Middle managers get hit again
I see middle managers are getting hit yet again, this time in McKinsey Quarterly as ‘innovation blockers‘.
It seems to be forgotten that middle managers have the additional rather boring but important role of actually running the business that generates the cash flow that funds innovation. This is the group that actually knows how things work, as compared with juniors who only see their own function and seniors who move on every couple of years so never get to really understand anything.
With no organizational slack and perpetual pressure to hit targets with ever lower costs, they often don’t have time even to do that essential job properly, let alone contribute to innovation.
And too often, their ideas for innovation have been ignored for years.
Don’t copy what’s not relevant
A nice word of caution from strategy+business magazine about looking for magic strategy answers by peering into the ways of superstars. In The Google Enigma, they point out that ‘Unless your company makes money by selling advertising attached to digital goods, you may not be able to learn much from Google’s example’. You can say that again! … the staggeringly powerful technology behind Google is so idiosyncratic to its case as to dwarf the contribution of almost anything else they may be good at.
Shame, then, that management development and MBA training puts so much reliance on case studies with way too little attention given to the relevance of those stories to other contexts.
Strategic incompetence continued
… 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?
Strategic incompetence
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?
Oh no – not ‘change’ again !
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”
Strategy and leadership
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.
Profitability or growth?
Much of what we know about strategy comes from research into why some firms are more profitable than others – but investors value growth in cash flows [see chapter 1 of Strategic Management Dynamics]. An article in McKinsey Quarterly ‘How to choose between growth and ROIC‘ [return on invested capital] confirms the importance of this issue and shows how investors benefit from growth, depending on companies’ profitability.
Crisis in Strategy?
The Academy of Management conference each summer brings together large numbers of faculty from business schools, mostly from the United States but also from other countries. Amongst the sessions on strategy at this year’s event in Philadelphia, discussions expressed disquiet about the state of the subject and its status in departments and teaching in business school. Observations and feelings reported include:
- ratings for strategy courses are falling, and students are dropping strategy classes
- other subjects [Economics, Marketing, OB, Operations, Entrepreneurship] are stealing segments of what used to be strategy courses
- young Faculty can’t be found to teach strategy because it needs real-world experience which they don’t have, and the frameworks available for them to teach with are weak and not especially relevant to real-world challenges
- top recruiters, especially the strategy consulting firms complaining MBAs don’t know anything useful about strategy
There was a general call for something that consolidates strategy’s key role, to provide integration amongst the other subjects of the curriculum.
Is this your experience, whether as a teacher, student, or recruiter?