Corporate strategy has become the bailiwick of consultants and business analysts, so much so that it is no longer a top-of-mind responsibility for many senior executives. In this article by Carmen Nobel, which first appeared on the Harvard Business School Working Knowledge website, HBS Professor Cynthia A. Montgomery explains why it’s important for CEOs to become strategists again.
“What are the first three words that come to mind when you hear the word ‘strategy’?”
That’s the free-association exercise Cynthia A. Montgomery gives to mid-career business leaders in her Executive Education classes at Harvard Business School. Seasoned executives, they respond with “plan,” “vision,” “direction,” “focus,” “advantage.” But they rarely say “leader,” “CEO,” or “leadership.”
To Montgomery, the Timken Professor of Business Administration, this is indicative of a disturbing trend.
“We’ve lost sight of where strategies come from and the distinctive role leaders play in the process,” she says. In her new book, The Strategist: Be the Leader Your Business Needs, Montgomery discusses when that disconnect happened, why it’s a problem today, and how leaders can turn themselves back into strategists.
(Read an excerpt from The Strategist.)
According to Montgomery, the divorce of strategy and leadership was an inadvertent result of academic research that started to take hold in the 1980s and ’90s. The work brought much-needed economic thinking to strategy’s underpinnings. It armed legions of MBAs and strategy consultants with frameworks and techniques to help managers analyze their industries and position their firms for competitive advantage. It also made it very easy for leaders to think of strategy solely as an analytical exercise. “If we’re being honest, I was part of the problem,” Montgomery says.
Montgomery and fellow HBS professor Michael Porter—who is considered to be the father of the modern strategy field—were among the first researchers who began to study strategy through a rigorous, scientific process, using large empirical samples to look at regularities across industries and firms. “We were proud of it!” Montgomery says. “And rightly so: the work yielded a number of well-grounded insights that have had a powerful impact on practice. But the benefits have not come without costs.”
Montgomery maintains that strategy has been narrowed to a competitive game plan, separate from a firm’s larger sense of purpose. This has led to the eclipse of the leader’s unique role as arbiter and steward of strategy. The exaggerated emphasis on sustainable competitive advantage has drawn attention away from the fact that strategy must be a dynamic tool for guiding the development of a company over time.
“Strategy has become more about formulation than implementation, and more about getting the analysis right at the outset than living with a strategy over time,” Montgomery says. “As a consequence, it has less to do with leadership than ever before.”
Montgomery explains that leading strategy requires confronting four questions: What does my organization bring to the world? Does that difference matter? Is something about it scarce and difficult to imitate? Are we doing today what we need to do in order to matter tomorrow? Being a strategist means living these questions, she says.
For a leader, becoming a strategist starts with getting clear on why, whether, and to whom your company matters. While that may sound obvious at face value, it’s something that regularly stymies the veteran leaders in Montgomery’s executive classes. “We’ll be talking about Nike or Apple, and the participants will be praising the authenticity of the company and the clarity of its strategy,” she says. “And then I’ll ask a participant at random, ‘Do you have that clarity in your company?’ And there’s always a pause. That pause gives them away.”
To illustrate the importance of clear purpose, The Strategist touts Swedish home goods retailer IKEA, founded in 1943 by Ingvar Kamprad when he was 17-years-old. From its early days, the book explains, IKEA set out to create “a better everyday life for the many.” The retailer did this by addressing an unmet market need, offering customers an extensive range of practical, well-designed furnishings at low prices. This driving purpose steered IKEA to succeed not just on low prices but also with a singular customer experience that no other retailer has yet managed to duplicate.
“IKEA has made very clear choices about who they will be and to whom they will matter, and why,”Montgomery says.
Clarity of purpose behooves corporations and nonprofits alike, Montgomery adds. “Look at Doctors Without Borders. If you go to the website, you’ll see incredible clarity about what they do and why they do it. They won the Nobel Peace Prize in 1999, and they didn’t get it for being murky about who they are and why they matter.”
That said, a compelling purpose is just the beginning of a strategy. “It gives you the right to play, and puts you in the game,” the book states. But at the root it’s only an idea.
Strategists also must lead the charge in creating organizations that can deliver on their intentions. That means building business models with mutually reinforcing parts. Rich in organizational detail, and anchored on purpose, such systems of value creation “make strategy the animating force in a company,” says Montgomery. “They’re the crucial link between lofty ideas and action.”
To visualize such a system, Montgomery recommends the time-honored “strategy wheel,” in which purpose is the hub and the supporting factors are the spokes. Drawing from an HBS case study, she shows how Gucci essentially used such an approach to support a purpose–”fashion-forward, high quality, good value”–that saved it from failure in the 1990s.
Who is a strategist?
Montgomery equally stresses the importance of recognizing how a strategist lives and leads. To that end, in the book she cites not only economic gurus, such as Joseph Schumpeter, but also philosopher Jean-Paul Sartre, military theorist Carl von Clausewitz, and poet Mary Oliver, who wrote, “Tell me, what is it you plan to do/with your one wild and precious life?”
Incorporating the role of the strategist into one’s identity is important because leading strategy is not so much a task as it is a never-ending quest. “For most companies, a long-run sustainable competitive advantage-the holy grail of strategy-is a dangerous mirage,” Montgomery warns. “The longer you can keep an advantage vibrant, the better. But any advantage is better thought of as part of a bigger story, one frame in a motion picture.”
Although a company may change what it makes, the services it provides, the markets it serves, and even its core competencies, its continued existence depends on finding and continuing to find a compelling reason for it to exist. Shepherding this never-ending process, being the steward of a living strategy, is the defining responsibility of a leader.
And while her goal is to embolden top leaders to embrace the role of strategist, Montgomery believes it’s important for employees at all levels of an organization to start thinking like strategists, too.
“What [people] do, and why they do it, should be driven by strategy,” she says. “If the clarity isn’t there, they should push for it and think more actively about how they can be communicating upward. Learning to be a strategist doesn’t happen overnight. It’s like a muscle that you have to flex. Don’t wait to see if you might someday get the chance to drive strategy. It’s a skill and a disposition that take time to hone.”
Question for leaders
You’re at the podium addressing a group of new recruits. One of them asks about the strategy of the business. You have two minutes to explain. Could you do it? Share your thoughts in the comment section below.
Wednesday, 23 January 2013
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