Strategy is Not the Process

How many of us are familiar with this scenario: a company has a problem their management cannot solve.  The execution of a process has failed.  Market share is diminishing.  The plan does not seem to work.  Management panics, and calls in the panacea of the management consultants.  These management consultants com in, do their investigation and report, document everything, present it in a meeting with a long report on the minutiae, and get paid.  The company organises meetings, fireside chats, events.  People are instructed to change the way they do things.  There is new documentation.  There is a budget to support all this.  And then, after some time, it goes back to the way it was before.  After all that was said and done, a lot was said, and little was done. 

The primary reason for this lack of improvement is actually quite simple.  A series of reactionary measures to a defined problem is not a strategy.  There is no guarantee that the issue has been adequately diagnosed and addressed.  This is a linear approach to issues that are complex and involve multiple factors.  What we have here is a preset goal.  When the underlying conditions fail, the new system fails, and the process is repeated. 

A strategy is any plan of action designed to achieve a long-term overall goal.  It creates a series of actions for choices, and outlines the process of making a choice, not giving either-or scenarios with pre-determined choices.  For example, if the client claims it wants market leadership in a certain demographic or region, that is a goal, not a strategy.  If, however, it states it seeks to acquire that market leadership through best customer intimacy, with an emphasis on aftersales service to upsell, that is the outline of a strategy.  We understand not only what the company seeks to do, how they will go about working towards it.  Based in this, they can develop a strategy. 

Another mistake is when management outlines the company’s goal priorities, and business choices, and assume that is a strategy.  For example, a company can claim that it seeks 30% market share in Southeast Asia, for electric vehicles, and raise funds in the ESG sphere.  In that process, they will broaden their manufacturing ecosystem in target companies, and acquire or divest specific aspects of the business.  We understand what they are going to do.  We may even have a timeline for it.  That is still not a strategy.  It is the basis for one. 

An example of strategy is Microsoft Corporation.  This is a company that has always been ahead of the curve.  From 1972 to 1985 the company developed and sold operating systems, often in partnership with companies such IBM and others.  It was only from 1985 that they launched Windows and Office, as an extension of MS-DOS.  Where the company truly started on the road to trillion dollar corporation was when it started its foray into wen services in 1995.  When people think Microsoft, they think Windows, and Xbox, the real money is in their web services.  This is the backend for companies such as Amazon and Apple.  A portion of their revenue is Microsoft revenue.  We can see that there was a progression, a clear identification of trends, and a positioning of the company to take advantage of it. 

Firstly, there is a clear strategic direction, which is obvious to outsiders on hindsight, but was definitely deliberate from within.  Secondly, that direction was communicated to key stakeholders within the company, which is how those processes were aligned, including starting entire new divisions within the company.  In the communication of ideas and choices, it is not enough to explain them, but context must be provided so people can be invested in it.  Finally, this internal communication is not just top down, but also permeates from  the bottom up.  People closest to the ground are also closest to the customer base, or the of the customer base users.  Their feedback and insights have more value than external consultants. 

In the case of Microsoft, the initial top down strategy was operating systems, and that was its clear strategy: achieve near monopoly of the market.  In this case, it good too successful, and this created public resentment and political pressure.  In democracies, people want the illusion of choice.  We must also consider that the market was evolving away from the desk top to networks to a full online retail industry for everything from video games to food.  Microsoft gave autonomy to teams and decentralised the budget and decision-making process.  This created a lot of projects that ultimately failed.  But out of it came the X-Box, Windows Vista, MS Teams, and Outlook.  Microsoft had widened its footprint, decreasing industry risk.  By far the best strategy, however, was to move into the B2B space for Azure Services platform. 

For strategic leadership to be exercised, people have to be empowered, from the board and top management to the local business teams.  It cannot be the sole discretion of executives far removed from the frontlines of the business to make decisions on which projects live or die, which have budget or cut off, which are pushed or shelved.  Rather, as part of implementation strategy, there should be an internal process to select the best initiatives.  Division and section managers need to have autonomy within this system to be part of that decision-making process.  This is a sort of democracy at work.  If few people believed in a project, it would not be supported and staffed, and it would naturally be selected out. 

One of the egregious errors of external management consultants is that they tend to recommend preferred behaviours for staff.  These recommendations should not have the weight they do with management.  We are talking about parachute consultants who are there to make observations in a constrained period of time.  What they observe is not even the actual behavioral pattern of the staff.  People know they are being observed, and they are putting on a show.  They are not going to change their habits.  A habit is an established, regular tendency or practice, especially one that is hard to give up, since it is ingrained.  People are not going to change their habits and modify their behaviour on the basis of a new system because some report recommended it.  Behaviours are often unconscious.  For that to happen, some form of social engineering must be effected to modify behaviour unconsciously, and there has to be context and self-interest to modify it consciously. 

One of the ways to make adjustments to stakeholder behaviour is to make willingness to evolve and change a company value.  It must be a default setting.  This is something cascaded down from management because ossification tends to begin at management as well.  One of the ways to address this at the root is to focus on the outcome, not emphasise the process.  There are many ways to run that same process to achieve the desired outcome.  As long as the process does not contravene laws and ethics, its viability is judged on its efficacy.  Too many companies make their employees hostages to the process, which means that habits form, and when the world changes, the company is now behind the curve. 

In summary, a strategy focuses on outcomes, not the process, since the process is merely a means.  A strategy considers consequences of actions, and allows different levels of the hierarchy to have some level of empowerment and decision making, so they are part of the refinement of that process.  This empowerment makes all levels stakeholders, and provides impetus for the gradual evolution of the business.  When that thinking is expanded over an extended investment horizon, for specific planned outcomes, that is a strategy.