The challenge, myth and role of Corporate Strategy

The challenge, myth and role of Corporate Strategy There was a time, the corporate or strategic planning function, responsible for developing the overall corporate strategy, was the most sought after in large companies. Fresh, bright and starry eyed grads of business schools want to become business strategists and shape the destinies of corporations all over the world. Today, everybody wants to join management consultancy or financial services or investment banks or IT services and become top honchos. I took up management consultancy after 25 years of handling real businesses from a trainee to a CEO. I didn't skip any steps. Business schools take pride in the salaries offered to their students. Some business schools advertise that they have visiting faculty from the Ivy League. They are the people who know all the directions but have never captained a ship, to quote the great Mr. Robert Townsend. I like the ad of Pirelli tires - 'Power is nothing without Control' - in this case self control. No one seems to be interested in operations and trying to understand the business. If you want to understand any business, you must start at the bottom and work your way up. How fast you go up is entirely up to you. You must spend a reasonable time at each level to understand its nuances. You must get your hands dirty but not tainted. 

Let me also make it very clear that even giant organizations need only one strategist. He or She must be from the field so that no operating manager can ever takes him or her for a ride. A strategist must know the business better or at least as well as the field managers. The strategist must have some extraordinary qualities not available with other field managers.

Everybody cannot become a strategist. A top field manager may not necessarily make a good strategist. The reason is most look at situations with a tunnel vision and have their blinkers on. A strategist must have a wide angle vision and take holistic view of the business. A good CEO without a firm grip on strategy is expendable but not a good strategist. Unfortunately, such a CEO will often rule in favor of operating managers and vote against a good strategy because it appears difficult. Most operating managers like to try out only the known and tested strategies due to lack of imagination. Operating managers are risk averse. The problem is low risks means low gains. Appointing fresh business grads to develop business strategy without exposure to the field operations is the most foolish act an organization can ever commit. Corporate strategy is a top management activity. It is not meant to control the field. It is meant to guide the field. It is a leadership role. An excellent strategist invariably ends up as the CEO, if not in the same organization, somewhere else. Why is it so?

Corporate strategy development involves the following areas:

* Products-Markets * Products design and delivery, which may include manufacturing. If the business is services based on IP, it would require some unique added value. 

* Investment * Distribution and supply chain 

* Financial - A strategist need not be a financial whiz kid, but must understand the financial impact of strategic decisions on the bottom-line. I call it FISD similar to PIMS - Profit impact of Marketing Strategy. All strategic decisions must ultimately lead to increase in value in the generic value chain.

* Research & Development * Innovation - Let it be very clear that R&D is not innovation like many believe. Innovation is creation and ideation.

Innovation should be both internal and external. Surprisingly, many organizations ignore internal innovation. It provides a strategic advantage not known to competition. External innovations can be copied or improved upon easily.   

* Cost reduction - depends largely on internal innovation * Diversification - Greenfield projects, Acquisition and Mergers * Integration - backward, forward, vertical and downstream * Technological * Human resources

No one function offers so much of variety and challenges. However, very few, only a minuscule can handle them. It needs extraordinarily talented people to hold the position of a strategist. The strategist must set up the broad guidelines, objectives, principles and overriding purpose within which the operating managers can conceptualize the field tactics and strategies, on which the future of the organization truly depends.

Any staff function would require extraordinary leadership qualities. Staff roles became unpopular because people tried to make them into power centers. The real power always lies with field operations. Never be under any false illusion. It was headed by business school grads who were long on theory but short on practice. The staff support must be headed by experienced and extraordinary people to whom the operating managers will look upon for guidance. They should play the role of mentors and guides. Power must come naturally to them and not by virtue of their position. Lastly, any staff manager must roll up the sleeve, enter the battlefield and lead the troops anytime to show that he or she is as good as or better than the operating managers. A field man always respects a staff man who can fight well. A staff manager cannot demand respect. He or she has to command respect. For that to happen, you need to know the business inside out, not just the numbers or some theory.

© July 2007. www.madgopes.com. All rights reserved.



The challenge, myth and role of Corporate Strategy - To learn more about this author, visit Madhavan T Gopalachary's Website.

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