The Strategist: Key Ingredients of Strategic Leaders
Key takeaways & tools from Cynthia Montgomery's book | Call to action
In this edition:
What I Think You Need To Know: Key takeaways from Montgomery’s book The Strategist: Be The Leader Your Business Needs
This Should Make You Smarter: Three useful tools you can add your strategy workshop
Through The Systems Thinker’s Lens: Why purpose and change matter
Call to action: What you can do starting now
What are the key ingredients to become a successful, dynamic, and purpose-driven strategist, one that is both prescriptive and descriptive, and one that acts as a beacon, architect, and catalyst in your organization?
In The Strategist: Be The Leader Your Business Needs, Prof. Cynthia Montgomery of Harvard Business School eloquently summarizes years of research and experience studying thousands of cases to give the reader a no-nonsense view of effective strategies and leaders as strategists.
Her fundamental question is often expressed in the form of an invitation: Ask yourself, as a leader, whether your company matters and why. Having identified that fulcrum, Montgomery outlines the skills a leader should develop to look at the conceptual as well as the analytical aspect of their role.
What I Think You Need To Know
Industry factors influence strategy formulation and implementation continuously. These traditionally discrete phases should be developed in an integrated way by an impactful and innovative leader.
A strategy is a system of unique value creation with mutually reinforcing parts that promotes your company's uniqueness over time.
Strategy is dynamic and strategists must adapt to change in time.
The leader as a strategist will not be a functional specialist. The leader's key role is to set the agenda and to design their organization in a way that can carry it out.
Such necessity is mandated by the answer to the question: Why does my company exist and why is it unique in the market? Or, if my company ceased to exist, what losses would the market face?
The more vision, boldness, and confidence a leader has, the more they are admired. However, there is potential for overconfidence that is often a result of increased predictability of industry forces the leader perceives following superficial analyses.
Economic forces and their impact on competition are the reason why merely looking at the company and its metrics is insufficient. This is the analytical view -- critical in strategic thinking, but it requires one more skill -- the panoramic (big-picture) view.
With a panoramic look at the industry, the strategic leader can begin to understand the forces that affect their competition.
The strategic leader understands and embraces the reality of outside economic forces that cannot be controlled. Such understanding is vital as it helps them pick the right battlefields.
In that sense, the strategic leader invests time in promoting purpose -- why their company exists in a way that's of consequential difference as they formulate and execute their strategy (to meet needs and provide value). The answer to that "why" question impacts, after all, the profitability variation among other players.
As a strategist, building an ennobling, distinguishing purpose is often the first step to being the best in class.
But writing purpose down is one challenge, making it a reality is quite another. This is where the strategic leader appeals to people, to teams, empowering them to set the course based on evidence (being data-driven) not on philosophical stances or intuition.
If your company has lost its way, "go back to the core" of why it exists and what it set out to do, advises Montgomery (p. 66).
A great purpose is not tantamount to a great strategy; purpose simply ensures strategy is anchored in a clear, unambiguous, well-communicated idea of direction. Then, a strategy anchored by purpose can evolve into a system of value creation backed by resources.
Resources include non-physical variables (brand, reputation, trust), high-performance culture, business capabilities, and business activities and processes. (For the Business Architect out there, yes, it's ringing bells!)
Thinking and writing about purpose and strategy is only one side of the task. Once the product is built -- often as simple (and, hopefully, powerful) as a brief written statement of your 'why' and uniqueness, the strategic leader must own the product. The next step is to market the product (purpose + strategy) by communicating it effectively to customers. In this sense, your customers are strictly the stakeholders who could most influence whether your strategy is bought or not. For instance, when I formulate data strategies, the customers are often the data functional specialists in the company (DBAs, BI Developers, informal data stewards, data analysts, etc.).
Writing your strategy is a process -- you often start with vague, poor, dull, cliche words until you formulate the impactful statement -- and that's OK. Montgomery quips that "what's required is not just wordsmithing but 'strategy-smithing' - the challenge is the thinking that goes behind the words" (p. 102).
No formulated strategy can provide competitive advantage in the long term due to a simple reason: change. This is why the strategist must manage their strategy as a function of change. And this is also why strategy should not be outsourced, given also how people and capabilities change over time.
To the question "What do you do?" that you may be asked by the fellow passenger sitting next to you, Montgomery brilliantly advises the strategist provide this answer: "I'm the guardian of organizational purpose" (p. 143).
This Should Make You Smarter
Here are three tools you can add to your strategy toolbox:
Strategy Tool 1: Here's a visual reference of the key takeaways, which you can adopt as a guide for your own work strategy. Start today:
Strategy Tool 2: On p. 91, Montgomery introduces her well-researched Strategy Wheel, a simple model "to visualize and record how a system of value creation backs up a firm's purpose," which I've sketched below using a data strategy development I recently completed as a rough example. Adopt it today and see if you can make sense of your strategy as a system of value creation:
In this example, the purpose for said data strategy could be to maintain exceptional data quality across accuracy, completeness, and timeliness through a non-intrusive data governance program. The strategist will take this statement and refine it per the previous continuous routine. The elements around the purpose are activities and resources (human, material, capabilities, processes, etc.) that "mutually reinforce each other" to enable you to deliver.
Strategy Tool 3: In 1985, Michael Porter introduced the activity system map to visually model business capabilities supported by organizational policies align with business activities. The product of this tool is insight into your competitive edge, your uniqueness. Building your map is straightforward: given your value proposition and key activities, draw edges if they support your value or if they affect one another. You can use open-source tools like Gephi to analyze the density of the resulting network. The denser it is, the stronger your strategy likely is. An example of a system activity map for Edward Jones is provided in the Call To Action reading below.
Through The Systems Thinker's Lens
Let's walk through a simple mental model illustrating what feedback mechanisms one can expect to encounter in business ecosystems, given the key takeaways above:
An ennobling, unique purpose fosters strategic alignment.
The more strategic alignment there is, the higher shared understanding (a key organizational success factor), thus contributing to a reduction in organizational risks.
Reduced risks increase predictability and decrease difficulty in carrying out one's strategic responsibilities.
A reduction in difficulty in the sense of decreased challenges, may stagnate work resulting in lowered confidence, whereas higher predictability may induce over-confidence.
Increased over-confidence leads to increased underestimation of competitive forces, which decreases the chances of successful strategy implementation. Parallel to this, though with different delays, lowered confidence can lower courage and openness in leadership, which can decrease the chances of strategy development. Thus, the firm effect gets a hit from two sides.
The story doesn't end here. Two major external forces that introduce balancing into the picture are change over time, which the strategist must account for as argued above, and the industry effect, both leading to an increase in complexity that further increase difficulty, thus bringing up more (hopefully) exciting challenges for the strategist.
Call To Action
The whole point of Montgomery’s book is to invite the reader to take action. Start by asking yourself if you can say what your strategy is. It so happens that the following HBR article can provide some further assistance with that:
Can You Say What Your Strategy Is?, by David J. Collis and Michael G. Rukstad, 2008 - This article also presents a strategic activity system map for Edward Jones, which is the third tool discussed above.
Happy Strategizing,