The following scene took place in a crowded meeting room in London a few weeks ago. Around the room sat concerned, committed middle and senior managers. We were there to talk about the strategic challenges that each of us was facing back at base. One by one, people spoke up. 'Well, of course we're looking at all this at the moment as part of our strategic review...' 'We're going away for two days next month to discuss this ahead of a major restructuring exercise...' 'There is a live debate internally right now about which of our activities we should be continuing with and which we should be stopping. The board hasn't said anything to us yet, though...' 'We're just not clear how we should approach this going forward, but the directors are coming back with a plan later in the year...'
On the one hand, you could find this kind of talk mildly encouraging. Here were some serious, hard-working people acknowledging that they did not have all the answers, admitting that things had to change and looking forward to taking some positive action. And yet, how glum everybody looked. How flat. It was as though the phrase 'strategic review' was code for '12 hours of root canal work'. Everyone knew they had a lot of important thinking to do. Everyone was dreading it.
This is not the way it is supposed to be with strategy. Yes, it's a daunting word (from the Greek, strategos, meaning a general - ie, it's real boss-class stuff). But for all you students of management out there, strategy is the big league. This is what Harvard Business School's Michael Porter has been going on about all these years - the 'five forces', competitive advantage and so on. It's what Gary Hamel and Henry Mintzberg and Joseph L Bower and... well, all of them, really, have been working on. It should be exciting, thrilling even. As Mintzberg has said: 'Strategy should not merely differentiate, it should also inspire.'
So why all the long faces at the discussion a few weeks back? Because - whether through fear, or lack of confidence, or bitter experience - some managers find strategy too awful to contemplate. It has become an arid, joyless affair, predictably grim and predictably disappointing.
Research bears this subjective impression out. An article in the Harvard Business Review in September 2004, featuring data gathered by the Marakon consultancy, suggested that as many as 90% of strategies fail to deliver their intended results, and 70% fail at execution, perhaps because as much as 95% of the workforce say that they do not understand their company's strategy.
It is depressing that in spite of all the literature and all the intensive work carried out by prestigious strategy firms, the outcome has been so patchy. And surprising, also, that no coherent challenge has been issued to the conventional yet unsatisfactory old ways of developing strategy.
But now there is something new. A London-based, 'marketing-led' (its words) strategy consultancy called Cognosis has done something rare and valuable: it has had an original thought.
Bringing together years of experience in FMCG markets - in particular, the drinks industry - the consultancy has asked some good questions: Why is strategy handled in such a narrow and unproductive way? Wouldn't a more effective approach be to devise strategies that appeal to both heart and head, rather than rehashing the coldly rational strategies that emerge from a conventional strategy-building process? Is it not time to give 'emotionally intelligent strategy' a try?
Cognosis believes that it is not enough for a strategy to be rationally and logically 'right'. Says Richard Brown, the firm's managing partner: 'The best strategies have "emotional edge": they engage, excite and inspire the people who must deliver them. They achieve better results.'
Over the past two years, the firm has invested in a large programme of research, called, naturally, Emotional Edge, to test its beliefs. The first piece of research was carried out in the autumn of 2006, among 1,600 top executives and senior and middle managers from a wide range of UK organisations, one of the biggest studies of strategy-making carried out in larger UK organisations. The research found that emotion plays a vital role in strategy and strategy-making. Most strategies fail to excite and inspire, and there is deep dissatisfaction with current strategy-making processes. An integrated 'whole-minded approach' emerged as the most successful one to take: it won 'super-engagement' with both corporate strategy and the strategy-making process.
Super-engagement flows from collaboration and creativity and is fuelled by certain key practices. These move managers up a 'ladder of belief', which establishes exceptionally high commitment to strategy. This super-engagement is important, because when it comes to the business of strategy and strategy-making, a huge gap exists between top executives and senior and middle managers.
Finally, research revealed four distinct strategy styles - rational, practical, collaborative and creative - each with its own strengths and limitations. A combined, whole-minded approach to strategy and strategy-making that incorporates all four styles is most effective in creating a super-engaging strategy.
Fine, but what does this all mean in practical terms? Strategy is going wrong for a number of reasons. First, because corporate leaders think that strategy is their responsibility alone, as if they were still being guided by the literal Greek meaning of the word. The rest of the organisation doesn't get a look-in until it's too late.
Consider this 'management tip of the day', which was sent out in September by the Harvard Business Review to its subscribers: 'Turn top-level strategy into unit-level action.' 'A change in your company's strategy,' it said, 'should have an impact on all employees. How the change will affect day-to-day behaviour and longer-term priorities is relatively easy to discern at the top. Deeper into the company, it's often more difficult to determine.
'To convert your firm's strategy into an actionable agenda for your unit, don't just parrot the strategy. Translate it in a way that brings it to life and makes it real for them. For example, if the new strategy emphasises improving new products' success rate, lay out how each and every person in your unit can best support that effort. And invite subordinates' input; you'll win their commitment to the strategy and to its execution.'
Close, but no cigar. This all feels like a rather deadly way of bringing something to life. Telling 'subordinates' what to do is precisely the wrong way to go.
But we know why suggestions like this get made. They are conceived in isolation from the rest of the business. What could be more sterile than senior managers disappearing for a few days to go off and work on their own, and then coming back to issue the tablets of stone to a grateful workforce? This approach is doomed to fail.
Bosses are either in denial, or they just haven't thought hard enough about this. Who is going to carry out this brilliant strategy? The staff. Does it matter, therefore, if they cannot understand or cannot believe in the strategy you present to them? Of course it does. And how do you win that understanding and belief? By involving them.
This is how you can get staff to ascend that 'ladder of belief' referred to earlier. Cognosis' research found that this ladder is in fact 'a buy-in hierarchy' - like the illuminated column on Blue Peter's old annual appeal: the higher up you go, the better it is. And belief stands at the top, while mere factual understanding is at the bottom.
Crucially, this is a hearts-and-minds process. In fact, as far as winning commitment is concerned, hearts seem to be rather more important than minds. 'Belief catalyses action, driving performance and confidence,' the researchers found. 'An ounce of belief is worth a tonne of understanding, and emphasising understanding without building belief can actually damage performance and confidence.'
One convinced exponent of emotionally intelligent strategy is Stuart Fletcher, president of the international division of Diageo, the global drinks group. The views he expresses here are personal, not corporate, but he has seen at first hand how making strategy work depends on the enthusiastic engagement of colleagues at all levels.
'Developing breakthrough strategies means connecting with your organisation's purpose,' he says, 'answering the question: "What are we really about?" We "catalyse" this sort of discussion throughout the organisation, to establish a deep personal connection with our strategy... We emphasise the importance of vision and systematically challenge our major assumptions, to ensure they don't restrict our thinking. It's exciting when the strategy really comes to life. You see it happening and delivering results.'
Fletcher says his approach to strategy development is 'highly collaborative and people-oriented, because it starts by considering our purpose... it's not just rational and analytic like conventional planning approaches.
'We have a huge engagement process, a combination of large set-piece meetings and smaller team meetings. We use these to bring the strategy to life for people throughout the business, to explore what the strategy means for each individual. We try to flush out all the questions and concerns, and deal with them authentically. It's vital that people at the coalface understand and commit to the strategy. This happens for us, because of the sorts of discussion our strategy process triggers.'
Sounds great. But what has this approach delivered in practice? 'There's a very clear link between the quality of our strategy process and our delivery of results,' Fletcher says. 'Our performance has been great recently and this all flows directly from the engaging strategy process. But our process doesn't just emphasise financial goals.
'The positive shifts in our customer relationships are a direct consequence of the new thinking that's emerged from a more emotionally engaging strategy process.'
His conclusions? 'At a basic level, emotional engagement is about making a strategy personal,' he explains. 'It's about seeing the connection between what I do and delivering something larger and more meaningful, the overall result. An emotionally intelligent strategy is about people getting fired up by the thought that the world will somehow be a better place as a result of what they're doing, playing their part in delivering the strategy. If a strategy engages people emotionally, there's an authentic commitment to making it happen.'
Cognosis is still only about halfway through its planned programme of research. A second tranche, conducted last autumn, confirmed the extent to which leadership teams were failing to take their organisations with them.
The problems here were revealed as being in part cultural: organisations are suffering a strategy-culture mismatch; most cultures don't contribute to effective strategy-making or strategy execution, the research findings suggest.
There is a lot more work to be done. 'We're tired of seeing clients saddled with strategies that are dead, dull and devoid of reality,' says Brown at Cognosis, 'strategies that don't differentiate, drive action or deliver growth.'
But don't clients think that now is the time to go ultra-rational and hard-headed about strategy? Apparently not. A well-attended client breakfast at the end of September was full of corporates wanting to know more, with some committing to more there and then.
I don't want to get all over-emotional about this. But if you don't start devising more emotionally intelligent strategy, it could all end in tears.
INTER-CONTINENTAL HOTELS GROUP (IHG)
- The challenge
Customer loyalty is a key issue for IHG, being a significant value driver for the company. But to make the loyalty strategy work, it was necessary to have a single internal view as to the programme's ambition and role, which meant resolving several different - and individually reasonable - strategic alternatives when viewed from a property, brand or company perspective.
- What it did
IHG identified the different internal perspectives, assessed the potential 'size of prize' of each, and crucially aligned stakeholders behind a single strategy for growth. Key to the project's success was the use of emotionally intelligent strategy principles: aligning and engaging key internal stakeholders across critical project milestones, and ensuring that their views were integrated when the strategy was built. The result was a solution that had collective buy-in, commitment and belief across all stakeholders. 'Ensuring stakeholders' engagement and buy-in was absolutely critical to the project's success,' says Brad May, IHG loyalty director. 'Delivery has to be underpinned by belief.'
As a result, the programme's vision, strategic goals and key principles were agreed, aligning key internal stakeholders and securing resources for faster growth. The projected future worth of this project, if realised, will result in a substantial increase in revenue per guest and value for the company.
WILLIAM GRANT & SONS - WHISKY-MAKER
- The challenge
The newly appointed managing director of the European region of William Grant & Sons wanted to rethink the strategy to speed up growth in his major markets. The executive team was new and had no established ways of working. The MD knew that his 'stretch growth' targets would be especially challenging for the team, as they were aiming to beat the company's existing three-to-five-year plan.
- What it did
A series of highly interactive workshops facilitated by Cognosis was held over a three-month period. Workshop input was based on a mix of rational, fact-based analysis, managers' views and opinions from 'depth research', and psychological profiling of individual and team-thinking styles. Team-building and creativity were explicitly part of the strategy-development process.
The William Grant & Sons group bonded quickly into a team and developed an ambitious strategy to deliver stretching growth targets. They achieved clarity, consensus and commitment around the strategy. They worked effectively as a team to communicate the new strategy within the wider organisation, aligning the key internal stakeholders via internal 'service' contracts. They extended the process into other stakeholder groups and in-market business units, releasing energy and enthusiasm for the new plans. The strategy that resulted gained rapid and unanimous board approval. The executive subsequently adopted the process pioneered in Europe for its five-year strategy-development process worldwide.