If the goal of strategy development is to achieve profit growth, statistically speaking, most companies fail at it. Books like Strategy Beyond the Hockey Stick by McKinsey’s Bradley, Hirt, and Smit, as well as whitepapers from the Corporate Strategy Board, point to the exceedingly low odds – one in 10 -- of driving profitable growth, based on an in-depth analysis of thousands of companies.
At the core of this conundrum is a coherent organizational culture, which still remains elusive decades after Peter Drucker famously said: “Culture eats strategy for breakfast.” Certainly, we all have been in executive strategy presentations when an intellectual, fact-based debate about strategic choices devolves into chaos – derailed at the hands of human biases and social dynamics.
Culture speaks to the task of managing human capital – ever more important in today’s world. In a recent Harvard Business Review article titled, “Strategy in the Age of Super Abundant Capital,” the authors emphasize that capital and knowledge are now easily accessible, and “a workforce that can generate good ideas and translate them into successful new products, services, and businesses” is more important.
So, what can CEOs do to address the social side of strategy development to boost their odds of delivering better results?
All humans are genetically engineered to be biased. Cognitive biases are built into our brains, affecting everything from what we see to how we decide. One of the most common, confirmation bias, drives us to seek out data that supports our beliefs, even in the face of plentiful counter-evidence. In a business environment, such bias may lead us to turn a blind eye when strategies are not working.
In any organization, there are always multiple objectives at play which create interesting social dynamics. General Managers who are afraid to lose their jobs might try to present everything in a positive way. This can result in what many CEOs know as mushroom syndrome.
Most organizations determine what constitutes acceptable behavior by how the top managers model it. So, as the CEO, you have a key role in supporting a culture that can deliver better strategies and results. Let’s consider ways that this can be demonstrated in particular scenarios:
Today’s growing knowledge base moves at digital speed. Your organization needs to keenly focus on changes in the marketplace to avoid being left behind. You need a structure that can move fast, without being trapped or tripped by social dynamics and individual biases.
Korn Ferry’s Swift and Buening, in their webinar titled Shaping Digital Organizations, talk about the need to build a fluid workforce, to espouse networked ways of operating, and to cultivate inclusive and agile leaders. Such agility can ensure your company has the ability to continuously adapt and thrive in the new economy.
Some companies are leveraging the growing concept of interim executives, who can bring in years of experience with an unbiased external view, while avoiding the social dynamics of an organization. Julian Birkinshaw from London Business School wrote about the benefits of interim managers as:
Boyden Executive Search worked with Prophet to study the impact of interim executives, and reached the following similar conclusions:
In summary, for organizations that are open to change and are ready to try new approaches to strategy and execution, this could well be the best of times -- given all the knowledge and resources available.
As always, if you have any thoughts about this article, I’d love to hear from you.