Thursday, June 27, 2013

Strategy: From Formation, Implementation to drawing analogies

Strategy is just the initial step of embarking on a journey which is lot more complex and unpredictable as compared to its start. This analogy can be better realized by analyzing what basic parameters define the strategy building process. It is defined by the geography of the market aka the road, the core capabilities aka the strength of the mode of travel, the external environment/competitors aka the roadblocks, and eventually the conquest to satisfy the vision aka reaching the destination.

A good strategy comprises of three parts: Objective, Scope and Advantage, and its formulation succeeds the established mission and vision statements of an organization. Though very commonly and interchangeably used, words like mission, vision and objective vary in their fundamental meanings. Mission is a broad, more humble statement defining the motive behind functioning in the industry. For example, one such example for companies operating in the financial sector is, “help customers meet their corporate financing and risk management needs.” Vision, on the other hand might be specific to an organization and can be quoted as, “to be the market leader in management of hedge funds for corporate clients”. Mission and vision statements are universally interpreted, by including the market, competitors, and consumers in the ecosystem and are valid throughout a company’s course of operations, that is, they are never outdated. Objective for a strategic initiative can be better described as say, “double the market share of the organization in a span of 2 years”.

Let’s now analyze and discuss the scope of the strategy statements. Scope typically defines the landscape; the geographies addressed, the markets targeted, and vertical integration. Scope for a financial institution can be, say retail investors, institutional investor or high net worth individuals. This restricts the operating market and helps define the core capabilities that the organization must possess to succeed in that market. This helps the employee marketing teams to focus on the appropriate competencies to highlight, the sales team to make apt decisions about whether to deal in cost-driven or price driven sales deals and subject matter experts to map their expertise into client profits. It is through this process that the clarity is achieved in formulation of vision, which helps the management and the employees alike, to answer David J. Collis and Michael G. Rukstad’s question in the Harvard Review asking “Can you say what your strategy is?”

A successful implementation of strategy is linked with clearly defining the decision owners, facilitating swift information flow at all levels of hierarchy, appropriate organizational structure, and motivators. To discuss the significance of decision owners, I will like to draw a parallel between this accountability for decisions and the lack of it witnessed in the downfall of Enron in 2002. Investigation of reasons behind Enron’s bankruptcy erupted in clues towards material misrepresented financial statements, for which there were no owners within the organization. The CFO denied shouldering the responsibility of this fraud by claiming he was unknown of this activity, leaving no decision owners. This later led to establishment of Sarbanes Oxley Act in financial accounting world, which now mandates CEO/CFO to certify the authenticity of these financial statements. So what this means is that a decision or initiative succeeds only when it has an owner driving it, and a passionate team following and helping to shape its future trajectory.

All being said, it is evident that strategy demands a careful analysis of all such parameters to ensure that is well-representative, clearly communicated, easily understood and diligently followed within the organization. Do you think your company supports such a strategy? 

1. Can you say what your strategy is?, by David J.Collis and Michael G. Rukstad, Harvard Business Review.
2. The Secrets to successful strategy execution, by Gary L. Neilson, Karla L. Martin, and Elizabeth Powers, Harvard Business Review.
3. Strategy as Simple Rules, by Kathleen M. Eisenhardt and Donald N. Sull

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