For a very long time the process of strategy formation and the process of strategy implementation has been seen as two separate areas and part of a two-step process. This has its roots in the assumption that strategy is predominantly a financial process best left to senior management and financial consultants that delivers a fait d’accompli to the line businesses and HR to implement. Change process research has demonstrated that most change initiatives fail to bring the intended benefits to the corporation. That does not prevent managers from declaring victory even for implementations that destroyed shareholder value. Even a good strategy can fail as a result of a poor implementation and the other way around.
Nice landing – wrong airport!
By integrating the strategy and the implementation process it is possible to increase the probability of success significantly. Here are 7 steps to integrating Strategy formation and Implement the change process.
1. Have a clear non-financial goal with the strategy.
It is fine to have a financial goal for the strategy but it is not a strategy; a financial goal is an outcome of a successful strategy. Strategies are in their core about creating future sustainable competitiveness as either a response to external events or as an attempt to create events. Too often the financial goal is communicated as a strategy bearing no meaning to most of the stakeholders.
2. Make sure your strategy makes the world a better place (it also ok to make a profit).
This vital element of a strategy has been known for a long time but has been forgotten in recent years. Carl von Clausewitz put it: “There can be no strategy without noble purpose”. With a noble purpose it will be possible to move the organisation through a change process. Profit and revenue might be powerful motivators for management and executive staff but as Daniel Pink demonstrates it does not really motivate significantly.
3. Make the cost of doing nothing clear.
It is often assumed that doing nothing is the lowest risk option. In this time of disruption it is never the case. When Stephen Elop, CEO of Nokia, declared: “Nokia is on a burning platform” he made it very clear that change was needed and even that would not guarantee success. People don’t change as a result of information. They change either to get away from a bad situation or to get to a better place or both. For the change process to succeed, the strategy has to create tension between these to states.
4. To secure implementation, it is important for the strategy to benefit all or most stakeholders.
Most strategies have a short term aim to create monetary benefits for the shareholders often at the expense of other stakeholders. Profits can be increased by reducing headcount at the expense of the people that stay; they will have to work harder. Profits can also be increased by reducing service staff at the expense of the customer. These kinds of strategies are rarely implemented effectively and although short term profits can be demonstrated it also destructs shareholder value in loss of employee engagement and customer defection. For a strategy to be effective it has to benefit most or all stakeholders not just shareholders. If the strategy benefits employees, customers, external organisations and society, it should also benefit the shareholders. Even if this is not the most common way of operating it is quite obvious that there are a number of companies that have taken this path and are in a league of their own. Companies like Google, Tesla, Netflix and Virgin are willing to make their strategy work through their employees and not at their expense.
5. Convince your shareholders of the long term perspective or change them.
It can be challenging or even scary to take a long term strategy to the shareholder community. Stories are countless of stocks being punished for initiatives that create long term shareholder value. When Paul Polman took over Unilever after 10 years of cost cutting he declared that his goal was to double the revenue and the days of cost cutting where over. If an investment made sense it would be implemented no matter what the quarter looked like. He decided to stop giving guidance to the stockmarket and was immediately punished with an 8% drop in shareprice when the quarter-rapers left the stock. As he put it “Like you select what customers you want to serve, you also need to select what shareholders you want to work with. You need to find shareholders that share your long term sustainable vision for creating shareholder value without exploiting other stakeholders. Since then, the Unilever stock price has doubled.
6. Involve stakeholders in the strategy creation.
It is not common to involve stakeholders into the process of strategic formation. Senior management often believes that it is best to keep this process behind closed doors to limit damage. The assumption is that the speculation stakeholders has outside the door is less damaging that if they were on the inside of the process. This is a reminiscent of the ancient view of heroic leadership – senior management knows best and just do what you are told. Most implementations fail, not as a result of people being change resistant but as a result of people resisting being manipulated. By involving stakeholders into the process, the strategy might change in ways that benefits different groups and as advocates are involved the implementation has started before the strategy process has finished.
7. Communication of the Strategy has to involve Emotional Persuasion as well as rational arguments.
New neurological research that has proven that human behaviour is modulated heavily by emotions and social context. Many years of study has failed to establish a strong link between employee and customer satisfaction and corporate results. More recent research by Gallup has shown that employee and customer engagement directly predicts corporate performance. Where satisfaction has it base in a rational exchange between the corporation and the stakeholders – engagement is a fully emotional connection.
Management theory has a lot of research on both strategy formation and change processes for successful transformation of organisations. However most of these models assume that people and organisations predominantly behave rationally. There has been a lot of new neurological research that has proven that human behaviour is not predominantly rational and does not change as a result of getting new information. But we already knew – if we were rational there would be no wars, stock market crashes, substance abuse, obesity, poverty or exploitation of resource.