… talking about strategy

Many companies may find some of the articles in the latest e-issue of the McKinsey Quarterly to be helpful, such as ‘Market fundamentals: 2000 versus 2007‘ and ‘Learning to love recessions‘.
Even more useful perhaps is the article on ‘Preparing for the next downturn‘ - it can be too late to think about escaping the quicksand when you’re already up to your neck. There’s an intriguing little twist to this one though - one of the examples quoted of successful survival after 2000 is Starbucks, who “… accelerated growth during the recession by increasing the number of licensed and owned locations.” Perhaps the authors could explain how come the company is now in trouble from following precisely that strategy? [see earlier post] When retail turnover falls away, rationalizing an over-extended branch network is often essential - better perhaps not to have over-extended in the first place?

Pity to see that long-rising star, Starbucks, in trouble over the last year or so. Specially intriguing to see the similarities with the MacDonalds’ trouble around 2005 - over-expansion.

… and now we see Merrill Lynch in the same trouble, so perhaps they could answer the same question we put to Citigroup.

Meanwhile, here in the UK, we are told that every household in the country is going to have to stump up Stlg 2,000  to prop up another spectacular failure of strategy, this time at Northern Rock - a bank whose breath-taking brilliance took them to a leading position in the mortgage market.

Again, what makes me especially angry is less the losses suffered by investors who know the risks than the awful hurt done to the bank’s customers and employees - ordinary folk who did nothing to sign up to this damage. So, same question again - who are the people whose strategic errors did this harm to those people, and will they kindly return all the money they were paid in at least partial recompense for the damage they have done to ordinary people?

Interesting to see that Citigroup may take a further multi-billion dollar hit as a further consequence of the sub-prime lending fiasco. Now nothing makes me angrier than strategic incompetence, not because of the harm it does to investors - they know they are putting their money in the hands of people who may flush it away - but because of the ordinary folk who get burned.

Now a few people walked away from all this with nice multi-million dollar bonuses, when anyone with half a brain already knew the house of cards was going to collapse. I’m sure the finance guys made sure the numbers looked right when the strategy continued to be pushed forward. But it’s strategic managers’ responsibility to look over the horizon and check what might be coming towards them.

So here’s the question - will those same strategic managers now go get back the money from the people who took those bonuses and return it to the ordinary people who suffered? And if not, why not?

The latest from McKinsey Quarterly is yet another fire-hosing about ‘driving radical change’, ‘transformation without crisis’, etc. etc. Radical change is very rarely needed, most often destructive, and only appropriate in the most dire circumstances - which applies to very few organizations. And don’t come back with ‘Well you’ve got to transform yourself before some mega-upheaval happens to you’ - it probably won’t, and if it could do, then you’d be better looking to adapt than transform.
At least they haven’t done what the late lamented Cap Gemini did - define themselves as a ‘transformational’ consulting firm - before seeing sense and teaming up with ‘boring’ Ernst & Young.
“If it ain’t broke, don’t fix it - but for sure look to make it run faster, bigger and easier”

Everything seems to be happening at once round here. Having got the book out … and decided to rebuild the MBA course entirely around it … and record it all for others to use in class and professional training … and start a Forum for course participants and everyone else to use … and offer loads of new learning materials - Christina and I are just about done in !

Ah well, only another thousand hours to get it all finished !

This FT article regrettably makes public what can no longer be kept as private grief within the business schools - and Strategy is amongst the worst offenders !
There’s no gentle way to say this - virtually no-one uses the ‘tools’ we teach, because they don’t do anything useful. Take a look at the latest survey of management tools by consultants Bain & Co. The only strategy ‘tools’ mentioned ['strategic planning' and 'growth strategy tools'] aren’t tools at all, but things managers feel they ought to be doing.

The data in chapter 1 reports the numbers of diabetes cases diagnosed, whereas chapter 6 looks at the likely development in total numbers of cases, including estimated numbers undiagnosed. These could be as much as 40% higher in number.

We have just launched a NEW forum for this area and encourage you to join the community conversation. I have added links on the StrategyDynamics website and the book website - forum.strategydynamics.info.

There are two streams of students taking a Strategy Dynamics course with Kim Warren starting week of Jan 14th, one based in London at London Business School and one online through Worcester Polytechnic Instrute (www.WPI.edu) and we hope this will encourage debate - the forums are not limited to students though - please do drop by - and don’t be shy!

Hope to see you there!

I see the latest Harvard Business Review (Jan 08) includes a nice piece from Cynthia Montgomery on ‘Putting leadership back into strategy‘. It makes important points  … that strategy is about creating value [a.k.a. growing future cash flows], rather than sustaining high profitability … that strategy is a continuous process of improvement rather than an occasional event … and that strategy is the CEO’s job.

Not so sure about the implication that this ‘leadership’ is a semi-mystical process [ 'At heart, most strategies involve some mystery' - any evidence to support this assertion? ... 'The need to create and recreate reasons for a company's continued existence sets the strategist apart' - delivering strong cash-flows seems a better purpose for the CEO]. Not sure either about the veiled hint that there is ‘too much’ analysis in strategy. Any evidence for this? … seems to be plenty for the dangers of strong leadership with poor analysis - Enron, WorldCom, Tyco, eBay/Skype, sub-prime lending.