Most strategies fail, but that's no excuse for not having one. Take Intel, where clear direction has driven it to dominate. Trouble is, says Robert Heller, it's not a game many managements play.
'Strategy' has seized centre stage, not just in management lore and literature, but in the financial pages. When a 'strategy row' precipitated the departure of chief executive Duncan Lewis from Mercury Communications, the City professed itself dismayed, not just by this loss, but by the perceived strategic limbo at the parent, Cable & Wireless. Not so long ago, the attitude would have been, never mind the strategy, where's the profits?
In fact, Mercury's 'slipping profitability', to quote the Financial Times, along with its 'unfocused management' and 'lost opportunities', underlies City criticisms. But institutional investors are now strategy-conscious as never before. Never mind that most City bastions have themselves been devoid of meaningful strategy since the collapse of Big Bang diversifications. Today a respectable company is expected to have a vision of the future, a mission derived from that long-distance view, and a plan for achieving its tasks.
Ironically, Mercury had all fashionable elements in place, including a long-term programme, complete with consultants, for generating the culture change that would bind together the plans and their execution. The actual, as opposed to theoretical, situation that Lewis found at Mercury says little for the oversight exercised by the C&W board. His refusal to join that body, rather than accept collective responsibility for its strategic musings, is thus doubly explicable.
Mercury's mishaps are also unsurprising. The mortality rate of strategies probably exceeds that of mergers and acquisitions (which, of course, are always 'strategic'). Henry Mintzberg has explained irreverently why strategic planning fails. One reason is poor execution. But the basic cause is man's inability to foretell the future.
The most effective strategy carries within it the seeds of its own success. At Intel, where chief executive Andy Grove famously obeys his Law ('Only the paranoid survive'), the strategy has been to dominate by size and speed combined. Each new family of chips has appeared after a shorter interval than its predecessor. Even if rivals advance, Intel dominates simply by possessing an overwhelming and indispensable share of the available world manufacturing capacity. Now it has gone further in creating its own future. By becoming the major supplier of motherboards and chip sets, the guts of the PC, Intel is forcing customers to become mere marketers of basically Intel machines.
The alternative is to run short of the latest chips at a time when slipping behind on their incorporation is death in the marketplace. Customers perceive each new advance in microprocessors as adding important value: Intel has thus used its size, speed and market power to create what Edward de Bono calls a 'value monopoly'. More and more, the name of the strategic game is to discover a Unique Selling Proposition and to sustain this USP by continually upping the ante: giving competitors higher and higher barriers to scale.
This isn't a game that many managements play: they certainly haven't in the C&W boardroom, where strategy took the form of a watered-down metooism. But is the boardroom the correct strategic locus, anyway? The more that managers at all levels participate, according to a PIMS Associates survey, the higher the profitability. Competitive strength and productivity, the key strategic arenas, are enhanced by involving management as a whole: many minds are surely mightier than one.
Valuable insights and contributions are available far down the scale. They can be tapped by several methods, including management development. For instance, in a series of seminars, Harrogate Management Centre has been helping National Australia Group to tackle the formidable task of developing a USP in British banking. But widening the circle has a virtue beyond even the generation of bigger and better strategic thinking. The Japanese showed long ago how greatly participating improves implementation.
That's the essence of the old ringi principle in which plans get signed off at each level. When managers understand fully why courses of action have been planned, they carry out the plans more effectively and with greater commitment. But sharing the strategic process, and the cultural change which sharing demands, are an academic issue for most British boards: they don't have a strategy to share.
This embarrassing reality is emphasised by a recent Gallup survey. The pollsters asked 200 CEs and finance directors what issues they thought most important: lack of demand and increased competition topped the list. When asked what strategies they had implemented to crack these nuts, Gallup found a 'lack of clear and innovative thinking - perhaps suggesting that senior management have run out of sound creative ideas'.
Did they ever have any? It must follow that companies where strategic thought is deficient or defective at the top, and where the middle is never consulted, will be steam-rollered by the Groves of this world. Maybe you don't have to be paranoid to survive: but being strategically inert is a great way to fail.
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