Eight elements to create a winning corporate strategy
Harvey Schachter Monday Morning Manager May 20, 2013
In his corporate deal-making career with companies such as Oxford Development Group and Campeau Corp., Alan Kennedy was never satisfied with the boardroom discussion about strategy. It always seemed hazy and unfocused.
When he established his Toronto-based consulting firm, Gibson Kennedy & Co., and began teaching strategy at York University’s Schulich School of Business, he noticed the difference between research on corporate strategy (which tended to be structured) and on the strategy-making process (which was amorphous). Worse, he found that business leaders couldn’t effectively communicate strategy to those whose understanding is required to carry it out.
On the first page of Henri Fayol’s classic 1949 book General and Industrial Management, Mr. Kennedy found six management strategies for executives. Combining that with two ideas from management guru Peter Drucker, he has devised an eight-element framework to develop and communicate strategy.
Mr. Kennedy has also added a second helpful step, showing how to weight the elements according to your organizational needs. “This gives you a dynamic tool to talk about strategy,” he said in an interview.
The framework is explained in The Alpha Strategies, co-written with his son, Thomas (who works for the consulting firm after time in investment research), and is meant not only for companies but also for the public sector and social agencies.
It begins by detailing the eight elements that strategists must consider:
1. Business definition
This is the classic Drucker question: “What is my business and how is it positioned in the competitive market?” For non-profits and governments, the question might be, “What is our mandate?”
2. Financial management
This focuses on the sourcing, allocation and management of the financial capital the organization has at its disposal. The strategists must consider performance and controls as they develop a financial management strategy.
This concentrates on the type and rate of the organization’s growth. This can involve not only growing but also deciding to get smaller, perhaps by leaving certain markets. “Some companies want to stay the same size, which is the toughest,” Alan Kennedy noted.
This involves identifying and capturing customers, through value that will appeal to them. Developing marketing strategy usually requires thinking through the balance between new and old products, and between current products and new products. (In non-profits and governments, where the term “marketing” might chafe, “communications” could substitute.)
5. Organizational management
This requires thinking through the sourcing, allocation, and management of the human resources of the enterprise – the HR strategy.
This is the development and management of technology and intellectual property. You could use it for competitive advantage (as in pharmaceuticals, for example), or for productivity (as when introducing a new computer system). Research might be needed to develop the technology, or it might be purchased.
This illuminates the possible occurrence of the unacceptable, which could include lost opportunities as well as threats. Strategists can assemble the risks on a grid that indicates the likelihood of it occurring (from high to low) and the severity of impact (again, high to low).
8. Service delivery
The organization must take its marketing promise and deliver to the intended audience (through manufacturing, production or service). Key issues to consider are effectiveness and efficiency.
The authors note that each of these eight elements is actually a strategy in itself, and that companies usually have a senior manager charged with each one (chief financial officer, chief marketing officer, chief risk officer).
Their most intriguing insight, however, is that organizations must arrange their strategies into the following array: One strategy, which they call the Alpha, will be the ultimate driving force and focus for the organization; two or three strategies are the Influencers, because they provide the most guidance and constraint on that Alpha; and the other strategies are Enablers, helping it all to work.
At a bank, for example, financial management is the Alpha, with risk management, service delivery, and technology usually the main supporting elements, or Influencers. Some bankers might argue that customer service is their prime goal, but Thomas Kennedy notes that when a customer says he can’t pay back a loan, bankers don’t typically say, “Oh that’s fine,” as they might if customer service were the real driver. Instead, they operate from financial management perspective of securing the funds.
The eight strategies, and the separation into categories of Alpha, Influencers and Enablers, are powerful for clarifying strategy in the boardroom and communicating it beyond. An organization can crystallize its plans on a single page, listing the eight strategies in a few words, and mapping out the Alpha, Influencers and Enablers.