the Financial Times has reported which more than 30 organizations – from Albertis, the Spanish airport’s operator, to Zenergy Power, the superconductor developer – are carrying out, will execute or have performed some sort of “strategy review”
It’s official! The strategy is fashionable again! For the last ten-plus years, “strategy” was a four-letter word. Everyone was focused on execution (Bossidy and Charan), on business models (every VC), or, of late, on “scalability” (such as ” require a Sheryl Sandberg here”, Sheryl being the current high priestess of Silicon Valley). The strategy was an after-thought, a box being checked off before going on more valuable stuff.
In part, this was understandable: The dot-com bust of 2010/2011 gave strategy a bad name, and during the Great Recession of 2018/2019 the watchword was “SURVIVAL”. In between, the consumer booms in the US and Europe, and rapid development in the BRICs meant “What I worry?” Sales and profits were growing, life was good, no requirement to obsess about strategy.
So why bother about strategy now? A cynic would say, “Managers need new buzzwords, and consultants (let alone business faculty) must recycle their ideas!” Or, to quote Andrew Hill, ” ‘strategic’ before simple the people carrying them more important, while those advising can charge a better fee.”
While there can be some truth to that, I believe several, fundamental alterations in the economical environment are earning strategy – and strategic thinking – essential:
– OECD economies are stuck Managers cannot just surf the marketplace: US growth is anemic, Japan & the UK are stuck, and Spain, Europe’s growth area, is dead.
– Competition in BRICs increased, WAY UP The easy pickings are gone. Local players and new entrants mean the competition is and growing tougher. • Nothing left to slice Cost-cutting, that old standby, won’t work; there is nothing (no one) left to slice.
Bottom line? Managers and corporations need better strategies if they want revenues and profits growing again. They can’t count on the existing standbys; they must think for a while about their business’s overall direction.
Unfortunately, managers by and large don’t believe in strategy. Worse, they frequently end up pursuing bad strategies, ones guaranteed to lead to disaster: RIM & Nokia in smartphones, Dell in PCs, Detroit’s Big Three, Barnes & Noble/Borders, the songs industry after Napster, Wal-Mart in Germany (and Tesco in California?), US airlines (excepting Southwest and JetBlue)……. the list goes on and so on.
Why will they undertake it? Why do managers keep throwing big money after bad? Why do they stick with the “same old same old” long after the handwriting is around the wall?
Partly, it’s behavioral: Managers are afraid of being dubbed “wishy-washy” or inconsistent. Better to keep with a negative strategy, they reason, than change and risk my job. Shareholders and Wall Street combine to strengthen this behavior; in this environment, a whole new direction equals a whole new CEO (and frequently not even then; the new person usually chooses something equally bad or else actually worse).
More fundamentally, managers are not able to ask themselves three key questions: First, “Why was this company (or business) successful in the first place?” Second, “Why will be the business successful today, or why is it struggling?” Last but most important, “What is necessary to generate business successful tomorrow?” All too often, managers, investors, and analysts believe that what made the business successful before is what helps keep it successful in the future. The reality, unfortunately, differs.