Wednesday, March 23, 2016

Improving Internal Strategy Making Processes at Organizations

This week’s readings speak to the importance of developing coherent strategy management within organizations. Both the HBR and MIT Sloan Review articles highlight how senior leadership teams routinely misunderstand and mishandle this process. At best, this wastes time and at worst, it puts a company at a competitive disadvantage among industry players.
From my work experience, substandard strategy approaches resulted from misalignment in executive opinion re: what strategy is and what the process of developing it should look like. This uncertainty in turn facilitated a process set up to fail from the outset. In a past workplace, I (several times) witnessed a senior decision-maker vaguely outsource the job of coming up with novel ideas and growth opportunities to different middle managers. With little direction or articulation of expectations, the resulting recommendations routinely ended up buried in a slide deck and glossed over at the next meeting.  Also, since his subordinates knew their superior was risk-averse (i.e., saw any deviation from standard procedure as risky and expensive), ideas tended to stay in the safe zone. In this context, strategy did devolve into the much maligned “tribal ritual” or occasional “dog and pony show” at this organization, as Kaplan and Beinhocker identify.
The fact is, executives hold different opinions about the necessity and optimal process of strategy-making, depending on a whole slew of factors like industry, personal background, and experience. Some leaders view strategy as an organically occurring thing that happens alongside or as a product of ongoing operational activity. Others think they already have a stable market position and see little value to allotting more executive time and resources to in-depth discussions.  In the “Your Strategy Needs a Strategy” article, Reeves et al. discuss a survey distributed to leaders where approximately 90% of the respondents report developing strategic plans on an annual basis (regardless of the pace of change in their industry) and 70% of the respondents value accuracy over speed of decisions. My hunch is that most of these respondents have a MUCH different perspective from the authors on what constitutes optimizing their company’s market position (and also what constitutes effective strategy-making in their unique micro-environment).
Separately, I also like the acknowledgement (in the “Your Strategy Needs A Strategy” article) that senior managers can limit themselves in viewing strategy solely through a business school case study lens (i.e., focusing on finding one right answer vs. thinking outside of the box). This point is well-taken and something that I have suspected to be a limiting factor for many managers (including some of the MBAs in my family).
What both articles do right is to highlight that effective strategy-making means really understanding the organization’s current status (harder than it seems) and where it is striving to go. This demands a great deal of self-knowledge, tact, novelty, and clarity of expectations. It goes far beyond a half-hearted stab at the classical strategy style. In other words, knowing your business and your people and your context facilitates superior strategy-making processes than do attempts to accurately forecast numbers in the future.

Sources:
1. Sarah Kaplan and Eric D. Beinhocker. “The Real Value of Strategic Planning.” MIT Sloan Management Review. Winter 2003.
2. Martin Reeves, Claire Love, and Philipp Tillmanns. Your Strategy Needs a Strategy.” HBR. September 2012 Issue.

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