What is your strategy?
Updated: Apr 15, 2019
A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge. If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy. And, if you cannot assess that, you cannot reject a bad strategy or improve a good one.
International Harvester learned about this element of bad strategy the hard way. In July 1979, the company’s strategic and financial planners produced a thick sheaf of paper titled “Corporate Strategic Plan: International Harvester.” It was an amalgam of five separate strategic plans, each created by one of the operating divisions.
The strategic plan did not lack for texture and detail. Looking, for example, within the agricultural-equipment group—International Harvester’s core, dating back to the McCormick reaper, which was a foundation of the company—there is information and discussion about each segment. The overall intent was to strengthen the dealer/distributor network and to reduce manufacturing costs. Market share in agricultural equipment was also projected to increase, from 16 percent to 20 percent.
That was typical of the overall strategy, which was to increase the company’s share in each market, cut costs in each business, and thereby ramp up revenue and profit. A summary graph, showing past and forecast profit, forms an almost perfect hockey stick, with an immediate recovery from decline followed by a steady rise.
The problem with all this was that the plan didn’t even mention Harvester’s grossly inefficient production facilities, especially in its agricultural-equipment business, or the fact that Harvester had the worst labor relations in US industry. As a result, the company’s profit margin had been about one-half of its competitors’ for a long time. As a corporation, International Harvester’s main problem was its inefficient work organization—a problem that would not be solved by investing in new equipment or pressing managers to increase market share.
By cutting administrative overhead, Harvester boosted reported profits for a year or two. But following a disastrous six-month strike, the company quickly began to collapse. It sold off various businesses—including its agricultural-equipment business, to Tenneco. The truck division, renamed Navistar, is today a leading maker of heavy trucks and engines.
To summarize: if you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have a stretch goal or a budget or a list of things you wish would happen.
Mistaking goals for strategy
A few years ago, a CEO I’ll call Chad Logan asked me to work with the management team of his graphic-arts company on “strategic thinking.” Logan explained that his overall goal was simple—he called it the “20/20 plan.” Revenues were to grow at 20 percent a year, and the profit margin was to be 20 percent or higher.
“This 20/20 plan is a very aggressive financial goal,” I said. “What has to happen for it to be realized?” Logan tapped the plan with a blunt forefinger. “The thing I learned as a football player is that winning requires strength and skill, but more than anything it requires the will to win—the drive to succeed. . . . Sure, 20/20 is a stretch, but the secret of success is setting your sights high. We are going to keep pushing until we get there.”
I tried again: “Chad, when a company makes the kind of jump in performance your plan envisions, there is usually a key strength you are building on or a change in the industry that opens up new opportunities. Can you clarify what the point of leverage might be here, in your company?”
Logan frowned and pressed his lips together, expressing frustration that I didn’t understand him. He pulled a sheet of paper out of his briefcase and ran a finger under the highlighted text. “This is what Jack Welch says,” he told me. The text read: “We have found that by reaching for what appears to be the impossible, we often actually do the impossible.” (Logan’s reading of Welch was, of course, highly selective. Yes, Welch believed in stretch goals. But he also said, “If you don’t have a competitive advantage, don’t compete.”)
The reference to “pushing until we get there” triggered in my mind an association with the great pushes of 1915–17 during World War I, which led to the deaths of a generation of European youths. Maybe that’s why motivational speakers are not the staple on the European management-lecture circuit that they are in the United States. For the slaughtered troops did not suffer from a lack of motivation. They suffered from a lack of competent strategic leadership. A leader may justly ask for “one last push,” but the leader’s job is more than that. The job of the leader—the strategist—is also to create the conditions that will make the push effective, to have a strategy worthy of the effort called upon.
33 views0 comments