Leaders in every organization know that it is important to have a business strategy; it brings a company to success, and it helps leaders decide what’s working, and what needs fixing. In his book ‘Strategy for Success in Asia’, Professor Kulwant Singh shares that “leaders who think strategically will be better able to identify and exploit opportunities, avoid widespread risks, and develop strategies that can enhance the probability of success for their firms.” Yet, not every organization with a business strategy succeeds. What gives? Here, he elaborates.
In our globally dynamic world where there are multiple external factors affecting the success of one’s organization, the multiple roles leaders play in an organization and the multiple paths that leaders can choose from to bring a firm to success, it is difficult to pinpoint to the exact factors that cause the success of an organization. The reality is that many factors determine success. Unfortunately, this may lead organizations to attribute success to a laundry list of factors that collectively, do not necessarily enhance success.
The danger in focusing on a laundry list is that by indicating that everything influences firm success to some extent, it suggests that nothing is of particular importance.
Such an organization may be seen as one that focuses on short-term opportunities or on correcting mistakes, which is unlikely to result in sustained success in complex and rapidly changing environments.
The first and most basic proposition is that senior leadership is responsible for the strategy and success of their organization. Effective leaders understand that they have two primary responsibilities – to develop and implement strategy.
Leaders must recognize that these responsibilities cannot be delegated. Having developed the strategy, leaders should also be heavily involved in implementation, to keep track of progress, problems, and contingencies. This allows leaders to intervene and put the implementation back on track or modify the strategy if need be.
Some leaders make the mistake of not allocating enough time to develop a strategy, preferring to deal with operational and routine matters that do not contribute to a firm’s long run success. They then let their middle or junior managers develop the strategy, or adopt the strategy that the firm has been taking all along. This results in leaders becoming detached from their strategy.
Development & Implementation – Two separate activities?
With changes in the environment, competitors and customers, the common thought is to adjust and adapt the implementation strategies to respond to these changes. As a result, firms may deviate from their intended strategy.
When the development of a strategy and its implementation are seen as two separate activities, firms run the risk of deviating from their intended strategy.
Firms may formulate different strategies, but not implement them. A strategy that is developed but not implemented is not a firm’s strategy. Similarly, an intended strategy that a firm deviates from in the process of implementation is not a firm’s strategy. The only strategy that a firm has is the strategy it implements.
The primary means for preventing this problem is thus for leaders to regard strategy formulation and implementation as a single process; and leaders need to be involved in this single process.
Any alternative way of thinking about strategy formulation and implementation carries the high risks of separation, lack of integration, and failure.
Customers. Competitors. Competencies.
Strategy is about setting goals, and outlining how a firm will use its competences to offer greater value to customers than competitors. A firm should establish its strategy on the basis of how it can use its competencies to satisfy its customers more effectively than competitors. When developing their strategy, leaders must consider the political, economic, social-cultural and technological characteristics of the environment in which they are operate.
It is important that strategy development efforts start by focusing on the value firms can create for customers. Customer satisfaction is the ultimate test of the effectiveness of the strategy. In short, if customers are not satisfied, firms will not succeed in the long run. The challenge is for firms to focus on satisfying current customers and their changing needs. At the same time, firms will recognize that not all customers should be served. Good strategies will indicate customer groups that should be targeted and those that should be avoided.
It is also important for strategy to recognize the threat of actual or potential competition. Competition draws customers away by offering alternatives. So while customers may determine firm success, competitors will determine firm profitability by determining market prices. An effective strategy dictates how a firm will avoid, eliminate or overcome competition.
To do so, a firm needs to have an understanding of its core competencies – a combination of resources, routines, skills and knowledge that allow firms to perform critical operations that create value for customers. Firms need to focus on these competencies to ensure that they remain valuable and provide the competitive advantage for the firm. While doing so, they would also need to evaluate competencies required in the future so that investments are made in time to drive future competencies, rendering them the competitive advantage in the long run.
Professor Kulwant Singh, Interim Dean, NUS Business School
“The first and most basic proposition is that senior leadership is responsible for the strategy and success of their organization.”
~ Prof Kulwant Singh, Interim Dean of NUS Business School