By Romulo Pinheiro, FALCONI’s partner
There is an increasing temptation among Brazilian companies to apply a short-term focus within an unstable world; however, this is gigantic mistake, which must be corrected through the application of a three-step process.
In the early 1960s, the ideas expressed by a Harvard professor brought one of the most significant mindset changes to the world of organizational management. In his book, Strategy & Structure, Alfred D. Chandler proposed that corporate structures should be at the service of a goal and a larger long-term purpose, which he called strategy.
According to his research, the growth of the largest US corporations was linked to a process of first choosing the alternatives, according to corporate resources and skills, and then creating an organizational structure that would lead the company towards the future. His most faithful follower, Michael Porter, also a Harvard professor, deepened Chandler’s studies and took them even further.
The adoption of a military metaphor – strategos, the art of commander – originated a new field of study and new management tools to help companies formulate their “strategy” as efficiently as possible.
However, something got lost in this process. “Strategy” became a magical word in the corporate environment; the adjective “strategic” came to be used to add glamour to any given operational initiatives. The “art of commander”, the skill to make long-term choices and execute them, was forgotten in a drawer somewhere.
The consequence all corporate strategies began to fall into discredit. It became commonplace to hear high-ranking executives say that “in January all the plans are going to be shelved and we are going to work” or line managers saying that “here on the frontlines, things are different”. In the 1990s, Henry Mintzberg, in his book titled The Rise and Fall of Strategic Planning, criticized the confusion of roles and the lack of pragmatism in planning processes.
But has the capacity to think strategically lost relevance for organizations? In a turbulent, fast-paced and unstable world, is simply carrying out routine activities and rendering accounts every three months really the best option?
I believe not. On the contrary, in a threatening environment, companies that maintain strategic management alive and know how to make better choices have a greater chance of surviving.
Strategy is necessary in light of two factors: scarcity of resources and competition. That is, if a company does not have the necessary human and financial resources to carry out everything it intends, it needs a strategy. If there are other companies in the market going after the same revenue and clients, it also needs a strategy.
The definition of a clear strategy will allow the company to do two things: allocate its resources as efficiently as possible and anticipate moves from competitors, standing out from them. We can call this strategic maturity.
How do we bring strategy back to organizations? At FALCONI, we have been perfecting our approach to strategic formulation by applying a Cartesian problem-solving method to traditional planning processes. As taught by Professor Vicente Falconi, this method is simple and intuitive, despite its complexity.
The result is the creation of a more pragmatic approach, which enables the entire organization to learn through the process and consequently turns strategic formulation into something sustainable.
There are three key characteristics to our approach:
1. Align strategy with goals
A Yiddish saying tells us: “Man plans and God laughs”. But this is a false contradiction: we need to act in the present in order to build the future. The main fuel of strategy is a big dream – a big goal that acts as a challenge to mobilize the entire organization, with a fixed timeframe for achievement.
When strategic formulation starts with a preliminary goal, the result of a collective reflection from all executives or shareholders (or both groups), the company knows how much effort must be made in the planning process. Then, initiatives become “responses” to a clear challenge, rather than just ideas generated without a real application.
Strategic formulation without a goal ends up becoming a big analysis of scenarios, which is an important part of the process, but not an end in itself.
2. Identify the really strategic questions
Oftentimes companies choose a ‘creative’ approach for strategic formulation: they start with a blank page, analyze several successful cases and benchmarks from across the globe and then try to define as many options for action as possible.
Mapping out the competition and market benchmarks is vital in any basic formulation process, but we understand that companies must that a step back and seek out managers’ understanding and critical vision regarding the real opportunities and threats for the future and for the big dream that was established. This is what we call focusing on strategic questions: “What keeps shareholders and executives up at night?”, “What opportunities are we missing out on?”, “What could get in the way and prevent our operation from becoming sustainable?”, “What are we failing to see?”
When addressed in conjunction with traditional analyses of the external environment, strategic questions act as a reality check in this process, making it more pragmatic. Obviously, the company risks being myopic in relation to the future, but critical questioning and identifying key information gaps – something all organizations experience – is part of the process.
Another benefit of clearly identifying the truly strategic questions is that it leads to alignment of all parties involved, executives and shareholders. It is quite common, in the early stages of the formulation, to see that the relevance and priority of these questions varies according to the group; thus, a commercial director may prioritize client-related matters without taking into account that operation- or finance-related matters that may considerably affect the company´s performance, which can be troublesome.
When put together, placed side-by-side and prioritized, strategic questions direct the energy of all involved parties towards the right path, working together.
Subsequently, questions are ‘broken down’ into smaller parts so that they can be address in a more precise and collective manner. In this moment, strategic options are generated, giving the organization a chance to actually make clear choices regarding the future.
3. Connect strategy with results
Clear objectives have now been provided, but the company continues operating at its old pace, without knowing what to do. What is missing now is a plan. A strategy without a plan is just collective utopia.
It is common to find plans with a comprehensive analytical basis and scope, but that still result in managerial inertia. In our experience, this occurs because plans are elaborated without people in charge (“action owners”), macro-stages, dedicated resources, deadlines, and specific indicators and goals to measure the effectiveness of actions or projects. Further, these strategic plans must be broken down to incorporate the tactical and operational levels.
The secret is to bring the big dream to the current reality, deploying organizational goals to increasingly smaller time intervals and to the most basic managerial units of the organization, clearly detailing everyone’s contributions to the achievement of the overall organizational goal.
Perhaps, the main challenge faced by companies nowadays is to clearly show the cause and effect relationship between strategy and results.
Published in May/June edition of HSM Management magazine.