change Practice Area Lead at Beacon Associates where he is responsible for change management, organizational performance, and business strategy consulting engagements. In addition to his consulting work, he is a professional speaker and adjunct professor in graduate psychology and management programs. He can be reached at firstname.lastname@example.org.