(Note: This blog was published for the first time several years ago, but it is still timely. Enjoy)
The logic of validation allows us to move between the two limits of dogmatism and skepticism.
It is too often the sad truth that the only way we find out whether a strategy was good or bad is after it is implemented. And then it gets confusing as to what caused the strategy to fail. Was it a bad strategy or was it just badly implemented? This chicken and egg argument is currently rampant in academic business circles and in the literature on strategy.
Now there are a myriad of ways one can go about this. Most strategy validation exercises conducted by the big consulting firms involve lots of market research, weeks of data analysis, and analysing the company strategy versus current and future market trends. This is an important piece of the strategy validation process.
However, I have been surprised that even when the strategy gets the green light from the consulting firm, the strategy may still fail. Ah, you are saying, poor execution is the culprit. Maybe you are right, but it would be great if there was a better early warning signal that the strategy might fail, instead of waiting for 12 months to determine the outcome.
My approach to strategy validation has less to do with market and customer analysis and more to do with evaluating the alignment and commitment of the senior leadership team.
However beautiful the strategy, you should occasionally look at the results. ~Winston Churchill
Here’s a good example. Several years ago I was asked by the new CEO of a major european manufacturer to help with their turnaround through improved strategy execution. He needed to it happen as they were losing both market share and millions of dollars. The CEO was experienced, knew the business inside and out and had developed, along with a few other of his senior executives, an excellent turnaround plan. The market research was solid, the financials stacked up and the forecasts were favourable. It was a good plan.
He asked me about his turnaround plan. I told him it was going to fail. And he’s why?
I had spent a week talking one-on-one with all the members of the senior team, a large number of key next level leaders and managers, and developing and implementing an on-line survey to all middle managers and above. My assessment was that this team, one of the most knowledgable in the industry, could not work well together. And for the new Go Forward plan to succeed, it would take excellent cross functional teamwork and sharing of resources, especially since the turnaround plan also required considerable cost cutting to get the financials in line with the realities of the marketplace.
Over the past 30 years I have discovered that alignment, or in a case like this lack of alignment at the top, is a critical factor in deciding whether a strategy is valid or not for a business. And this deciding factor is often overlooked and undervalued for its impact on the ability of a business to perform. In this case precious time would be wasted in meetings where the senior executives would argue, defend their functional silos, play politics to look good in front of the new boss, and hoard resources. The had no common agenda since they were measured and compensated on functional objectives more than how well the overall business performed.
As a result of this insight, the new CEO revised the compensation of the senior team to focus totally on the turnaround of the company, instituted a Line-of-Sight execution roadmap that linked objectives across functions, pinpointed specific enterprise initiatives, and spelled out clear accountability within the strategy for each member of the senior team. He had changed the “leadership processes” and as a result, created a shift in the leadership culture towards more collaboration and teamwork.
The company broke even the first year and made a significant profit in year two as well as reversing the downward slide of market share. A good strategy delivered by a good team.
Strategy validation is more than just analytics and market insights. There are people and process insights as well.
John R Childress
Senior Advisor on Corporate Culture, Leadership and Strategy Execution
Author of LEVERAGE: The CEO’s Guide to Corporate Culture and FASTBREAK: The CEO’s Guide to Strategy Execution
Visiting Professor, IE Business School, Madrid
PS: John also writes thriller novels