Who is responsible for making strategy? In most companies, this has traditionally been the job of the leader. When we look at successful business leaders of the past – Alfred Sloan at General Motors, Thomas Watson at IBM, Arnold Weinstock at GEC – or more recent figures like Jack Welch at GE or Andrew Grove at Intel, we find that they spent a great deal of their time thinking about and planning strategy. They set out the goals of their companies, and then decided on the best way to reach them. Morgen Witzel, FSN writer and honorary senior fellow at the University of Exeter Business School, suggests there is another way.
Strategy-making was widely seen as one of the tasks of the leader, and still is by many people. But is this wise? Should so much responsibility be laid on the shoulders of one person? Is it possible, given our complex and fast-changing environment, for a leader to know enough about what is going on – inside the organization or outside of it – to create a successful strategy?
Increasingly, leaders themselves are saying it is not. ‘Quite frankly, leaders don’t know all the answers’, says Allan Leighton, until recently chairman of Royal Mail. In his book On Leadership, published in 2007, Leighton talks of the need for consultation and advice and the gathering of information. He makes it quite clear that leaders can no longer make decisions on their own. The day of the ‘leader as hero’, the Napoleonic figure who issues orders which others rush to obey, is over.
What is to replace it? Increasingly, the emphasis is moving away from individual strategists and towards team-based decision-making. The idea that strategy is best created by teams was first discussed by strategy guru Henry Mintzberg, Bruce Ahlstrand and Joseph Lampel in their book Strategy Safari, published in 1998. Mintzberg and his colleagues believed that strategy was simply too big an issue for a single person, no matter how talented, to be able to get to grips with. ‘Strategy formation is a complex space’, they argued. ‘It depends on individual cognition and social interaction, cooperation as well as conflict; it requires analyzing before and programming after as well as negotiation during; and all of this must be in response to what can be a demanding environment. Just try to leave any of this out and see what happens!’
Ten years on and there are signs that some organizations, at least, are putting these ideas into practice. In their 2008 book Fast Strategy, Yves Doz and Mikko Kosonen describe how the process works at IBM. Here, responsibility for strategy rests with a team that reports to CEO Sam Palmisano, not the CEO himself. Half the strategy-making team are senior executives; the other half are hand-picked by Palmisano from all across the company, selected in part for their brains and analytical ability and in part for their expertise in areas of particular importance at the moment. For example, if the company is particularly concerned about competition in India, an Indian manager will be drafted onto the team to provide insight and knowledge.
Team members serve for terms of a year and are then replaced by others from elsewhere in the corporation. The team itself has full decision-making powers. This system also leads to more dialogue and discussion about strategy, not only among team members but throughout the organization. ‘The strategic dialogue is not confined to the top team but extended in various ways to promising minds throughout the organization’, say Doz and Kosonen. ‘These high-potential people are expected to bring additional factual and conceptual richness, given the range of their backgrounds and the depth of their experience, as well as cognitive diversity, to the top management dialogue.’ In other words, a lot of different people with different backgrounds and different mindsets will, when considering a given problem, probably come up with a better and more creative solution.
But, it can be argued, is this not over-complicating the process? Is strategy really that hard? One of the original strategy gurus, the Prussian army staff officer Karl von Clausewitz, had maintained that ‘everything in strategy is very simple’, although he had added the important corollary that ‘this does not mean that everything in strategy is very easy!’
To get an idea of how strategy is both simple and complex at the same time, let us step outside the world of business for a moment, and into the world of Formula 1 motor racing. A lot of time and effort is expended on strategy both before and during races, and most teams have a strategist. Ross Brawn famously filled this role at Ferrari in the 1990s, and now does so at his own team which, at time of writing, has won four out of five races in the 2009 season.
The objective of Formula 1 racing is very simple: to drive a car around a circuit a certain number of times, and to do so faster than the competition. And in fact, the number of variables that the strategist has to contend with are comparatively few: weather, tyres, fuel consumption, the technology of the car itself, the skills and fatigue level of the driver. Yet when making strategy, neither Ross Brawn nor any other team strategist sits down and works out the race plan in isolation. A wide variety of people – the team owners, the mechanics and technical staff, advisors on everything from local weather conditions to the possible strategies that other teams will adopt, and not least the drivers themselves, the people who will execute the strategy on the day of the race – have input. And, as the race progresses and events unfold, the strategist relies on the drivers and the technical support staff to provide information and help make decisions should the plan need to change.
So, the strategy is simple, but as Clausewitz said, neither the making or the implementation of it are necessarily easy. IBM has learned the same lesson. Decisions that look deceptively simple are often the result of long thought and consultation. In fact, decisions that come easily are not always good decisions. Back in the 1930s, Alfred Sloan was told by his board at General Motors that they were in complete agreement on a particular decision. ‘Then, gentlemen’, said Sloan, ‘I propose we postpone further discussion of this matter until the next meeting to give ourselves time to develop disagreement, and perhaps gain some understanding of what this decision is all about.’ Perhaps if General Motors chairmen in recent years had adopted the same policy, the threat of bankruptcy might not be looming now.
Today, more than ever, strategy needs to be made not by one person in isolation, or even a few people at the top of the organization, but by as many people as possible. We have seen in the past year what can happen when people get their strategy wrong. Not only do they wreck their own companies, but they can cause damage to entire industries, even entire economies. In order to make good strategy, we need to harness the best brains – no matter where they are in the organization - and put them to work thinking about strategic issues and problems.
