When I worked with managers from middle management up to senior executives in the process of strategy development, I often found that they have problems with the terminology of strategy. There seems to be a lack of clarity about the real meaning of terms like strategy, vision, mission, plan, strengths, opportunities and so on.  Hence, a concept is used without proper understanding. A strategy that is developed on that basis is not a strategy but a compilation of thoughts and ideas labeled with some strategic terms. Not surprisingly, such a “strategy” will hardly deliver the expected results.

Ken Favaro’s article confirms this observation. He writes:

When discussing strategy, executives often invoke some version of a vision, a mission, a purpose, a plan, or a set of goals. I call these “the corporate five”. Each is important in driving execution, no doubt, but none should be mistaken for a strategy. The corporate five may help bring your strategy to life, but they do not give you a strategy to begin with.

Nevertheless, they are often mistaken for strategy—and when that happens, real damage can ensue. If the corporate five are the cart and strategy is the horse, leaders who put the cart first often end up with no horse at all.

Ken suggests that in the first step, companies need to address five more fundamental, and difficult, questions. He calls them “the strategic five”:

1. What business or businesses should you be in?
2. How do you add value to your businesses?
3. Who are the target customers for your businesses?
4. What are your value propositions to those target customers?
5. What capabilities are essential to adding value to your businesses and differentiating their value propositions?

In the reminder of his article, Ken explains what problems will arise when leaders mistake the issues related to execution for strategy and thus miss to answer the really strategic questions. He illustrates his point with IBM’s Lou Gerstner as an example for how it is done right.

I think Ken touches an important issue with this article. The terminology of strategy is well known and very popular to use. Many people give in to the temptation to improve their speeches and presentations with some strategy terms. Unfortunately, and as one of the comments to this article points out, most people have their own understanding of what these terms mean. So they talk to each other using the same words but having potentially different things in mind. The result will be more confusion than a fruitful strategic conversation.

There are 7 categories of the Thinkers50 awards now. The categories and the 2011 winners are:

• The Breakthrough Idea Award (Vijay Govindarajan)
• The Leadership Award (Marshall Goldsmith)
• The Global Village Award (Nirmalya Kumar)
• The Innovation Award (Clayton Christensen)
• The Strategy Award (W Chan Kim & Renée Mauborgne)
• The Future Thinkers Award (Lucy P. Marcus)
• The Thinkers50 Book Award (Pankaj Ghemawat)

The nomination process for the 2013 awards is described on the Thinkers50 website. Nominations are possible until 31 July 2013. There are also some criteria by which thinkers are evaluated, such as originality and practicality of ideas, impact of ideas, power to inspire, and more.

Finally, I like to recommend you the Thinkers50 Blog. In this section of the T50 website, several management thinkers present inspiring thoughts and ideas in the area of management and strategy. There are new posts about two or three times a month

So here is my vision how it should be done, how it should not be done, and what could be done between these two extremes:

How strategic measures should not be developed

In most cases, the responsibility for developing strategic measures lies with the management at corporate level and strategic business unit level. These managers normally are more than busy with other tasks and duties, and not all of them are sufficiently experienced in strategic thinking. In the worst case, they do not dedicate much time to that aspect of their job, until they are forced to by some corporate strategic planning event.

Than they virtually sit down with a blank sheet of paper (or screen) and try to come up with some more or less groundbreaking ideas. With luck, there will be a gold nugget among their findings. But chances for that are fairly rare. It is more likely that strategic measures that are developed this way are in the nature of

• An update of last year’s strategy
• Marketing initiatives
• Investment proposals
• Old ideas with an updated and re-launched packaging
• More short-term oriented initiatives

How it could be done better

It is understandable that managers do not work on strategic plans continuously. Firstly, they have other things to do. Secondly, a strategy is a medium- to long-term thing and should not be changed every few weeks.

However, business drivers, internal and external conditions change continuously. A good manager keeps at least a mental list of strategic issues that come up over time. When it comes to preparation of the strategic planning meeting, he can take the time and come back to this compilation of unfinished thoughts and ideas. He can organize structure and prioritize them and evaluate the most promising (or most pressing) ideas in more detail.

Thus he has a good basis to think about the relevant issues that really drive his business. He is more likely to come up with strategic measures that are

• More long-term orientated
• Proactive
• Focused on the most relevant drivers of change

How strategic measures would be developed in an ideal world

From a strategic planning perspective, the ideal manager has incorporated a strategic mindset into his day-to-day activities. He continuously scans his internal and external environment for developments that could potentially impact the strategy of his area of responsibility. Every new event of piece of information is instantly evaluated in a strategic context:

• Is it something that could become important or not?
• Should we keep an eye on that trend for some time?
• Does it require immediate action?
• Is it worth to do (or have somebody do) a preliminary short analysis of its potential impact?
• Does it have an impact on any short-term business decisions?
• Are any decisions we had taken before still valid with this new knowledge?

Such considerations would implicitly be part of all day-to-day decisions and of discussions with colleagues, board members, and other business partners. Thus, the manager is able to incrementally adjust his businesses strategy as part of his regular business routine.

The result is what Mintzberg calls ‘emergent strategy’: the overall strategy is still valid and unchanged. It is not intended to be changed unless it is really unavoidable. There are, however, smaller adjustments. Some aspects are abandoned since they don’t fit the expected medium- to long-term development any more. Other new aspects are incorporated to the strategy. Hence, minor strategic measures are developed all the time, as the need for them arises.

When it comes to the strategic planning meeting, such a manager is well equipped with a good overview of his businesses situation, potential development, drivers of change, and potential disruptions. On this basis he can take the time for some thoughts about the businesses long-term strategic direction. This is the time to evaluate the overall strategic foundation of the business. This is also a good occasion to develop some scenarios.

• Are we still in the right business?
• Will the way we are doing things right now still be the right way in three to five years?
• Will our value proposition still meet customers’ expectations within this timeframe?
• Should we dedicate some resources to explore some vague future developments in more detail?
• Is there any potential disruption for our industry on the way and what could we do to prepare for it?

The strategic measures that are developed that way are likely to be

• Much smaller in numbers
• Medium- to long-term orientated
• Related to long-term trends and developments
• Proactive
• Potentially leading to significant investments and changes in the businesses activities

Hence, these decisions may have an enormous impact on the future performance of the business. Thus they also bear higher risks if they are taken wrongly.

Summary

Strategic measures are not to be developed in a one-off exercise at a particular date every year. They are based on the businesses long-term vision as well as on a continuous scan of internal and external developments, driving forces and trends. Smaller strategic decisions that adjust an existing strategy but not change it entirely are more frequently. Significant, long-term orientated measures that will alter the businesses strategic direction are developed less often. Such measures should be based on a thorough strategic analysis, which is often undertaken at the occasion of an  (annual) strategic planning meeting.

A very simple thing: All coffee machines were replaced by new ones from a different brand and supplier. The lease agreement for the old coffee machines had expired and management had taken the one right decision – they changed the supplier.

You may already guess that the old machines did not produce something that people liked very much. They worked with some sort of refrigerated coffee syrup and milk syrup, which was mixed with hot water to give a coffee. The result was everything but tasty. I never met anyone in the company who actually liked this coffee.

My colleagues and I developed two different strategies to cope with this situation: Some tried to get used to the coffee. They drank it every day although they did not like it. Others experimented with different mixtures of coffee, milk, espresso and hot water to find a combination that was drinkable. Others – including me – went for substitutes such as instant coffee, tea, or no coffee at all. I even saw somebody with a good old coffee-filter and coffee-powder.

Today all this changed. We got new coffee machines that operate with real coffee-beans and real milk. We all were busy trying this new experience and were delighted. Comments like these were heard:

• “Looks like coffee, smells like coffee, tastes like coffee”
• “It is even hot!”
• “You would not believe that coffee from beans tastes better than coffee from syrup.”
• “Delicious”

My conclusion: Our management had decided to listen to its employees and to change something that was not good. It probably had cost some money, compared to the old vendor. It will most probably cost even more money, because our consumption of coffee will increase considerably. However, these are minor amounts. And they achieved something that others struggle to achieve: They made a complete workforce happy.

Despite the relevance of this bundle of constituent skills and technologies I would like to recommend your company to test, whether each and every employee and manager knows them and is able to transfer and to communicate them to your customers. I know that this might sound a little bit strange, but let us have a look at corporate practice. A research and consulting company observed the following results among Austrian retail banks. The key issue was to which extent managers and employees know the core competencies of their organization. The results are definitely surprising.

82.5 percent of managers and employees confirmed the existence of core competencies, but…

Figure: Share of respondents regarding their knowledge of core competencies

Data Source: emotion banking newsletter, May 2012 / VICTOR Global 2011

Only 48 percent of managers show a full understanding / knowledge of the companies’ competences. Among staff the share drops to 28 percent. But in particular the proportion of managers (24 percent!) that have no understanding regarding the bank’s core competencies indicate some major areas for improvements.

So what can be recommended to improve the situation (not matter whether your organization is a bank, a service based organization or a production company):

• In general it is recommended that your organization should employ internal communication structures to inform its members about the vision, the strategy, the existing and the needed competencies.
• Your organization should support regular meeting for “competence holders”.
• Your organizations should also support a continuous transfer of know how within the organization. Networking within the organization – you might employ “an internal facebook approach” becomes an important activity.
• Core competencies are not stable; hence your organization should always search for the development of new competencies.
• Your organizations should try to focus on competencies. Opposite to this: Areas in which your organizations cannot establish or maintain core competencies, represent candidates for outsourcing.
• The ability to set up and to run knowledge-networks (i.e. think about open innovation!) can be a fundament for future competencies.
• Exchange with customers and colleagues can support your “competence holders” to identify new market opportunities.

Literature and Links

*Johnson, G.; Whitting R. & Scholes, K. (2011): Exploring strategy. FT Prentice Hall. Harlow.

* Bain & Company: Core Competencies.

These are the results for the question: What would you do asap, if you were the banking management?

Data source: Handelsblatt 2012, January 2; ECG.

Of course, strategic decisions are part of corporate management. HAMBRICK and FREDRICKSON, two important strategic thinkers, (2001) argue that the strategy should be a central and integrated concept of how the business will achieve its objectives. Such a concept needs to include activities and measures; since resources are limited in most cases or most organizations, a concept needs to include decisions. Major strategic decisions will focus on financial resources (i.e. investments), corporate culture or HR related areas. LOMBRISER and ABLANALP explain that it could be possible within each step of strategy implementation to return to a previous process step (in strategic planning) or even to decide about an unclear step in advance. To implement strategic management the following set of attributes should be taken into account:

• Legal, political and social limitations
• Ethical issues
• Stakeholders’ expectations
• Values, experiences, skills and goals of managers
• Corporate culture
• Financial room for maneuver

For all these attributes the management team needs to make “long-lasting” decisions. According to JOHNSON and SCHOLES strategic decisions name four key characteristics.

• Those decisions are likely to be linked with or influence the long term direction of an organization.
• Strategic decisions are normally concerned with attempting to achieve some advantage for the organization, e.g. over the competition.
• Furthermore, strategic decisions are likely to be concerned with the scope of activities and address the question, whether the organization should concentrate on one area of activity, or should it have many? This is a fundamental issue to strategic decisions.
• The scope of activities defines the way in which managers understand the boundaries of the organization.

Hence strategic decisions are very likely to have an impact on operational decisions.

Literature and consultants provide us with many ingredients for team success, such as value of each team member, empowerment, active listening, autonomy, storytelling, team events, and celebration of success, SMART objectives, committed leadership, and many more. However, I am convinced that all these things may or may not lead to the expected outcome. Of course, it will be much more difficult to build a good team without any of these measures. But there is no guarantee for success.

To my experience, team success depends largely on the individuals involved. There is no doubt, that a good team needs members that bring a variety of skills, experiences and character traits. Thus they can take on different roles and complement each other. However, if the team is too heterogeneous, if there are too different people forced to work together, the whole team may fail. Team members need to establish at least some common ground. In my opinion they have to be willing to work together – despite any personal dislikes – and they should all find a common understanding of their goals and the ways to achieve them. This common understanding has to be more than mere lip service; every team member truly has to be willing to follow that.

If it is not possible to establish this minimum basis for co-operation, the team has little chances for success. So what to do if there is a team that is really not able to find together and deliver results? I suggest two things:

• Don’t force them anymore. Dissolve the team and find an alternative. In Germany, we have a saying: Better an end with terror than terror without an end.
• Take it as a learning experience. A failure may be a much better chance for learning than a success. The team members should have learned something, as should the one who initiated that particular.

I personally remember being once part of a “team from hell”. It was an extremely heterogeneous group of individuals with different cultural backgrounds, character traits, and professional experiences. More than that, we all had our personal agenda, knowing that the team was just a means of achieving our personal goals. We did not choose each other, but were told to work together in a team.

• After not more than half a year, the team took the first opportunity to self-dissolve. We all found new teams afterwards, in which we felt much more comfortable. Here are my lessons learned:
• Even the worst team is able to deliver better than expected results. Nevertheless, this is not an experience I want to endure for long
• I am able to work together with almost everybody on a professional basis. Besides that, I don’t necessarily have to like these people.
• I am always willing to help team members and to give support where needed. But I am not willing to cover continuous poor performance of others by taking on their workload in addition to mine.
• In a poor team, beware of those team members that loudly advocate the team and try to improve moral with a textbook-approach of teambuilding. They may be the first to run away if something better for them shows up.
• If I am really convinced that a group of people will never function as a real team, I would rather be the one who speaks out that truth loudly, than go on with this unsatisfying state for much longer.

In summary: teams can be a great thing – but not every team in every situation.

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Matthew writes that in his experience many successful products, services, processes and strategies have a few common characteristics:

• Lean features: They abandon all the clutter and unnecessary features that make products and solutions complex, difficult to understand and error-prone.
• Loose reins: Matthew advocates flatter organizational structures, self-directed and self-sufficient teams and employees, and “bossless” structures, meaning that employees will find tasks that best fit their skill-set and solve them with more expertise than their boss can have.
• Quiet minds: Here Matthew mentions the positive effects of meditation and mental brakes, which shall help to focus and to achieve creative results.

The post ends with a sentence I could not support more: “These three trends add up to a rather powerful, and appropriately simple, idea: when you remove the right things in just the right way, something good is bound to happen.”

My first thought was: Wonderful idea, but it is probably about never used in practice. However, after some thinking I realized, that I know some examples of how these trends are used (or not used) by myself. It is not that these ideas are never used in practice, but that they are all too seldom used intentionally. So here are my own experiences:

Lean features: This is an example of how this characteristic is not used. Some years ago, I worked for an industrial and automotive supplier that produced high quality and high-tech metal parts. This company was very engineering-driven and considered innovation as one primary source of their competitive advantage. For them, improving their products naturally meant putting more engineering-expertise in, adding more features, improving functionality and so on. They were very successful with this strategy, until they realized that they started to loose sales to low-tech products from China. Some of their products were simply over-engineered, whereas customers simply needed a reliable solution with lean features.

Loose reins: My current direct superior is a really good boss who has a loose rains leadership style. When I was new in his department, I entered his office and said that he should give me some tasks and projects to utilize the resource of my knowledge and experience. His answer was something like that: You already know what we do and what we don’t do. You know that many things here need improvement. I won’t give you any specific tasks. Just look around and if you find something that is of interest for you and you think you can add value to – just make it your project. With these few sentences he turned me into a satisfied and productive team member.

Quiet minds: This is again about my current boss. When I entered his department he told me that it was entirely up to me what I do at what time and in what order. And if you think you need a clear mind or a mental break, just get up and go for a walk or do whatever you feel is necessary in this situation. I won’t mind.

Update: For those who are interested, here is Matthew E. May’s book The Laws of Subtraction: 6 Simple Rules for Winning in the Age of Excess Everything