Senior Management's Blueprint for Corporate Growth

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The Strategy Revolution

ey LewisJ
Perelman

In this article, Lewis] Perelman, President, Strategic Performance Seroices in Alexandria, Virginia, summarizes some of the key elements in what he contends is a new strategy revolution emerging among executives who have been revising their approach to management in an effort to make theirorganizations "bestrategic." The strategy revolution is marked by a shift in focus from "hard" [0 "soft" -that is, away from "hard" data, rational analysis, and singleminded pursuit of the bottom line, and toward such "soft" dimensions of management as goals, philosophy, culture, organization, systems, creativity, innovation, and motivation. Similarly,the old concept of "strategy" as a static document in a black notebook, generated by an often thoughtless planning ritual, is being replaced by a new vision of strategy as management thinking and total organizational performance. Based on a number of years of professional experience in strategic management, I recommend the following five essential steps for corporations that want to be leaders in strategic performance.

Alean staff and/ or consultants may be used to support e process generating and implementing strategy, but the essential workthinking, deciding, acting - must be retained by line management. Flat, broad, and lean structure. In the turbulent business environment that will persist for decades to come, strategic advantage will be commanded by those companies that are most flexible and adaptive to change. Hierarchicalbureaucracies are doomed. Superior strategic performance requires a flat, broad stnICturefew levels in the "chain of command;' broad "span of control;' and human-scale business units (500 employees seems about the optimum size). . The overhead burden of sprawling staff, once a necessary evil of governing a large organization, has been made an unnecessary evil thanks to telematic technology. One desktop computer with good software, and the right kind of communications system, can provide the line manager with far greater support to analyze and execute decisions than do dozens of staff and middle managers. Participatory strategic management. Agrowing number of American corporations are encouraging employee participation in operational management through such devices as "Quality Circles:'Few companies yet have grasped the necessity of broadening participation in strategic decisionmaking. We need a more powerful process than just the usual "open door" or suggestion box, Le., the use of "Strategic Circles" which could provide companies with an effective mechanism for broadened participation in strategic management. 5. Manage Thinking. It should be evident that the quality of corporate strategy is limited by the quality of the thinking that creates it. Though "strategic thinking" long has been a popular catch phrase, we are just beginning to learn how much we really can do to manage and cultivate this most critical resource. This is a complex task, but again let me offer a few simple suggestions. First, learn as much as you can about the intellectual capabilities of your company's people. People vary not only in their levelof"IQ;' but in their knowledge, interests, experience, values, and thinking "styles:' No one human can be a perfect thinker about all problems; it pays to learn what your organization's mental strengths and "blind spots" are. . Second, develop opportunities to expand your collective cognitive skills.There are a surprising number of workshops, seminars, books and other training resources available to cultivate creativity,innovation, imagination, intuition, logic, and other problem-solving skills. Finally,develop your intellectual support network of individuals with powerful minds and provocative ideas to leaven the thinking ofyour own people. Bring them in to reason with - not just talk atyour folks and keep them involved over a sufficient period of time for them to get to know your goals and values. ConclusWn These things are happening in many comp~ies today. But, to be a leader in the strategy revolution.you.aeed to pursue them all in a consistent, integrated program: keep a clear focus on what "strategy" really means; move to*ard flexible issues management and away from planning rituals; take full advantage of the power of emerging telematic technologies; make your total organization an effective strategic weapon; and make a conscious effort to expand and use your uniquely human capacity for creative thinkin!t,;;.... ,

"Strategyis ideas- intentions (uhat do we want to do and to achieve).perceptions (uhat are the relevant.{acts).and expectations (the 'what if' questions):'
There are examples of each of these steps being practiced inAmerican companies today. But superior strategy requires all these steps to be carried out in a coherent approach, and I know no examples where that is yet being done. 1. Understand the Meaning of"Slrategy" Important business strategy needs are often unmet because executives get distracted by tactical activities which are misleadingly labelled "strategic." It is, therefore, important to know what we mean by "strategy." Strategy literallyrefers to the decisions made by a military general, or similar top manager. In essence, strategy is the line decisionmaker's consciousness of the implications of each competitive decision. Strategy is ideas - intentions (what do we want to do and to achieve), perceptions (what are the relevant facts), and expectations (the "what if' questions). At best, planning may help you to organize the execution of strategy, but the rigidities of formal planning systems also have been known to stifle the creativity and flexibility that superior strategic performance requires. For example, the vice-president for planning of a major electronics company, which recently abandoned a consumer product line that had lost half a billion dollars, admitted that the company's planning had failed because of "the tendency to substitute mechanics for thought," resulting in a process of" strategy by cookbook." The critical fact to understand about "strategic planning" (which I have never seen stated clearly in any text on the subject) is this: no strategic plan has ever been implemented Anyone who ever
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The Strategy Revolution

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tried to adhere to a prefabricated "strategic plan" in war, politics, poker, business, or any other competitive game suffered disaster. "Strategic plan" really is a contradiction in terms. Plans are most useful under conditions that are predictable and controllable. Strategy is essential precisely because the events of a competitive battle are always,to some extent, unpredictable and uncontrollable. The importance of strategy increases as the feasibility of planning decreases. Also, while planning is highly concerned with analysis of data, strategy is mainly concerned with creation of ideas - that is, patterns and meanings. If you try to define the ideal strategy for creating a new business or entering a new market, environmental changes will continually invalidate the assumptions on which your plans are based. Competent competitors, who know that surprise is the most effective strategic weapon, win go out of their way to do what you least expect. Customers will behave "irrationally." The plan will be compromised by internal politicking;subordinates will be insubordinate. And on, and on. Such disruptive events, commonly referred to as strategic problems, cannot be "solved" like algebra problems. Instead, they must be addressed as issues to be managed - the desired result is not an ideal solution, but some resolution that at least allows you to make continued progress toward your strategic goals.

into the consciousness of decisionmakers. Teamwork helps reduce information overload. Teamwork also helps sharpen pattern recognition, and therefore issue definition, by subjecting business intelligence to a variety of perspectives and thinking styles.For example, one corporation has created an issue team to answer the question ofwhat technological capabilities the firm should possess to remain dominant in its industry. Teamwork is really essential to getting the full strategic benefit of issues management. Critical strategic issues almost always cut across the boundaries that define professional fields and organizational units. Superior performance requires a holistic view of COfporate strategy which can only emerge from an interdisciplinary or interdepartmental approach.
Line responsibilit)l Issues must be managed by line managers, not

by an academic department of staff "issues managers:' Staffor consultants can provide technical expertise, but the process should remain in the hands of line people and centered ultimately on the CEO.

3. Manage "Telematlcs"
Telematics -the marriage of computer and communications technology - is transforming the structure and function of our whole economy; including corporate management. Nobody yet knows exactly how to capture the fullbenefits of these powerful tools, but it is clear that enormous strategic advantage will accrue to those companies that lead the way. A leading oil services company is using computerized production scheduling and parts-inventory records to enable plant managers to decide quickly whether to fill an emergency order for the company's specialized oil drilling equipment. Ifyou wait for the perfect system, you willbe accepting a permanent and growing competitive disadvantage. Leading organizations will learn to coevolve with the technology. The important requirement here is to make this development a collaborative effort of computer experts, communications experts, industrial psychologistS, organization developers, human resource specialists, and managers themselves. You will need to establish a multidisciplinary team, calling on consultants if needed. The whole program should be directed by a forceful line manager who win report to the CEO.

2. Manage Issues
Superior strategic performance requires getting away from the annual ritual of concocting an ideal "pian;' and instead developing a proactive, flexible, day-to-day process for managing strategic issues. "Issues management" is being practiced in a growing numher of corporations. Although corporations are devising substantially different ways of establishing an issues management process, the most effective approaches reflect at least the following three characteristics; Business intelligence. The American headquarters office of a major Japanese electronics company has been described as an "anthill of intelllgence activity:' A Defense Department consultant estimates tharjapancse electronic firms have some 1,500 software experts deployed in the U.S.,spending up to S30 million a year, primarily to gather intelligence about American computer technology. The same expert estimates that 35-40% of the baseline data required to develop Japanese VlSI semiconductor chips came from such intelligence operations. FewAmerican companies take the intelligence process as seriously as do their foreign competitors. The corporate planning department o(ii;l\xtune 500 company I know had a staffof20 people receiving over t2P periodicals a month, yet had no process for systematically

4. Createa Strategic Organizatton

Though "corporate culture" is currently a hot management topic, many managers still seem not to realize that superior strategic performance, in relation to the external environment, requires a "strategic" internal organization, including structure, systems, human resources, values, goals, and so forth. Creating a strategic organization is a complex task, but let me suggest three fundamental requirements. Clear line responsibilit)l "Implementation" has become a key buzzword in recent strategy articles, because top managers are coming to realize that having an elegant strategy on paper is useless if the organization cannot carry out the actions it demands for success. The simple fact is that line people are not effective in carrying out a strategy that they do not "OMl;' and they feel ownership only of what they have created themselves. You should make it explicit and forcefullyclear that strategy is a line responsibility which should be shared broadly (to encourage the sense of"oMlership"), but must not be delegated to those who lack decisionrnaking authority

"Teamwork is really essential to getting tbefuU strategic benefit of issues management. Critical strategic issues almost always cut across the boundaries tbat define professknud.flelds and organizatUmal units:'
scanning, analyzing, consolidating, and reponing the strategic infor mation in this resource to responsible decisionmakers. In this company, millions of dollars and thousands of people-hours were being invested in reading, professional seminars, conferences, sales

reports, market research, and so forth.Yet only a few percent of the potential intelligence value of all this activity was actually used.

'/eamwork Information is useless ifit is not digested and integrated

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