Sunday, November 16, 2014

MANAGEMENT / STRATEGY SPECIAL ..................The essence of strategic management

The essence of strategic management


Strategies, in my experience, always come from one of three sources: strategic planning, strategic thinking, and opportunistic decision making—with the latter two being the most important.

I think of strategic planning as the job of collecting and analyzing the enormous amounts of data that characterize the modern world and monitoring changes in markets and the competitive environment. This process, which requires frameworks and concepts, is where academics can contribute most in the way of ideas, and strategic-planning groups can add the most value. Strategic planning, defined in this way, provides the raw material and factual basis for strategic thinking and opportunistic decision making.

The next challenge is to synthesize this raw material into what I once called (in a 1978 McKinsey staff paper that was subsequently summarized in the Quarterly) an “integrated set of actions designed to create a sustainable advantage over competitors.” In my view, this is the province of CEOs and their top-management teams, and the quality of the synthesis and the effectiveness of the implementation are determined by the quality of the interaction between those teams and the strategic planners. This is the essence of strategic thinking and strategic management: it’s where creativity is paramount and insights take place, and it’s not something that should be limited to an annual strategic-planning process.

Checklists of strategic leverage points—though I prefer the richer notion of “dimensions,” or “strategic degrees of freedom,” as Ken Ohmae called them in his book The Mind of the Strategist—are a powerful means of structuring these discussions and stimulating strategic thinking.

Those involved must gain agreement on what the dimensions are; what, in each dimension, is the second level of strategic degrees of freedom; and what data and analyses are required to shed light on these questions. There are some obvious dimensions: customers, costs, and so on. But new ones are always coming in. You’re more likely to grapple with the right issues if you explicitly take the time to ask along which dimensions should your organization be doing its strategic thinking and engaging in creative debates.
The question then becomes what process continually engages the top-management team in synthesizing and resynthesizing the analyses into both meaningful strategic initiatives and some strategic rules of thumb that can inform opportunistic decision making and continually evolve. A related step in building a robust and insightful approach to managing a company strategically is to engage the board in the process. This must be done in a manner that keeps directors fully informed about the dimensions of the strategy being explored and that provides them with ample opportunity to probe and contribute to the strategic thinking.
Our recent conference in London began with a lively debate on the paucity of new frameworks for strategy development. We wound up spending a considerable amount of time sharing views on the people and processes that underpin strategy. I thought this was appropriate, and I am hopeful that as the developers of strategic ideas—in academia, corporate strategy departments, and McKinsey—continue pushing the state of the art in response to the changing business environment, they will focus at least as much on tools supporting synthesis and bold responses to unexpected opportunities as on frameworks and planning.

Fred Gluck

http://www.mckinsey.com/Insights/Strategy/Synthesis_capabilities_and_overlooked_insights?cid=mckq50-eml-alt-mip-mck-oth-1411

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