Strategy starts with two essential questions: What’s the crux of the challenge the organization faces, and who should be included in deliberating the issue?
Crux is a lovely word, hinting at the root, heart or nub of the problem. It has extra meaning for one of the best known strategy thought leaders, Richard Rumelt, who as well as being a long-time professor at UCLA, now retired, is also an avid rock climber.
In climbing, the crux is the toughest problem faced in moving upward, a puzzling obstacle that requires having the courage to make delicate moves while hanging well above the ground, risking a fall. Just like developing strategy.
He identifies the crux for your strategy discussions as gnarly challenges, usually involving a tangle of issues – perhaps even a paradox – you face. He stresses that the crux need not be problems but can in fact be opportunities, or a mix of both.
“To be a strategist you will need to embrace the full complex and confusing forces of the challenges and opportunities you face. To be a strategist you will have to develop a sense for the crux of the problem – the place where a commitment to action will have the best chance of surmounting the most critical obstacles,” he writes in The Crux.
He points to Elon Musk’s passion for space exploration. An issue was cost and the crux of that was re-entry, saving money on putting payloads into orbit by bringing them back for reuse. Related was overcoming the issue of keeping costs down while maintaining reliability. Mr. Musk would tell doubters that apparent paradox could be accomplished, noting a Ferrari is very expensive but not necessarily reliable while a Honda Civic is much, much cheaper but highly reliable.
Strategy, Mr. Rumelt stresses, is not about vision or goals, at least as a starting point. Instead, you must begin with the challenge and diagnose its structure and the forces at work. Once you do that, your sense of purpose and the actions you consider will change.
“In that diagnosis, find the crux. That is the most critical part of the challenge you can actually expect to solve. Don’t pick a challenge you cannot yet deal with – attack the crux of the situation, build momentum, and then re-examine your position and its possibilities,” he advises.
To move ahead, you must understand the sources of power and leverage relevant to the situation that you can employ. “To punch through the crux, you will use one or more of them. Willpower is not enough,” he warns.
Don’t fuss over a mission statement. Strategy is a form of problem-solving, a journey, a response to challenges, and so mission statements are not helpful. Don’t try to come up with some flamboyant (or even non-flamboyant) goals. Don’t confuse management techniques, decision-making or planning with strategy. Planning doesn’t produce strategy; it produces plans.
Find your crux. Formulate a hypothesis, and design some action alternatives, checking them against existing knowledge. You need insight and that springs upon us by surprise as we grapple with an issue. At first glance, there might be no answer, which could be embarrassing as well as frustrating. There will be a strong temptation to grab the first solution that arises. But he cautions you to simply keep it in mind while looking for others. “The discipline of persistence – of thinking again about the situation from a different angle – is vital,” he says.
Keep in mind that strategy is an exercise in power. Attacking the crux will result in action. That will lead to shifts in roles, influence, and resources, of people and departments. You will need to deal with that.
Traditionally, strategy is developed by a small group of top leaders. That notion is being challenged by companies reaching out to a wider group of people – front-line employees, experts, suppliers, customers and even competitors. “These leading-edge companies are winning because they’ve quietly adopted a new way of doing strategy, one tailor-made to fit today’s faster, more volatile business environment,” Open Strategy authors business professors Christian Stadler, Julia Hautz, Kurt Matzler, and Stephan Friedrich note. “They are ‘opening up’ strategy just as companies have opened up other areas of the business, such as innovation and marketing. And the results have been spectacular.”
Barclays, for example, created a series of “councils” in 2012 of 20 to 25 senior product people, as well as colleagues from functional units across the business, including marketing, compliance, legal, and HR. Their job was to define the business’s current state, bringing to bear their deep knowledge of products, trends, and operational capacity. In parallel, the company created working groups of several dozen front-line employees, asking them, “What should Barclays look like in 2020?”
Front-line employees were close to the bank’s customers, who they knew wanted more speed, accessibility and transparency. The work councils merged those ideas with their own operational knowledge and presented a provisional strategic plan to the executive team.
“To fine-tune and finalize this plan, Barclays widened the conversation to include much larger numbers of front-line employees – in fact, everyone,” they write in Open Strategy. Leaders wanted to ensure that the final strategy would be simple enough for everyone to comprehend, believing a simple strategy understood by all beats a complex strategy understood by only a few.
Open strategy challenges the way we normally do things, so therefore is worth at least considering. And Mr. Rumelt’s crux also challenges some popular notions, helping to illuminate the strategy process.
- Governance consultant Mark Phister says boards in inflationary periods should pay attention to employee retention because operational officials may become overly focused on consumers and forget the organization’s staff. The most sensitive strategy discussion you face will probably be developing a clear and fair pricing policy.
- Silicon Valley executive Deb Liu believes it’s a misconception that staff won’t read periodic updates from their managers. She has been successful with them and recommends you try once or twice a month.
- Another common belief that could be a misconception is that co-CEOs won’t work. A recent study of 87 public companies whose leaders were identified as co-CEO found they produced significantly more value for shareholders than their peers: Average annual shareholder return of 9.5 per cent compared to 6.9 per cent for each company’s relevant index. And that wasn’t a result of a few high flyers; nearly 60 per cent of the co-CEO companies outperformed.
Harvey Schachter is a Kingston, Ont.-based writer specializing in management issues. He, along with Sheelagh Whittaker, former CEO of both EDS Canada and Cancom, are the authors of When Harvey Didn’t Meet Sheelagh: Emails on Leadership.
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