Ask The Pro With Robert A. Gough, Jr. Ph.D
What Is Strategy, Anyway?
If you are going to succeed or you want your corporation to succeed, you have to think strategically. Short of winning a lottery or lucking out with perfectly aligned market forces, good strategy is necessary to success. Even in the face of serendipity, you maintain the fortune or lose it, based on the strength of your strategy.
To explore strategy, we sat down with Robert A. Gough, Jr., Ph.D., Managing Director of Lexington Partners, a strategic investment and advisory firm.
Q: Why Strategy?
A: Because change happens! Major change events fundamentally alter the way business is conducted. Such events can create tragedy for some. They can create exciting opportunities for others. The difference lies in strategy, specifically the strategic response to the event: doing something and doing it well compared to doing it poorly or simply doing nothing at all. Each carries and leads to major differences in outcomes.
Intel Corporation is one of the more well-known and successful U.S. corporations. Other than those close to or in the industry, however, few know that Intel is a very different company than it was at inception. In the mid-1980s, Japanese memory producers caused such an overwhelming inflection point in the memory chip business that it forced Intel out of the business and into, at the time, the relatively new field of microprocessors. During the worst of Intel’s adjustment and transition, then Intel Chairman and CEO, Gordon Moore, had a choice: fight a losing battle or change. History has already recorded and validated both the choice and the outcome. The reason? Good strategy.
Q: What is a Strategic Question?
A: The most common of all strategic questions: “Oh, no…now what do we do?”
A strategic question usually stems from a triggering event: shifts in market forces such as changing consumer tastes or new competitive products, changes in regulatory laws, new management, planned or otherwise, changes in ownership through a merger, acquisition, or buyout, or simply reaching an inflection point in growth in a company’s life cycle. All triggering events act as a stimulus for change; all demand a response in one form or another; and all cause strategic questions such as:
1. “Ok, now what?” or “What do we do now?” to
2. “What do we do as a result of…?” or “How do we achieve…now?” and “What path do we take now?”
Most such questions quickly evolve into more specific versions, but all strategic questions start at this very basic level. In short, it’s not hard to come up with broad strategic questions…particularly the most common of all!
Q: What is the Difference between Strategy and Business Planning?
A: Depth of analysis, degree of participation, and quality and extent of communications. Good strategic thinking like good communications usually evolves. It’s rare that an individual or corporation goes through all the appropriate steps in envisioning, designing and implementing a good strategic plan the first time attempted.
Strategic Management involves input and commitment from all levels of management. Planning groups are typically formed with managers from all levels and key employees across various departments and work groups to develop and integrate visions, implementation programs and procedures, evaluation techniques, and control measures all aimed at achieving the company’s primary objectives. Rather than relying on “forecasts” of the future, plans emphasize probable scenarios and contingency strategies. What makes strategic thinking different from all other planning processes is the input and commitment from all levels and areas of the company.
Participation in a design leads to “buy-in” of the plan which, in turn, leads to passion in execution.
Q: What does Good Strategy do for a Business?
A: “Out performance”! Research has shown that organizations that engage in strategic management generally outperform those that do not. Surveys have repeatedly shown that the three most common and important benefits of strategic management are:
1. A clearer sense of vision throughout the firm.
2. A sharper focus for all employees as to priorities of what is strategically important.
3. An improved understanding throughout the firm of the implications of rapidly changing markets and environments.
Q: What is a Strategic Decision?
A: Strategic decisions are rare, highly consequential and far reaching in their implications.
Unlike many types of decisions, strategic decisions don’t come across our paths that often. That may be good news to some. The bad news about the infrequency of such decisions is that they rarely if ever involve cookbook recipes or textbook answers. That means they typically have no precedents to follow. What is required to make good strategic decisions are “Five C’s”: creativity of the solution, confidence that it will work, clarity of the plan, communications throughout the organization, and passionate commitment to the success of the decision. All five ingredients are necessary conditions to the success of any strategic decision.
Q: What is Effective Strategy?
A: Effective strategy is about effective people…which means leadership and communications. If life didn’t change, strategy wouldn’t be so critical an ingredient to success. But life changes – sometimes quickly – and so the need for assessment, reflection, formulation of new plans, and execution comes to center stage for the serious corporate leader. Hence, the need for strategic thinking.
Fundamentally, strategy is relatively simple. It consists of four parts: (1) inputs about the external environment and internal culture and resources of the company; (2) the design and formulation of a strategy, consisting of clarity in a company’s primary mission, objectives, strategic plan, and policies or rules for decision making; (3) the actual implementation steps of the strategy, which includes the programs and activities required to accomplish the plan as well as the budgets and tactical procedures and sequence for carrying out the overall plan; and finally, (4) evaluation and performance tools for monitoring results. In other words, strategic management consists of evaluating a company’s opportunities and threats in light of its strengths and weaknesses – and then putting in place a game plan for success in light of all realities.
Q: What is the Biggest Mistake Leaders make in Developing a Strategy?
A: …only developing a strategy!
The critical part of strategy only begins when the objective has been envisioned and the plan formulated for achieving it. The analysis, the discussions about options, and the agonizing decisions are now over. Leadership now becomes the watchword.
Whether at Fortune 500 corporations or early stage companies, effective strategic leaders exhibit 5 common characteristics. In order of importance, they are:
1. A great communicator with a compelling message.
2. A realist who paints an image of a future that is exciting and plausible.
3. A person of character.
4. Creativity is in their blood.
5. A propensity towards action.
Q: What Do You Wish Every Leader Knew about Strategy?
A: …that effective strategy is about effective leadership. In fact, strategy is the key job function of the CEO, not operations, marketing, financial management, or any other corporate function. The primary role of the CEO is to architect the grand vision, orchestrate the plan for achieving it, and communicate it all in a compelling way that is both exciting and believable.
Q: How Can Leaders Be More Effective in Communicating Strategy?
A: Be open, share of yourself and who you are, but most of all, be authentic.
Strategy is not rocket science. Intellectually, it is not that difficult. What is difficult is to assess – substantively and with no constraints – your playing field as well as your own performance on it and to be open minded as to what you see and hear. What is difficult is mustering the courage to look in the mirror and be honest about present realities and future opportunities that may be very different from historical market rules and structures that have governed your game to date. It will be those who are willing to accept the tough but realistic answers they hear who will then begin to move their companies ahead of their competitors. It will be those who are “in the moment,” willing to “let go” and able to grab on to the new and do it through exciting strategic discussions that will set themselves apart as true, top-notch leaders. Those will be the leaders who will guide their corporations to be dubbed winners in this rapidly changing business landscape.
Dr. Gough is presently Managing Director of Lexington Partners, a strategic investment and advisory firm, where his primary responsibility is (1) identifying and supporting alternative investment opportunities, and (2) designing and implementing strategic growth initiatives. He has consulted with Fortune 500 decision makers, both domestically and abroad, national and international government policy makers, and dozens of emerging growth company entrepreneurs. He is renowned for his public speaking in both this country and abroad on the effects of economic, industry, and
technology issues as well as government policies on investment opportunities and alternative growth strategies.
Dr. Gough has been Economics Editor at WBZ-TV, the Boston NBC (now CBS) affiliate. He has frequently appeared on nationally televised programs such as the Lehrer News Hour, The Today Show, Good Morning America, and the CBS Evening News and others to discuss, analyze, and comment on topical economic issues and breaking news events. He has also consulted with various international and federal agencies, has testified before various U.S. House and Senate committees on a variety of economic, investment and government policies, as well as lectured frequently at numerous leading colleges and universities in the U.S.
He can be reached at r.gough@comcast.net.