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How Important is Corporate Strategy Evaluation?


by Bob McCulloch

People gathered around boadroom table

“The king is dead. Long live the king. Strategic planning is dead. The new king is execution and flexibility.” —Bill Conerly, Forbes

This statement begs the question, “execution and flexibility” of what, if not a plan? In The Future Executive, Harlan Cleveland writes that strategy is “improvisation on a general sense of direction.” If an organization is going to improvise, to flex, it needs a base against which to improvise. Strategy is not a rigid—or dead—monarch; it’s a direction, a waypoint that serves both to keep an organization on track, and allows it to detour. Revisiting strategy is a way of re-establishing and resetting this waypoint.

Opportunities to Revisit Strategy

A number of years ago, a chemical company found itself dealing with a major—fortuitous—change. It was heavily involved in resins. The price of resins increased by a factor of 10 within about 18 months, and the $35 million organization became a $250 million organization virtually overnight.

Suddenly “burdened” with an enormous amount of cash, this would have been an opportune time to sit down and ask: “What are we going to do with these riches? Invest, save, buy new equipment, hire great minds?”

Interestingly, and unfortunately, the company didn’t alter its corporate strategy in a way that moved the organization forward. Such a stance can leave a company cash rich and strategy poor, which ultimately puts it in an untenable situation.

In what other situations is a re-examination of strategy a sound idea?

  • Massive discontinuity in the business environment. For example, when oil doubled in price, it sent a number of people back to the drawing boards because they were so dependent on oil.
  • Major changes in funding policies.
  • Disruptive technology introduced to the marketplace.
  • The original mandate is outdated and irrelevant.
  • A new leader or member of senior management is appointed.

These events could trigger a major revisit of corporate strategy. What then? After a new or revised strategy is in place, it is beneficial to hold quarterly learning updates and a more extensive annual review.

Planning for—Not Predicting—the Future

Let’s back up a minute. People often invoke the strategy-is-dead mantra, saying it is impossible to plan five, three or even one year ahead, because no one can know—or even reasonably predict—the future in this tumultuous climate. Who, they say, can foretell the introduction of a disruptive, game-changing technology or a major global event?

Is that really the case?

Consider this: a number of years ago, I consulted with a Canadian company that was affiliated with an American company. The U.S. company was thinking of purchasing the Canadian company and making it a wholly owned subsidiary.

Management went catatonic, paralyzed by an unknown future. I asked a few questions, and it turned out that, regardless of whether the American company bought them, a good two-thirds of the business would not change.

Why not set the third of the business that may change into a risk area and continue to go ahead and make strategic changes to the two-thirds that was going to be stable? This way, there would be a plan against which to improvise.

‘Strategy is good only until first contact with the enemy’

Yes, it is true that we can’t know the future. It doesn’t necessarily follow that we can’t plan for it or for a number of likely scenarios. Another definition of strategy comes from Prussian general and military theorist Carl von Clausewitz: “Strategy is good only until first contact with the enemy.”

In other words, things are going to change. Any choice we make now is directional at best. The alternative is remaining directionless, aimless, paralyzed by the future.

Because we can’t “know” and can only plan for different scenarios, a formal review cycle is imperative. The senior management team can gather quarterly for a half a day and say, ‘OK, what did we learn over the last 90 days about this strategy?’

It’s essential that it doesn’t come off like a standard management or sales meeting. It isn’t about hitting or missing targets; it’s about valuing people as contributors and growing in a positive direction. What did we learn? What will we, as an organization, do differently over the next period? What are the next steps? A more extensive annual review process can solidify learning and guide planning for the next year.

A strategic plan should not negate the possibility for alternative approaches or flexibility; in fact, a good plan makes it possible to deviate, to detour, without losing sight of the mission or mandate. Ultimately, revisiting corporate strategy is much more than a learning exercise; it is the key to surviving and thriving as an organization.


  

 

 
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