The Strategist Handbook

🚀 The Book in 3 Sentences

This book is a very practical introduction to company strategy, and how to execute strategy. It is for the consultants, managers and planners who define and execute a strategy.

🎨 Impressions

A strategy must be clear and communicated again and again and again until it is as ingrained in the culture that everyone knows it.

Execution is everything.

✍️ My Top Quotes

Likewise, the Greek term strategos, a compound of the Greek words stratos (army) and agos (leader), refers to a leader or commander of an army.
The most prevalent descriptions of “strategic planning” characterize it as the process by which an organization differentiates itself from its competition to achieve its desired mission and goals
A mission answers the question: what do we do as an organization? Awell-designed mission statement defines the company’s primary, distinctive purpose, setting the firm apart from other similar organizations.
Vision. A clear organizational vision answers the question: where are we going as an organization?
The clear and concise vision of General Electric, during the tenure of former CEO Jack Welch, was: “We will be either number 1 or 2 in any business we are in.”
Values. A firm’s values answer the question: who are we as an organization? Organizational values refer to beliefs about standards of behavior organizational members should exhibit
While strategy addresses how a firm will deliver on its mission, achieve its goals, and reach its vision, tactics answer the question: how will we execute our strategy? Therefore, tactics are a subset of a particular strategy.
Strategy is the one you can implement. No matter how brilliant or elegant a strategy is, it is worthless until effectively implemented.
Robert Behn (2003) of Harvard University identifies eight key benefits of effective performance measurement: Evaluation. How well is the department, business unit, or overall organization performing? Control. How can we ensure management and employees are doing the right thing? Budgeting. In which programs, people, or projects should we invest? Motivation. How can we prompt line staff, middle managers, and collaborators to do what is necessary to improve performance? Promotion. How can we demonstrate to stakeholders and the media we are doing a good job? Celebration. What accomplishments are worthy of celebrating success? Learning. What is working or not working? Improvement. In what areas do we need to focus our improvement efforts?
Henry Mintzberg (1987) argued that strategic planning is an analytical process with a business plan as its outcome.
As Matzler and colleagues state, “Most managers would be unable to work effectively if they couldn’t rely on their ability to extract relevant information from the many reports and charts they are confronted with daily. Thanks to their experience, skilled managers can ‘read between the lines’ and recognize patterns, rather than consider all possible information in detail”
Use data to mitigate personal bias. Although intuition plays a role in the strategy process, and, depending on the organization, often a prominent role, those working on the strategy process should guard against intuition turning into detrimental bias.
The senior team to make the case for why a particular proposed strategy should not be pursued can help moderate any management biases and/or groupthink that may occur, helping management to genuinely think through the rationale for and validity of each proposed strategy.
Senior team to make the case for why a particular proposed
Assign a “devil’s advocate.” A person assigned within the senior team to make the case for why a particular proposed strategy should not be pursued can help moderate any management biases and/or groupthink that may occur, helping management to genuinely think through the rationale for and validity of each proposed strategy.
At its core, strategy is about predicting the future.
According to two different studies (McGahan and Porter, 1997; Rumelt, 1991), in developed economies, company characteristics have about three times more impact on profitability than industry factors. However, in emerging economies, company characteristics have over twenty times more impact than either industry or country factors
Conducting a Five Forces analysis provides data that feeds into the external “OT” (Opportunities and Threats) elements of a SWOT analysis, helping management understand where a firm fits in the industry landscape, how it currently competes within the industry, and how it might position itself in the future. In a follow-up piece to his original Five Forces article, Porter (2008) emphasized that understanding the overall industry structure as well as the competitive forces at play is a vital element of effective strategic decision-making to develop an effective competitive organizational strategy.
Consequently, almost two decades after Porter’s seminal article, Brandenburger and Nalebuff (1996) introduced the concept of a “sixth force” they called “complementors,” which provide products and services that are best used in conjunction with a product or service from another provider.
Fads. Common in the fitness, clothing, food, and beauty products industries. A fad is something that quickly becomes popular and often disappears just as quickly, often lasting a year or less
Fads are short in duration and often narrow in scope, trends last longer and their scope is broader, whereas megatrends are enduring, take years to progress, and impact the entire world.
The PESTEL framework examines key external factors beyond industry dynamics across six categories (Political, Economic, Social, Technological, Environmental, and Legal), which can also contribute to the external “OT” (Opportunities and Threats) elements of a SWOT analysis.
A common definition of a trend is the identification of societal changes and developments.
Potential pitfalls of external strategic analysis include no prioritization of data, one-off analysis, using qualitative information only, analysis paralysis, and relying on management intuition only.
Between resources and competencies. On the one hand, “resources” are what firms have and can be segmented into four categories (physical, financial, human, and organizational). On the other hand, “competencies” (which are often also called “capabilities”) are what firms do and can also be segmented into the same four categories
Segmented into four categories (physical, financial, human, and organizational). On the other hand, “competencies” (which are often also called “capabilities”) are what firms do and can also be segmented into the same four categories
To avoid confusion, it is useful to differentiate between resources and competencies. On the one hand, “resources” are what firms have and can be segmented into four categories (physical, financial, human, and organizational). On the other hand, “competencies” (which are often also called “capabilities”) are what firms do and can also be segmented into the same four categories
Threshold competencies are required to compete in the industry, provide competitive parity, are essential for organizational survival, and are possessed by many competitors. Meanwhile, distinctive competencies are required to win in a competitive market, provide competitive advantage, create organizational success, and are possessed by one or just a few firms in the market
The value chain model (Porter, 1985) is an end-to-end view of an organization’s operational and support activities. A firm’s operational activities along their value chain can include sourcing raw materials, manufacturing and production, logistics and distribution, marketing and sales, and after-sales service. A firm’s support activities can include human resources, information technology, finance, procurement, legal, accounting, and tax, among others.
The VRIO framework (Barney, 1995) consists of four key criteria about a resource or capability to determine its strategic value to the organization: Value: Does the resource/capability enable the firm to improve its efficiency or effectiveness? Rarity: Is control of the resource/capability in the hands of one or only a few firms? Inimitability: Is it difficult for other firms to imitate, and will there be significant cost disadvantages to a firm trying to obtain, develop, or duplicate the resource/capability? Organization: Is the firm organized in such a way that it is ready and able to exploit the resource/capability?
Key characteristics that make resources inimitable are: Complexity. The resource consists of internal and external linkages. An example is an auto manufacturer’s supplier network and embedding those suppliers into the firm’s enterprise resource planning (ERP) system. Ambiguous. It is difficult for other firms to discern the characteristics and linkages of the resource. A firm’s superior customer service process that blends skilled service personnel with an automated customer management system and a service-oriented organizational culture is an example of an ambiguous resource. Historical. The resource is built over time. A firm’s reputation for providing high-quality and long-lasting products is an example of a resource that is built over time. Cultural. The resource is embodied in the firm’s culture, such as a culture of innovation that enables the firm to regularly offer new products and services.
In any strategy process (whether dynamic or traditional), analytical data (both formal and intuitive) informs the potential strategies management identify and the strategic choices they make.
These analyses provide answers to two key strategic questions: Where and what are the largest and most likely future external developments and market opportunities? What internal resources do we have, and might we need, to take advantage of the future developments and market opportunities identified?
Keep the list of priority strategies short. Identifying a shortlist (e.g., three to five) of priority strategies for implementation enables management and the broader organization to allocate sufficient resources and attention to each strategic priority.
PATH Framework. Yet another alternative to the market entry profile map and the CAGE Distance Framework to assess a country’s market attractiveness is the PATH Framework. The four dimensions of the framework are: political, which includes governmental policies, political stability, corruption, and regulation administrative, covering trade agreements, currency, legal system, and visa and work permit requirements transportation and infrastructure, encompassing ports, roads, telecommunications, and internet access human resources, including demographics, cost of labor, workforce skills and education, and labor laws.
CAGE Distance Framework. An alternative to the market entry profile map is the CAGE Distance Framework (Ghemawat and Siegel, 2011), which can be used to ascertain differences or “distances” between countries across four dimensions that companies should address when identifying and implementing international strategies. The four dimensions of the framework are: cultural, which includes language, customs, values, norms, work systems, traditions, religion administrative, including trade agreements, colonial ties, currency, legal system, governmental policies, political hostility, visa and work permit requirements, and corruption geographic, involving physical distance, common land borders, time zones, transportation, and communication economic, composed of per capita income, cost of labor, availability of human resources, and economic size.
For example, a survey of senior executives from 197 companies worldwide, with sales exceeding $500 million, found that companies typically lose well over a third (37 percent) of their strategies’ potential value because of poor execution.
Consequently, the process of strategy execution needs to be a management priority. To make this point, Oxford Professor Thomas Powell compares strategy execution to climbers of Mount Everest who, “must consider strategy execution, both during the climb and while planning the climb … Success in climbing Everest does not depend on choosing the right path, but on the climber’s capacity to deal with the conditions of the actual climb”
Two key activities have a major impact on building and maintaining momentum for successful strategy execution: visible “quick wins” and continuous communication.
Initially implementing quick-win actions—those that can be put in place within thirty to sixty days of execution launch—demonstrates early progress. The quick wins should be closely followed by staggered implementation of medium-term (six to twelve months) and long-term (one year and beyond) actions.
Discounting the value of regular strategy execution tracking and reporting. The adage of what gets measured gets managed applies to any strategy execution effort. Regular tracking of both progress against milestones of the implementation plan and results achieved throughout the implementation process is essential
*Seven fundamentals of transformation management facilitate the process:
- Apply defined, clear implementation leadership
- Address “me” issues quickly
- Provide extensive communication
- Ensure a focus on customers
- Make tough decisions
- Create focused initiatives
- Manage resistance at every level
Too often, management who should be “transformation champions” opt for playing politics instead of providing visible leadership to the organization. This tendency only makes it more difficult for people to get resolution of their “me issues” described below that generate so much uncertainty and low morale across the workforce. When
Too often, management who should be “transformation champions” opt for playing politics instead of providing visible leadership to the organization. This tendency only makes it more difficult for people to get resolution of their “me issues” described below that generate so much uncertainty and low morale across the workforce.
Consequently, the foremost topic to become a matter of great concern among the workforce at all levels of the organization, from executives to front-line employees, is personal uncertainty, their “me issues.”
This finding is supported by Longo (1996), who notes, in writing about the difficulty of transformation efforts, “the number one source of difficulty with implementation is the disregard for, or misunderstanding of, the resistance to transformation”
It’s true that resistance can be irrational and self-serving. But like it or not, it is an important form of feedback. Dismissing it robs you of a powerful tool as you implement transformation. It takes a strong leader to step up and engage when a transformation effort meets with pushback. If you can gain understanding, and learning from behaviors you perceive as threatening, you will ultimately deliver better results.
Although the situation is shifting, many MBA programs and management training courses still focus primarily on the “hard” (technical, operational, financial, and analytical) aspects of business, dealing only in a cursory way with organizational transformation. As a result, management training does a poor job of addressing how to work through resistance encountered during major strategic transformation efforts. Another reason is that managers’ practical experience during the strategy formulation process, often with a particular focus on analytics, merely serves to reinforce their training and education while undermining their ability to gain a sound understanding of why and how people resist transformation during implementation and what to do about it.
“How do you bring people into the transformation process? Start with reality. Get all the facts out. Give people the rationale for transformation, laying it out in the clearest, most dramatic terms. When everybody gets the same facts, they’ll generally come to the same conclusion. Only after everyone agrees on the reality and resistance is lowered can you begin to get buy-in to the needed changes.”
The top two reported obstacles faced during major organizational changes were employee resistance and communication breakdown.
The Johari Window (Luft and Ingham, 1955) is a well-established model of building effective one-to-one interpersonal communication that can be applied to an organizational context, helping management develop and deliver effective strategic communications. The Window was originally developed to improve individual interpersonal interactions by assessing the ways in which people give and receive information.
Make communication a priority. Unfortunately, management often view transformation communications as a side issue or they delegate it to others. However, management must communicate early and often, and overtly participate in transformation communications.
When people are let go from an organization, the employees that stay are just as attentive to how the process of separation is being handled as are the exiting employees. The people remaining in the organization, the survivors, view the handling of separations as a clear indicator of the value management places on the workforce.
According to the McKinsey Global Innovation Survey, 84 percent of executives identified innovation as a strategic priority crucial to firm growth, but only 6 percent are satisfied with their organization’s innovation performance
Leverage the “multiplier effect.” Make the whole cultural alignment effort greater than the sum of its parts (1+1=3) by implementing half or more of the twelve cultural levers.
Examples of strategic advantages that can be either limited or enhanced by the company’s nonmarket operating environment include: Cost: cost-saving mergers and acquisitions (M&As) can be blocked or approved by competition or national security regulators. Growth: growth-creating M&As can be blocked or approved by competition or national security regulators. First mover: approved patents allow firms to be first to market. Sole provider: approved patents allow firms to be the only provider in the market. Demand: products made of rare or endangered species are banned by regulators. Complement: software firms are not allowed to bundle operating systems and browsers.
IA3 framework (Bach and Allen, 2010). The IA3 framework can help understand and analyze firm-specific nonmarket issues. The IA3 framework consists of six questions: What is the issue? Various issues include intellectual property, health and safety, emissions and fuel standards, trade policy, consumer protection, competition policy, diversity and inclusion, and so forth. Who are the actors? Nonmarket actors include governments, NGOs, activists, and the media. What are the actors’ interests? Various actors may be interested in equality, safety, sustainability, financial gain, and so on. In what arena to the actors meet? Nonmarket arenas can include the press, online forums, rallies, elections, and so forth. What information moves the issue? Nonmarket information can include research, position papers, expert opinion, emotion, and so on. What assets do the actors need to prevail? Nonmarket assets can include political power, funding, band equity, networks, and so forth.
Nonmarket strategy is a term applied to the aspects of business strategy that address relationships that do not unfold within commercial markets but still affect the company’s ability to reach its strategic goals.
“Regulatory risk” and “reputational risk” have been ranked as top strategic risks by executives.
The issue lifecycle consists of: issue identification, interest formation, legislation, administration, and enforcement.
*Positioning each business unit on the matrix identifies four categories of businesses in a corporate portfolio:
- Dogs. Business units with low market share and low growth rates are candidates for divestment.
- Cash cows. Business units in the portfolio with high market share but low growth are ideal to maintain and harvest the cash flows, which can be used to fund investment in other portfolio businesses.
- Question marks. Portfolio businesses with high growth rates but low market share. Corporate management must decide whether to invest in these business units to grow their market share.
- Stars. Businesses in the portfolio with high market share and high growth. These are business units that corporate management will continue to invest in to become even more dominant in their industries.
Ansoff’s matrix. Used by business unit management to identify growth opportunities (market penetration, new products, new services) and corporate management to identify opportunities to add businesses to the corporate portfolio.
BCG matrix. Used to assess the business unit portfolio of a corporate conglomerate to identify opportunities for investment, divestments, maintenance, or additions to the portfolio.
Mergers and acquisitions (M&As) are ubiquitous terms that include a spectrum of arrangements including non-equity alliances and partnerships, equity alliances, joint ventures, and M&As, each with increasing ownership.
Management agendas of companies, there are generally two types. “Social activists” are primarily concerned with influencing a firm’s ESG (environmental, social, and governance) agenda, whereas “financial activists” principally focus on creating greater returns to a firm’s shareholders.
Financial activists are most often hedge funds that take small but relatively significant stakes in firms, typically around 5 percent of outstanding shares (The Economist, 2015). Upon buying a small but relatively significant portion of a firm’s shares, an activist then tries to influence management’s agenda by gaining other shareholders’ support for their demands, which often include representation on the company’s board, cost-cutting, selling of underperforming assets, and returning cash to shareholders.
In general, shareholder activism creates returns above benchmarks. For example, the average activist hedge fund gained 8.76 percent in the first quarter of 2021 versus the average hedge-fund industry gain of 6 percent and the S&P 500 index gain of 5.8 percent (Herbst-Bayliss, 2021).