Why strategy statements are necessary, but insufficient, solutions
I had the opportunity recently to review an excellent article in the Harvard Business Review (HBR) on strategy development, and consider the notion of a business motivation model with respect to how a strategy is constructed. (“Can you say what your strategy is?” by David Collis and Michael Rukstad, Harvard Business Review, April 2008, link)
For those folks who are not familiar with a business motivation model, the goal of this kind of architectural artifact is to understand the different “things” that motivate an enterprise and trace the various behaviors of the enterprise that are engaged (or not engaged) to react to those things. Things (not a technical term) refer to influencers like competitive opportunities, drivers like strategies and objectives, and business models that describe the elements of the business itself.
One thing that is clear: traceability matters. Traceability is the ability to not only say “what” we are doing, but “why.” It is the ability to trace our activities back to motivators that we can all agree on.
The HBR article cited above provides a clear argument for rewriting strategy statements in a different way, one in which the traceability of the strategy is described in the strategy statement itself. For example, it would be “OK” for a ‘printer’ company to use a strategy like this:
“Increase market penetration in the North America SOHO segment by 20% through improvements in product usability, partner marketing, and customer relationship management.”
On the other hand, according to the article, it is even better to lengthen that sentence dramatically. An appropriate rewrite would include, in the strategy statement itself, the traceability to a key differentiator for the enterprise:
“Increase market penetration in the North America SOHO segment by 20% through improvements in product usability, partner marketing, and customer relationship management leveraging our long-term relationships with customers and deep awareness of their business needs.”
I must confess that it makes sense to care about this particular aspect of strategic traceability. After all, creating a strategy that does not trace to a fundamental motivation around improving the health, competitiveness, and financial stability of a company would be particularly corrosive. A bad strategy can be worse than no strategy.
The solution that the authors suggest is useful in an environment where the business does not already know who they are, and what aspects of their business are key differentiators for them.
If a business is very aware of their key differentiators, then extending the strategy statement to include them is redundant and, dare I say, mildly counterproductive. The notion that a long-winded sentence carries sufficient weight to drive a change, outside a complete understanding of the business itself, is indicative of two possibilities: (1) an enterprise with only one business model, or (2) a business with fairly chaotic thinking.
In effect, if your business is very simple, but you don’t believe that everyone understands it, then this is good advice. Also, if your business is in chaos, this is excellent advice. In both cases, you need the strategy statements to communicate and provide clarity.
On the other hand, if your business is well organized but competes in a rapidly changing business environment, using a complex multi-faceted set of business models, then I have some concerns.
The limitations of sentences
Long sentences as strategy statements are a good idea, if there is no conflict between them. In a business with one business model, this is a realistic goal. It would be inappropriate for the leadership of the business to issue strategies that overlap or compete with one another if there is only one business model.
On the other hand, many businesses, including Microsoft and most of the rest of the Fortune 100 corporations, have many business models within the framework of their enterprise. These different businesses will have overlapping customer bases, different products, and potentially some radically different ways to make money. For example, as Microsoft embarks on Software Plus Services, we make money on the sale of licenses of Microsoft Exchange. We also make money on selling access to an online version of Microsoft Exchange (Business Online Services) that many businesses find preferable to running their own e-mail infrastructure.
You can add only so much clarity to a business by stretching out the length of the strategy statements to include additional words, as the HBR article suggests. Some things cannot be worked out using long sentences, however. Long sentences to do not clarify overlaps, or what may appear to be competing strategies. Long sentences do not reduce internal conflicts or clear up customer misconceptions or make it easy for the sales force to explain what your company does, especially when your company does MANY different things, for different people, in different ways.
Perhaps having longer strategy statements do work in chaotic businesses. I’m not sure. I believe that the problems of poor role understanding, poor organizational discipline, and poor visibility into the success factors of others are each big problems typical of a chaotic business. If it were my call, I’d want to solve those problems before I focused on clarifying business strategy statements (although, in some sense, clarity may help).
Traceability through models
So let’s assume, for the rest of this discussion, that you can drive behavior from a strategy because your business has the organizational discipline to actually care about these statements. Let’s assume that the problem is this: you need your strategies to be executed better.
Now, let’s throw in a complicating factor: your enterprise has many business models… many different ways to make money. If that is the case, then there may be effective ways that work for more people, in more ways, than the one suggested in the HBR article.
One method for building effective, aligned, and actionable strategies to model the business using a rich mechanism like the Enterprise Business Motivation Model. This allows direct traceability between the competitive needs of the business model, the influencers that affect the business, and the drivers of change that propagate through an organization.
The method advised by the HBR article performs some of that traceability. According to the article, some of the differentiation of the business needs to be drawn into the strategy statements themselves. This is not bad advice. However, the author is selecting one particular path of traceability (product differentiation to strategy) and neglecting others.
With a model, you can draw this path, and many more. Modeling is necessary because business strategies are simply one of the tools of change, and a full and rich motivation model, like the one described in the MSDN article, clarifies the traceability without sacrificing all of the relationships in favor of a single important one.
Having a full model doesn’t fix a chaotic business, but it is a useful first step. On the other hand, a business without a rich and fully described motivation model will have a harder time reaching the maturity that they need in order to compete, and succeed, in the marketplace.
Once you have developed the model, you have something very valuable. The model lets you demonstrate how the strategies are connected to the various influencers, in the context of the (potentially many) business models of an enterprise. It provides much of the rich context needed to prioritize business objectives and deal with competing demands for resources, time, and mindshare. With a broad notion of traceability in place, the need to “pad” the strategy statements themselves may diminish. More importantly, strategy statements can be shown to derive from many different paths of traceability, not just one of product differentiation.
Conclusion
The advice from the Harvard Business Review is good advice. There are many situations where a set of long strategy statements is a good thing. Companies that want to use strategy statements as an education mechanism, and not just a motivation mechanism, can use their advice to full effect.
The HBR article does not, however, take into account the many interesting kinds of traceability that may be useful to the business. A full and rich motivation model can start where that article leaves off and go much further, allowing the business to describing its motivating factors in more than one manner (regardless of how useful that manner is).