Note : An interview with BFM (with my colleague). The processes discussed here are my firm's IP.
Q : Ok, first of all, why does a company need a strategy?
A : A very fundamental but an extremely critical question really. Well, a company needs a strategy because it does not operate in a vacuum. It operates in a business environment. This environment has two sides to it; one that is predictable and one that is unpredictable. To manage these, especially the unpredictable ones, a company needs a strategy. So fundamentally, a strategy is your collective efforts of both soft and hard actions to navigate these two sides to take the company where it wants to go. If the ocean is your business environment, and the ship is your company; then strategy is your navigation plot.
Q : ‘Strategy’ is possibly the most used word in the world of business. But in essence what is ‘Strategy’?
A : Well, bear with me for a second here as I define ‘strategy’ from the abstract to the concrete. Strategy is first and foremost a set of organizational paradigms that will ensure that the company will take the needed actions to achieve operational effectiveness(profit). So what it means is that a strategy is something that is supposed to guide your actions in a way that helps you achieve your objectives. Say for example, a low cost carrier. Its strategy is to go for volume at minimal cost not high yield like full service carriers. With that strategy it will take actions like tapping into hitherto untapped markets, providing hard to refuse offers, going paperless, having fewer cabin crew, extensive use of the world wide web, landing at secondary airports and so on. So, in essence your strategy will help you get to where you want to go…be it cost efficiency, market leadership or whatever.
Now, lets say a promising manager in this low cost carrier suggests that the company now offer at least one cup of fresh juice free for each passenger. A cup of fresh juice is no big deal but this action will be decided on only one criteria .ie. will it jive with the strategy and what is the strategy : High volume, minimal cost. That's it! Will adding a cup of free orange juice for each passenger achieve that? The answer to that will determine whether that particular action is go or no go.
Q : So, strategy should not be equated with actions?
A : No and that is a huge problem because it is so very easy to confuse both. Often we find ourselves busy taking actions, even seemingly creative and proactive ones, thinking that this is the strategy. They are not. Actions by themselves are of no use until and unless they help you to realize your strategies. You can only have that many strategies but you can take an infinite number actions to fulfill that strategy. And, sometimes a company makes it known to the market of its strategy and yet it takes actions that are contrary to that strategy - at least in the perception of the market. I am not saying strategy can’t change. They can but whatever it is your actions must help you achieve your strategies.
Q : Can you provide an example to illustrate that?
A : Lets say you run a coffee shop and your strategy is to position your little quaint shop as a place for middle aged businessmen and executives have their cuppa while getting their work done in a place that will bring back sweet memories of the little coffee shops of the old days. You promote your shop as such and yet when your targeted customers enters your shop, he or she is greeted by a worker who can’t speak a word of any of the Malaysian languages. Your menu is more western. Your wifi has moods every now and then. Will you close shop? Probably not but in the long run, you don’t have anything to create loyalty. Worst still when a competitor learns how to execute that strategy better than you.
Q : What exactly goes into a strategy or in other words what ingredients make a good or effective strategy?
A : Well, let me first put a caveat here. By it self all strategies are good strategies. They may be imperfect but good nevertheless as they are intended for improvements of some kind whether increase in profit, market share, customer satisfaction, and so on. What makes it effective or otherwise is in the implementation or execution.
Anyway, a more pertinent question is what should a strategy address? A good strategy should address 3 things : 1. Structure, Roles & Capabilities; 2. Leadership; 3. People, Systems & Processes. When your business strategy addresses these 3 areas, you then have high Employee Engagement, which in turn produces Customer Satisfaction and which in turn gives you optimum Organisational Performance i.e profit.
Q : Sounds logical and seemingly easy. Yet so many business strategy fail. Why is that?
A : It is logical but many organizations have this illogical believe that they can focus on one or maybe 2 of the 3 areas I mentioned earlier and that should be enough to take them across. No. You can’t be world class in your Leadership development strategies and hope for your People, Systems and Processes to sort it self out. No. You need to plan and execute all three effectively. Your strategies are dependent on all 3 areas and together they will give you your competitive advantage. In that sense, some of our GLCs are doing well now because they have realized that they can’t focus only on customer satisfaction without having a robust people systems or that they can’t achieve profit by merely focusing on cost and not employee engagement.
Then also, sometimes a strategy may not be well formulated with its end results not precisely determined. What is your strategy intended to do? In other words, where do you want to go with your strategy – Profit, retention, share price, efficiency, cost reduction, quality, market share, culture change? You also can’t bite off more than you can chew. You can only be good in one or two things. Have strategies to make you the best in these one or two things.
Let share some data on this. In 2005, the Wharton School Publishing reported that companies only achieved 63% of the expected results from their strategic plans. In 2007, MIT Sloan Management Review shows that fewer than 45% of board of directors believe that their company is capturing strategic objectives. Interestingly in 1999, Fortune magazine estimated that 70% of CEOs fail not because of bad strategy but because of poor execution. In 2005, the Harvard Business Review said that 2/3 of the HR functions are not aligned to the business strategy and 95% of the employees don’t understand what the strategy is all about. So, is it a wonder that according to a Towers Perrin global study in 2007 only 21% of employees are fully engaged with their companies and their jobs?
Q : Having a good strategy is one thing, but executing it is another! What can leaders do to ensure their strategies are executed effectively.
A : Well, they have to ask 3 critical questions : 1. What are the most important levers of strategy execution for me currently? 2. How can we improve our ability to deliver on our strategic commitments? 3. In what way we can leverage our current talents to achieve our strategic objectives?
Q : I have always wondered how consulting companies like yourself can help a business develop its strategy. I mean, its their business, not yours right?
A : That's an insightful question. We at Right Management of course will take pains to understand your business through our research and our interactions and discussions with you. That's gives us an understanding of who you are and where you want to head. But more importantly, what we can do for you is to ensure that you go through a systematic thinking and planning process in developing your strategy. We will also ensure that you are considering all the factors that you need to consider and sometimes we may also help you find the answers you need or identify the gaps you need to know about as you plan your strategy.
Q : Typically, what would be the recommended process for an effective strategy development?
A : 1. Discovery, 2. Executive Alignment, 3. Strategy Design & Planning, 4. Strategy Implementation, 5. Measure & Review
Q : Any last words on how to achieve organizational effectiveness through effective strategies?
A : Well, as we have been discussing in the last 4 sessions with you, all businesses have been impacted by the financial and economic crisis. To manage this, we have had to down size and restructure our business. So, while we begin to motivate and realign our existing talent and resources, we may be in a position to re-visit our business strategy moving forward. Take this opportunity to do the right things for your business. You owe that much to your people and your shareholders.
Especially for SMEs, our message is that pay attention to all facets of your strategy. I reckon that the business environment for SMEs will get tougher in the coming years. They need to strategize and the need to be nimble enough to adapt. A good and actionable strategic framework should help them do that.
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