The first step we normally start with to define or consolidate the strategy of a Client is to determine to what extent the company follows the model:
rather than the model:
This step would seem relatively simple, as all Companies should naturally steer towards the latter model. But in reality, despite what a Company’s mission statement may claim, we have seen that this is not always the case, and the results of this first step always come as a big surprise.
In essence, with this first, simple step, we highlight elements which may be extremely useful for reorganisation, even in larger organized Companies.
For instance, marketing is far too often interpreted as the company department dedicated primarily to promoting the products and services offered (the final part of the Design, Produce, Distribute model).
And even where there is an organised Marketing Department, products are often driven by developments from the company’s technical division rather than by inspired foresight by top management. These may even be winning, successful ideas, but in many cases, a lack of an organised “market analysis” makes the commercial implementation of these brilliant ideas ineffective.
Years of short-term operational plans and goals have impoverished the process that generates and consolidates strategy.
In certain cases, even in major companies, strategic thought has been labelled a pointless waste of time. This is perhaps a legacy of the double-digit economic growth of the 1990s and 2000s, when thinking was considered sometimes much less important than serving the market quickly and effectively.
But it is fascinating to see how, throughout history, strategy has always played a key role. Since antiquity, monarchs have always competed with one another to keep the best strategists in their court: the strategist helped the ruler decide the right military, economic and social manoeuvres and advised on the alliances and sustainable paths to pursue to ensure the prosperity of the nation.
We have seen by how much companies change when their strategy is clear and shared throughout the organisation, and how the clarity in the choices of top management makes processes and development faster. This is why we help our Clients define their strategy before we move onto actuation.
"Having a solid strategy is fundamental,
but it is not a guarantee of succeeding – indeed, in 15 years of research,
Kaplan and Norton found that only 10% to 40%
of the companies studied achieved success."
Analysing businesses that have attained success through an effective strategy, it can be seen that all these companies had a model that not only communicates the corporate strategy, but also ensures that is comprehended throughout the entire organisation.
Here too, our experience has shown us that years of operational plans – which are often specific for divisions and/or departments – have significantly eroded the synchronicity of action between the company’s different departments.
One of the first analyses we normally conduct at the start of our activities for a Client company is to take a "vertical core sample” through the organisation itself, to evaluate how well the corporate strategy is understood. During this analysis, in which a sample group of management personnel representing all the departments in the company is asked the simple question “can you describe your company’s strategy?”, all sorts of answers are received, and it is far from unusual for only 10 to 15% of these answers to actually be coherent with the strategy defined by top management.
But as low as they are, these figures offer some encouragement and prove that at least some progress has been made since the studies conducted by Robert Kaplan and David Norton, which found that up to 95% of management personnel did not know or understand their company’s strategy.
Often, the shortcoming is higher up in the organisation, and the strategy has not been clearly formalised – but equally often, even with clear, formalised ideas, there are substantial discrepancies in how the strategy defined by the top executives of the company is interpreted by management staff.
Of all companies fail to realize their strategic ambitions(Zook & Allen)
Of a company’s employees are unaware of, or do not understand, its strategy(Kaplan & Norton)
Of executive leadership teams spend less than one hour per month reviewing their strategy.(Kaplan & Norton)
Of management decisions are made without ever considering an alternative.(Lippitt)
Of organizations do not link their budgets to strategic priorities.(Kaplan & Norton)
Of the potential financial performance of most strategies is lost.(Mankins & Steele)
Of companies make it a regular practice to track business results against the performance forecasts of its prior year’s strategic plans.(Mankins & Steele)
It is therefore clear that a great deal of effort must be focused on making sure that the strategy is understood throughout the organisation, and that each department is fully aware of its role in the overall design of the company.
This is anything but a simple task, and often has a better chance of success if coordinated from outside the company.