Strategic management today must focus not only on meeting short term targets and budgets but also on building an organization prepared to succeed and lead into the future. This is obvious, you may say. But how is this simple reality reflected in how we strategically lead and engage our organizations? Read more in this article by IMD Professor Thomas Malnight.

If we honestly look at our companies, how much do we manage through pre-determined linear steps towards incrementally higher targets in successive budget periods? How often do we honestly engage our organization in challenging internal thinking and focusing on creating opportunities for moving the business forward? Ask yourself a simple question—are you and your company prepared today to be successful five years in the future? If not, what gets in your way and how can you start preparing today?

Any strategy process must engage your organization in building an honest and shared perspective on where the business is today – not based on internal perspectives but based on challenging perspectives from the outside-in. How well is your organization truly perceived by your customers? How well prepared is your company to respond to the aggressive strategies of your competitors? How well is your company positioned based on the long-term trends impacting your industry? These are the types of questions that must be asked when assessing our reality today. These questions go well beyond looking into whether we can meet our budgets and short term performance targets.

This is not as easy as it sounds. Different executives working within silos across a company tend to have different perspectives of reality and different views on what issues the company is facing. Building a common, aligned reality is a crucial first step for any strategy process.

Assessing and aligning our perspectives of reality—From the outside-in

Put yourself inside the head of the executives of your competitors—and your customers. Articulate the strategies: What is “our” value proposition? Why are “we” making money? What is “our” growth strategy? For competitors, why do they think they will win the competition? Why do they think they have the “right” strategies and that you are wrong? For customers, think about how they view our business. Look from the perspective of many customers—both those that like you and those that don’t.

Then think about your industry. What are the major trends impacting the environment in which we operate? Go beyond the normal one/two year budget planning horizons – instead look forward three years, five years and even ten years. This may require external data, for example from think-tanks, research institutes and other companies.

Based on these perspectives, think about what are the criteria for succeeding or failing in the markets in which you operate – both today and in the future. Some examples of criteria that have been developed by firms we have worked with are:

Positive evaluation factors:

Different executives working within silos across a company tend to have different perspectives of reality and different views on what issues the company is facing.

  • Customer focus and positioning
  • Possess specialized knowledge
  • Scalability of business model
  • Focused execution and follow through
  • Expansion potential and positioning
  • Balance of risk and return
  • Strength of leadership team

Negative evaluation factors:

  • Structural complexity
  • Lack of focus or diversity
  • Limits to growth
  • Insufficient profitability
  • Insufficient balance

With this perspective and these criteria, you are now ready to bring the focus back to your company and assess where you are as a business. Using these criteria, challenge your thinking on your strengths and weaknesses. Look again at your relative market position, your market strategy and your organization against these external criteria. This is the point where you really start to understand your company’s reality – and clearly see the choices you need to make to get ahead of the curve.

Facing your demons

Aligning reality can be an uncomfortable process. Most companies tend to look at their successes, and brush aside their weaknesses. They also rarely look at how the company functions, preferring to consider results alone. But unless executives can build an honest perspective of where their company is, and understand the source of its demons, they will not be able to move the company forward.

One result of this process can be to clearly identify the issues that everyone knows exists, but have been pushed into the closet or incrementally addressed – and continue to hold the organization back. Most organizations have these demons and there are many excuses that are developed for putting off addressing them. We don’t have the budget or time now! It would cause too much disruption! One executive or another won’t like it! So it is more comfortable to just drag it out and avoid these demons.

Creating a sound basis for looking forward

Executives today spend too much time looking from inside their business or their silo at the world around them. Understanding our current reality requires turning this lense around to see how we look from the outside. This is the only appropriate criterium to strategically evaluate your strengths and weaknesses.

Once you have reached an aligned perspective on reality, the next step of the strategy process is aligning ambition, followed by aligning focus, priorities and actions.

By Thomas Malnight

About the author

Thomas Malnight is Professor of Strategy and General Management at IMD, the leading global business school based in Lausanne, Switzerland. His fields of interest are global strategy, evolutionary organizational change, and internal growth and renewal. Professor Malnight is the co-author of two books, “Must Win Battles: How to Win Them, Again and Again” and “Accelerating International Growth.” He has written for the Strategic Management Journal, the Journal of International Business Studies, and the Academy of Management Journal. He has also authored more than 30 case studies on various aspects of global strategy and organization. Thomas Malnight consults extensively with numerous US, European, and Asian companies and has worked with many leadership teams supporting the development and execution of firm strategies.