Monday, May 28, 2007

Strategy Takes A Holiday

Over the years, I’ve organized a number of off-site strategy sessions for top management. They tend to go something like this. First, the CEO tells you what time he or she has available, which is never enough time. Then you scramble to find a resort that is available for that time.

Next, you start carving out time for expected activities. For example, the executives always want time for an inspirational speaker as well as time for a golf outing (and maybe some special dinner event).

Then, if you want to have any discussions and get any feedback from all the executives invited, even if you put them into groups and limit their presentations to about 20 minutes apiece, you pretty much have used up an entire day.

So when you subtract out all of these activities, whatever time that’s left can be used for strategic pursuits (which is never enough). After the meeting is over, everyone goes home, and most of the attendees do not think much about strategy until next year’s outing.

I’ve heard people say that they no longer believe in doing strategy, because they see no value in the process. When you probe a little deeper, I typically find out that these people equate “doing strategy” with the “process” of going to a resort for a strategic off-site session. They see these meetings as a waste of time, so they figure that doing strategy is a waste of time.

If the only strategic activity of a company is to have an annual outing at a resort, then I would agree that the “process” of strategy is flawed. As I tried to illustrate in the story, offsite meetings have a number of agendas which often have little to do directly with strategy. A few hours a year is not enough time to give strategy justice.

According to business strategists Gary Hamel and C.K. Prahalad, executives should spend about 30% of their time on strategic activities. In their research, they found that the typical executive spends only about 3% of his or her time on strategy. Without investing serious time in strategic thought throughout the year, strategy off-sites become little more than pep-rallies or worse, boondoggles.

Given that this is the Memorial Day holiday, I thought that it would be good to dispel the myth that good strategy is like going on an off-site holiday.

Good strategy involves much more than just showing up at a resort. There are six essential elements to a good strategic process. They are:

1) Research
2) Option Formation
3) Option Selection
4) Resource Allocation
5) Rallying the Troops
6) Monitoring the Process

These are discussed briefly below.

1) Research
Good strategy is rooted in facts. This is not to imply that all the facts need to be in before making a decision, since strategic decisions can often move a company into uncharted territory. However, strategy is more than just wild guesses. Certain things can be known through research, and that research should be done before making strategic decisions.

For example, consumer trends can be tracked in order to get a better idea of where consumer needs are heading. You can find out what consumers think about you—what are you known for? The more you know about the environment and the more you know about your strengths and weaknesses, the better you can determine how to best fit your company into that environment.

All of that takes research…something that cannot be done at a resort.

2) Option Formation
Before one can decide the proper strategic path, one needs to first come up with some strategic options. After all, it’s hard to make the right choice if you have nothing to choose from.

Developing strategic options requires brainstorming around the knowledge gained from the research. Although a limited amount of brainstorming can take place at a resort, I believe that a better list of options can come from dedicating a larger block of time than afforded at an off-site event.

3) Option Selection
Even if one had the time at an off-site event to develop options, there would most likely not be enough time to do that AND choose which option is correct. To know which option is the correct path to choose requires more than just having a list of options. It requires further analysis of these options. One needs to assess the risks, perhaps do a bit of financial modeling. One may need to ponder what unintended consequences may arise from a strategic decision (for more on this topic, see the blog “The Chisholm Trail”).

Hence, even if you want to choose an option at the off-site, someone needs to prepare in advance some assessment of the options—the pros and the cons of each, base on analysis.

4) Resource Allocation
Choosing an option is not enough. One needs some idea of how to make the vision a reality. This requires an understanding of how to allocate your resources—how to spend the company’s time, its talent and its money. In other words, there needs to be some discussion on what work needs to get done, who’s going to do it, and what do they have to work with to get it done.

Given all of the politics and sensitivities related to these issues, these might not be the types of issues which work well in a large, public discussion. With strategy comes power…and some will see their power grow while others do not. Some hard choices need to be made, since there are typically not enough resources to go around. It may be better to do this type of decision-making in a more private, one-on-one environment, than in a large gathering at a resort.

5) Rallying the Troops
Once the first four topics have been covered, the fifth task is to communicate the vision to the organization and rally the troops around supporting the decision. Off-sites are actually rather good settings for this type of activity. You can control the environment at an off-site and get people focused on the vision without a lot of distraction. There are opportunities to motivate people to action through razzle-dazzle and powerful presentations.

Of course, if you skip the first four steps (which require substantial time prior to the event), there isn’t much to rally people behind.

6) Monitoring Progress
Once a strategy is set in motion, the task is still not over. One needs to monitor progress to ensure that:

a) Tasks are getting done properly, timely and within budget.
b) Tasks are leading to the proper outcome. If not, then what modifications are needed to get the strategy back on track?

Neither of these two points can be done at the off-site meeting. They can only be done later, after the strategy is set in motion.

Strategic off-site sessions at a resort may be a useful (but not the most critical or most necessary) element in a larger strategic process. Without the entire process, however, these off-sites can become little more than “corporate vacations.” Leave the vacations to your personal time, such as the Memorial Day weekend.

Sometimes today, about the most sophisticated a strategic discussion gets is whether or not to sell out to privatization using money from a hedge fund. That type of discussion certainly does not require time at a resort. And I’m pretty sure the hedge fund won’t want you to spend a lot of money on time at resorts, either.

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