Monat: Juli 2012

Employees who think and act strategically are essential for a company’s survival

Strategic thinking and acting local

The bigger, the more international, the broader the customer scope and the more global the markets of a company, the more critical for that company’s success will be entrepreneurial decisions and actions of the top management on site.

Since a centralized business strategy can never take into account every local impact and risk that influences the global business, local and regional circumstances require adaptations that have to be identified and taken into account by local management.

This means that entrepreneurial decisions have to be taken locally.

Innovation and continuous improvement

Innovation assures a company’s future. Without the employees‘ continuous support, a company cannot be innovative – innovation cannot be bought. Employees have to be involved and it is their responsibility to continuously improve products, services and processes while optimizing the business models.

Therefore entrepreneurial thinking and acting is part of every employee’s job description across all hierarchical levels.

Training

To achieve this, junior staff must be continuously and thoroughly prepared for strategic tasks and consequently strategic management becomes an integral part of training and career development.

Employees learn strategic thinking by working on strategic tasks rather than in seminars

Learning by practicing

You do not learn tennis in a seminar. The same applies to strategy. Learning how to develop, analyze, present and implement a strategic topic comes from working on it from the initial vision to the implementation.

The company’s executive management assigns tasks and sets the scope. The team collects information and data, analyzes and evaluates it, develops strategic options, matches these during review meetings with the sponsor, then works out the details and submits these to the management board for decisionmaking.

While it is the board of management’s duty to come up with a strategy, they do not have to develop it entirely by themselves!

Building up knowledge

Based on this approach the company’s employees develop strategic knowledge and proficiency, a good sense of what is achievable and consequently leadership skills.

The development of strategy tasks can be started with a HiPo program with strategic initiatives and adjusted based on the level of requirements and management tasks – up to developing whole business or corporate strategies by and with key personnel.

Depending on the level and task, key personnel spend about 10 – 20 % of their time on strategic tasks.

A company’s best strategists are its employees

External knowledge is also available to competitors

The basic management assumption is that employees are not qualified to be strategists and that they should therefore not be assigned strategic functions. As a result companies spend enormous sums to acquire external consultants‘ knowledge and fail to utilize the capabilities of their own employees.

This approach has two fatal consequences:

• on the employees‘ motivation and willingness to implement the strategy;
• regarding the development of a company-specific, unique competitive advantage. The external expert’s knowledge is also available to competitors.

The result is that different companies‘ strategies are becoming more and more similar.

Utilizing employees‘ knowledge

Every good strategy builds on its knowledge of markets, products, technologies and especially customers. Without this knowledge, strategic reasoning becomes a purely theoretical exercise.

This knowledge includes the current state of the company and especially changes concerning customers and competitors that influence customer decisions.

And where is this knowledge located? With its employees:

• the sales staff are the people who best know the customers – and the competitors;
• the technicians and product managers are the people who best know the products;
• the service staff are the people who best know the problems and areas of application;
• … and really involved employees are the best innovators.

Real expertise comes from a company’s customers (and non-customers), rather than from consultants

80 % of the knowledge is available within the firm –
the rest can be purchased

Expert knowledge is often purchased without experts or employees really analyzing and interpreting it.

A large proportion of the knowledge required is normally already available within the company – and collects dust in some drawers (or, nowadays, on some hard discs) and cannot be located.

Practice shows that up to 80 % of the required expert knowledge can be compiled by interns and students based on documentation the company already possesses and the Internet.

Additional knowledge can be selectively purchased and applied and is available from databases, analysts, industry experts and associations for a reasonable price.

Customers‘ knowledge is authentic – consultant’s knowledge not

It is the customers who possess genuine, relevant expert knowledge, not expensive experts, who often work with secondary source materials and provide it only in aggregated, anonymized and therefore unauthentic formats. Therefore the main questions are:

• How systematically and with which approach do you involve your customers?
• How systematically and in which format do you use the knowledge of your employees?
• Where do you buy – targeted and focused – external knowledge and how do you integrate it?

Strategic methods and tools are sufficiently well known and can easily be obtained

Nothing new for decades

Strategic techniques and methods are well known and are freely accessible to everyone, but these only provide the place setting, rather than the recipe for a gala dinner.

Many theories sold as new approach are old wine in new skins. Apart from some reworked methods and tools, there have been no significant innovations for years.

The tools are easy to learn

It is not the concepts and tools per se that are the crucial factor for the effectiveness of a strategy, but how and by whom they are applied. This is something that has to be learned sooner or later by the employees since the external specialists are long gone by the time that the concepts and tools are being implemented and applied.

Most larger companies today have departments dedicated to business development which can provide access to all the necessary tools. The skills required to coach and steer the process are usually available internally.

External specialists can be called on if required, but their main role is to coach and act as a sparring partner.

Employees who develop a strategy will also implement it without change management

Persuasion is expensive and only partially achieves its objective

Developing a strategy in isolation endangers the chances of it being implemented successfully.

„It took senior management 19 weeks to develop the new strategy; it took the employees 20 minutes to misunderstand it.“

Just communicating a strategy formulated by senior management down the ranks is not enough to ensure that it is properly understood. Only those who took part in the development of a strategy will have truly internalized it.

Otherwise it might sound like:
„Do your employees know the strategy?“
„Yes, we presented it during the last company’s Christmas party.“

Listening is not the same as understanding, understanding is not the same as consenting and only those who are convinced will contribute their fair share to implement it.

Classic change management is based on the assumption that people and systems do not want to change, resist changing and that this resistance has to be overcome. There is an assumption that power promoters, change agents, pilot projects and communication strategies are necessary to build up the required suspense to create energy for change.

People do what they are convinced of

Our experience shows that someone who is working on something and is convinced of it wants to realize it too. If a strategy is already in the hearts and minds of the employees because they worked on it, there is no need for extrinsic motivation or incentives. The energy is there!

Besides, people tend to feel responsible for their own creation and do not immediately put the blame on senior management if difficulties arise.

Senior management focuses on the right questions and assignment of tasks during the strategy development process

Provide the guide rails and questions

It is executive management’s responsibility to define the strategic guide rails, formulate clear tasks, find the right key personnel, involve and instruct them and to participate in review meetings to set directions.

Strategic guide rails include the vision, the mission and scope for development for strategic ideas and options; eventually also the financial targets and growth objectives.

This requires an intensive engagement with the strategy

Caution: involving the employees with strategy work does not relieve senior management of its responsibilities. On the contrary, senior managers have to spend more time on strategy work: they have to read documentation, conduct intense (insightful, inspiring and also challenging) discussions – and this not only during the development stage, but also during implementation. They regularly have to challenge their employees‘ work, as well as their own.

They need to dig deep, apply themselves and offer their support to advance the implementation. It would be fatal to sit back, rather than leading from the front.

The reward is the very satisfying experience of seeing your own people make the strategy their own and want to put their all into proving that their strategy actually works.

 

The mutual development of strategies creates a culture of dialogue and a common language

A constructive dissent

Strategy development is a project that requires a clear project organization. A process of constructive controversy should take place in the project team – only consent coming from dissent is good.

The prerequisite of a productive dialogue is that the composition of the strategy team should be varied (key persons from different levels of hierarchy, functions, regions), to make the best use of the existing knowledge.

As strenuous as the clash of different perceptions and experiences can be in the beginning, the more valuable it will be when strategic considerations and options are enriched and based on real experience (with customers) rather than on numbers.

A common language and the learning organization

This dialogue, this debate has to take place. Organizations only achieve this if a process and corresponding committees exist, meet regularly and adopt and approve topics.

This approach creates a common language in the organization. The meaning of terms and definitions become unambiguous and based on the common understanding of problems and solutions confidence can develop.

Therefore this joint development and design for the future is an integral part of a learning organization.

An important side effect of this dialogue on senior management level is that members that initially focused on their own area of responsibility start to jointly shape the future and evaluate each individual contribution in the course of the process.

Overall strategic responsibility always lies with top management

Roles have to be clearly assigned

For integrated strategy development, roles have to be clearly defined. An independent strategic planning and controlling business process clarifies responsibilities.

Consequently strategy development is part of a transparent planning process.

For example:

• 3-5 strategic initiatives are assigned for a specific deadline, developed for six months and then presented and approved in a meeting with senior management.

The basis of these strategic initiatives is a clear and professional project management.

The aim is not to democratize strategic work. The strategic decisions are always the responsibility of senior management, but are based on broadly agreed foundations.

In certain cases decisions have to be developed by senior management autonomously

In exceptional cases due to non-disclosure agreements, strategic decisions cannot be developed on a wide basis, but have to be developed and decided autonomously by senior management. Examples of such exceptional situations are acquisitions, carve-outs or restructuring.

This integrated approach creates a unique strategy that is tailored to the company’s requirements and is difficult or impossible to copy

Tailor made

A jointly developed strategy is built on the specific knowledge of the employees and customers and thus really tailored to the own company. A strategy created this way uses the enormous potential of the company’s own employees and customers (current market and customer knowledge), instead of delegating this critical task outside or upwards.

Immediately effective

A strategy developed this way is immediately effective, requires no translation and consequently no loss of time and energy. The implementation works on its own since the employees identify with their strategy and therefore want to realize what they have conceived. The probability and speed of a successful implementation are significantly increased.

Cannot be copied

While strategy papers are easy to copy, strategies embraced in the heart and minds of the employees and therefore in the organization itself are very difficult for others to copy and then only with long delays.

But by then you are far ahead of your competitors.