The essentials of effective strategic management

The official definition of strategy is “a plan of action designed to achieve a long-term or overall aim”, according to the online Oxford Dictionary. Logic suggests this interpretation could be readily applied to business, but the widespread development of ‘single purpose’ strategy tools and techniques (eg Game Theory, Scenario Planning, Blue Ocean Strategy) has meant that a common definition of corporate strategy has to date, been impossible. Among a global community of strategy practitioners whose numbers can be counted in the thousands, there is no universally accepted definition of strategy when applied to business or a corporation.

In meetings, Strategic Management Institute (SMI) representatives are often asked to provide a meaning for strategy.  Our answer is clear: focus less on a definition and look to its purpose: what do you want to achieve from your investment in strategising, and how will strategy be implemented over time?

Toyota captures this notion well, relying on a strategy that has remained the same for 45 years or more: = leverage competencies in design, production and distribution into every automotive product category in every market in the world. Using this as a basis for policy, guidance and renewal, Toyota adopts a formal process of execution (the Hoshin Kanri method) that is repeated relentlessly year after year.

Most corporations can point to a formal process of strategy, but its practical execution is often blurred as a result of complexity and expectations about timing. When viewed from the perspective of purpose though,

(ie: why are we doing this) the task of strategising becomes much clearer. If the purpose of strategy is to provide guidance, direction and policy for decision-making, its true value can be appreciated from its contribution to:

• A meaningful strategic plan: a description of the way that long- term strategy will be implemented over the next three to five years.
• Strength of leadership: alignment around a common purpose and direction.
• Responsiveness: the way the organisation reacts to changes in competitor activities, new opportunity, changes in its environment and advances in technology.
• Resolution of ‘wicked’ strategic problems: informed decision-making that is both an input to, and outcome from, strategising activities that are repeated day after day.

In the absence of an enduring long-term view of the future, strategic plans are prone to end up as ‘to-do’ lists of various projects, not all of which are necessarily ‘strategic’ in nature.

An example is department store David Jones, which followed a strict five-year strategic plan that ended in 2011. Its content was not much more that a list of priorities for the next five years, consisting primarily of one-off projects that included: “Open high-value new stores in attractive locations; Launch a new David Jones-branded American Express card, Continue CODB reductions while maintaining our service standards”.

David Jones was ill-prepared for the emergence of radical external influences on its businesses that ultimately ended in disappointing outcomes around performance. Influences included a sudden reversal in what consumers wanted, such as attitudes towards products and prices paid for products, and the way they were acquired – ie, an accelerated uptake of online retailing.

In contrast, Michael Smith, CEO of the ANZ bank sought to use strategy to maximum advantage when appointed to the role on 2007. Seeking to reinforce his leadership capacity in his new role, Smith used the strategic plan as a means to motivate and invigorate staff as he sought to steer the business in a new direction.

Upon the development of the plan, Smith announced: “We have set an aspiration to become a super regional bank – a bank of global quality with a clear strategy to focus on growth in the Asia-Pacific, one of the world’s fastest-growing regions.”

Although the fundamentals of that strategy weren’t too different to other banks, or its long-term core strategy (Putting customers first, Being performance driven, etc.)

Smith sought to engage ANZ staff by inviting them to join him on a five-year journey of transformation and renewal. That journey was described in the strategic plan in three phases. It commenced with the negative features of restructuring, but ended up with the more enticing outcome of realised renewal.