Why Strategy Matters Most
It's the strategic plan, stupid. Have you reconsidered yours lately?
Leading people is exciting and inspiring. Formulating strategy? Not so much. Cynthia Montgomery, a professor of business administration at Harvard Business School, urges CEOs to stop treating the strategic plan as a dead, dusty document and instead make it the beating heart of the enterprise. In her recent book, The Strategist: Be the Leader Your Business Needs, Montgomery imbues strategy with an existential quality: It is why companies exist. Done right, it is why companies succeed. Leigh Buchanan spoke with Montgomery about why CEOs should learn to love this misunderstood part of the job.
Exposure to a group of entrepreneurs changed the way you had long thought about strategy. Tell me about that.
For a long time, I had been teaching strategy, mostly to managers in large corporations, as a matter of frameworks and analysis. Then I started working with entrepreneurs. They talked, sometimes very emotionally, about hard decisions they had faced about whether to stay the course or try to reinvent themselves. And I realized, first of all, that the way we think about strategy has become too mechanistic. And second, I realized how responsible these people felt for their strategies because they felt responsible to their companies and the people working for them. So I thought we should shift our emphasis from the strategy to the leader responsible for that strategy--the strategist.
What is the strategist's job?
The strategist's job is to determine what the company's identity will be, why it will matter, and to whom. Just saying why you are different isn't enough if you're not different in a way that matters to a customer. Think of the distinction Peter Drucker draws between doing things right and doing the right thing. Strategy is about doing the right thing. Here is an exercise. Take a piece of paper and write down the purpose of your business. Then describe what the world is like with you and what it would be like without you, and see if there's a meaningful difference.
You've asked a lot of entrepreneurs what makes their companies different. What are some bad answers you've received?
"We're a one-stop shop." Usually the leader thinks that's more important than the customers do. So I say, OK, if what you have relative to competitors is that you've put these things together, why is that important to the customer, and how much are they willing to pay for that? Another is something like, "We're the largest independent wholesaler in the Midwest." Well, who cares? A lot of people have points of difference. But they're not points of difference that matter.
What's a good answer?
Say someone who grows pineapples can show that the number of days from the field to the store is fewer than his competitors'. Pineapples are a perishable good, so that really matters. The customer will come to him instead of the other guy. Because he's connecting the customer's needs with his offerings.
What are CEOs spending a lot of time on at the expense of strategy?
Leadership has become all about people and culture and these soft things. Yes, it's important to get buy-in, but buy-in to what, exactly? People say, "Which is more important: formulation of strategy or execution?" That's a stupid question. What's the point of having a half-baked strategy executed well?
But a lot of CEOs pin their successes on their people, not their strategies.
I hate it in these annual reports where they just say, "It's our people." That's lazy thinking. Why do those people want to work for you, and why are they more effective working for you than for somebody else? In what way are you adding value to the people? You've got to think about your company, not just your people. You've got to look at your customer and how your company is meeting that customer's needs uniquely well. Because the customer will decide whether you are successful.
