Managing Director, Strategic Impact Partners
This post is the second in a multi-part series on some fundamentals regarding leading change. It is edited from a White Paper I authored a few years ago and is offered as a retrospective on how some of our thinking about managing change may, or may not, have evolved.
“In strategy it is important to see distant things as if they were close and to take a distanced view of close things.”
– Miyamoto Musashi
If we’re going to rethink the process of bringing about change, then it stands to reason that our approach and our attitudes should also be subject to reappraisal. I suggest that includes strategic thinking. Is what we learned about strategy still applicable in today’s organization environment? Do five- and ten-year road maps make sense when discontinuities are an everyday threat?
The concept of strategy itself has become muddled. Part of the reason, I believe, can be traced back to the late 1970s and 80s when Western economies were reeling under Japan’s economic challenge to U.S. leadership. A mad scramble to increase productivity ensued beyond business and industry into education, government, non-profits and the military.
These changes, traumatic as they were, increased productivity – often dramatically. However, as Harvard’s Michael Porter notes, “Many companies have been frustrated by their inability to translate those gains into sustainable profitability. And bit-by-bit, almost imperceptibly, management tools have taken the place of strategy. As managers push to improve on all fronts, they move farther away from viable competitive positions. (“What Is Strategy”, Business Classics: Fifteen Concepts for Managerial Success.)
“The pursuit of operational effectiveness,” notes Porter, “is seductive because it is concrete and actionable. Programs in operational effectiveness produce reassuring progress.” Porter adds, however, that being caught up in the race for operational effectiveness causes many managers to not understand the need for a strategy. An organization should not become preoccupied at the expense of developing strategies that will lead it into new frontiers. Otherwise it risks sameness.
Porter puts it succinctly: Sustainable competitive strategy is about deliberately choosing a different set of activities to deliver a unique mix of value… strategic positions should have a horizon of a decade or more, not of a single planning cycle.
But is it realistic right now?
Demos, Chung and Beck (“The New Strategy and Why it is New” Strategy + Business) offer a slightly different take. They still adhere to the belief that it all must begin with a fundamental analysis of what creates value, what drives costs, and helps maximize profit. And, like Porter, they appear to support the idea that the aura that was once strategic thinking has dimmed and, “functions mostly as a feed into the budgeting and coordination procedures necessary to run the business from day to day.
“Competitive advantage is so transitory as to be meaningless,” according to Demos, Chung, and Beck. “The accelerating pace of technology transfer, the velocity of communications, and the speed of global capital flows require companies to do much more than defend a static definition of the enterprise, they must continuously evolve from strategic position to strategic position. So, in addition to strategizing to capture value from the company’s current position, companies also must base their strategies, at least in part, on creating options to occupy future positions.”
Their idea is not to eliminate strategy or relegate it to second tier planning, but to integrate it better with operations management: “The emphasis has moved from the content of strategy to the contexts and processes that lead to sustained effective action. Formulation (what to do) and implementation (how to do it), previously separated, are now inextricably intertwined. Today operational decisions and transactions can often redefine the company’s strategy and thus alter the path forward.”
Core Ideology: Remaining Grounded While Reaching for the Future
Insight into an organization’s heritage is not nostalgia, or a blind love of practices past. It’s about understanding the core ideology that many find critical to the planning process; something that successful organizations keep in the forefront. Core ideology, for many, becomes sacrosanct as far as the organization is concerned.
Some may consider core ideology a remnant of the past. In reality, ideology and purpose are catalysts for change and for vision as James C. Collins and Jerry I. Porras note in Build to Last: Successful Habits of Visionary Companies. Companies with those qualities outperformed the overall stock market by a factor of 12 since 1925.
“It is more important to know who you are than where you are going, for where you are going will change,” say Collins and Porras. “Leaders die, products become obsolete, markets change, new technologies emerge and management fads come and go, but core ideology in a great company endures as a source of guidance and inspiration. Core ideology provides the glue that holds an organization together as it grows, decentralizes, diversifies, expands globally, and develops workplace diversity.”
Collins and Porras describe core values as, “a small set of timeless guiding principles (requiring) no external justification; they have intrinsic value and importance to those inside the organization.” No outside influence can or should change them.” They say that most elite (and perhaps iconic) companies usually list three to five core values:
Merck – Science-based innovation
Nordstrom – Never being satisfied
Sony – Being a pioneer, not following others; doing the impossible
Walt Disney – Creativity, dreams, and imagination
Also part of core ideology is core purpose; the organization’s reason for being. More visionary and inspirational, as Collins and Porras describe, “it captures the soul of the organization.” In relating core purpose to change and growth, they make a most interesting observation: “Whereas you might achieve a goal or complete a strategy, you cannot fulfill a purpose; it is like a guiding star on the horizon – forever pursued but never reached. Yet although purpose itself does not change, it does inspire change. The very fact that purpose can never be fully realized means that an organization can never stop stimulating change and progress.”
If their description is beginning to sound a bit noble or enigmatic, consider these examples:
3M: To solve unsolved problems innovatively.
Lost Arrow Corporation: To be a role model and a tool for social change.
Mary Kay Cosmetics: To give unlimited opportunity to women.
Merck: To preserve and improve human life.
Sony: To experience the joy of advancing and applying technology for the benefit of the public.
Wal-Mart: To give ordinary folk the chance to buy the same things as rich people.
Walt Disney: To make people happy.
Branding takes core ideology a step further. Values and ideals are captured, become transformed, and are transferred to the organization anatomy (people and systems). Perhaps the most difficult part about dealing with core ideology, branding, and instituting strategy is to know the difference between only changing the image vs. changing both behavior and image (in that order). The best approach, it seems, has to include institutionalizing meaningful behaviors.
“People with different personalities, different approaches, different values succeed not because one set of values or practices is superior,” said Herb Kelleher (former CEO of Southwest Airlines), “but because their values and practices are genuine.” (“Integrity: The Key to Leadership Style” Leadership Strategies).