How Leaders Can Clarify Types of Strategy to Align their Organization
by Richard Lynch, on Mar 23, 2015 12:34:00 PM
In an earlier post, Jeff Scott discussed business, operational and transformational strategy. In addition, companies need to address other dimensions of strategy.
Problems arise when leaders don't spend the time to clarify Corporate Strategy, Growth Strategy, and Business Strategy or their alignment implications in the organization.
Without clear and vivid direction on these types of strategy, people are left to execute through improvisation or in silos.
When the organization is disconnected, the results are all too familiar:
- Slow execution
- Project overload
- Frustrated talent
- Lost opportunity
Here's three actions leaders can take to overcome these strategy alignment challenges:
1. Define the Company's Corporate Strategy
Also known as the operating model, corporate strategy is an important discussion to have around the level of business unit integration/synergy. There are limited choices:
- Holding Company: wholly self-contained brands/businesses with dedicated core and support work. The businesses are tied together only by a common funding source and financial requirements.
- Allied: each business contains the core work required to create advantage autonomously. Issues of common interest are identified and leveraged across boundaries.
- Integrated: single business, requiring a single business strategy for competitive advantage. Important business issues are formulated centrally and tailored for local needs to optimize the entire business.
Use this decision to define the relationships among the businesses in the company and how investments are allocated among them.
This is a big issue as evidenced by the recent post in the Financial Times: Warren Buffett: Know when to hold ’em. The title here refers to Berkshire holding on to a good company for the long term or selling off under performers in the portfolio. That's the role of the executive of a holding company.
The question that remains: should his company move to an Allied model and group like businesses such as insurance; utilities and energy; manufacturing; service and retailing, and finance and financial products. The desire here would be more integration means synergies for better performance.
2. Define and Rally Around the Growth Strategy
There are about a half a dozen strategies to close the growth gap, including product leadership, service innovation, adjacencies, acquisitions, and new growth platforms (NGP).
GE's recent software start-up is a good example of a NGP. This “Center of Excellence” in San Ramon, California was set up to address the data explosion created by the increasing intelligence in products and machines. GE used this new venture to get alignment on which way(s) to grow and assess capabilities required to capture new revenues.
3. Get Real Functional Alignment Around the Business Strategy
Leadership teams need to define strategy in operational terms such as the company's:
- Primary business focus: product/service, customer /market, technology, production capacity, distribution.
- Primary customer value proposition: price, quality, speed, experience, or innovation.
Alignment here reduces organizational friction and battles over improvement dollars. This determines which capabilities empower the strategy and need to be done effectively and which capabilities need to be more efficient.
I welcome your comments below.
Check out a recent article I co-authored that illustrates these ideas more fully:
Clarifying Strategy is Simple. Aligning Your Organisation is Not.