Published by:
MIT Sloan School of Management
Length: 14 pages
Abstract
Strategy, at its heart, is about choice. Few companies succeed by making a single big bet. Winning strategies, authors Donald Sull, Stefano Turconi, Charles Sull, and James Yoder observe, are based on 'a bundle of choices': which customers to serve, the scope of the business, product offerings, and capabilities that interact with one another to help a company make money. While describing a strategy favors complexity, executing strategy requires simplicity, the authors explain, so that leaders at every level of the organization can understand, communicate, and remember it. The authors examined the SEC filings of 494 companies included in the 2014 Standard & Poor's 500 Index and other communications to investors as a means of identifying their strategic priorities. To set a strategic agenda and drive implementation effectively, they found that strategic priorities need to balance guidance with flexibility, counterbalance the inertia of business as usual, and unify disparate parts of the business. The article describes seven characteristics of effective strategic priorities and offers practical diagnostics that managers can use to assess their companies' strategic priorities. 1. Managers should limit the number of priorities to a handful. A small number (three to five) is easier to remember and communicate throughout the organization. 2. Companies should focus on mid-term objectives (things that can be accomplished in three to five years) as opposed to short- or long-term goals. Once the goals have been set, they should discourage managers from revising them. 3. Managers should concentrate on things that will pull the company forward (as distinct from what worked in the past). This might involve entering new markets or adding new capabilities. 4. Managers need to be prepared to make 'the hard calls.' 'The discipline of whittling down priorities to a handful,' they write, 'can force a leadership team to surface, discuss, and ultimately make a call on the most consequential trade-offs the company faces in the next few years.' Many companies try to avoid these decisions and pay a price. 5. Companies should address their 'critical vulnerabilities' - the elements of the strategy 'that are most important for success and most likely to fail in execution.' They should understand whether the risks are tied to external factors (such as new competitors) or internal factors (such as culture). 6. The objectives should provide guidance to people within the organization on what to prioritize. Although revenue and profit goals are specific, companies don't always provide sufficient guidance on how the company can reach them. 7. Finally, companies should develop agreement among top managers on the strategic priorities. The authors found that, at many companies, senior executives either didn't know or couldn't agree on the key priorities.
About
Abstract
Strategy, at its heart, is about choice. Few companies succeed by making a single big bet. Winning strategies, authors Donald Sull, Stefano Turconi, Charles Sull, and James Yoder observe, are based on 'a bundle of choices': which customers to serve, the scope of the business, product offerings, and capabilities that interact with one another to help a company make money. While describing a strategy favors complexity, executing strategy requires simplicity, the authors explain, so that leaders at every level of the organization can understand, communicate, and remember it. The authors examined the SEC filings of 494 companies included in the 2014 Standard & Poor's 500 Index and other communications to investors as a means of identifying their strategic priorities. To set a strategic agenda and drive implementation effectively, they found that strategic priorities need to balance guidance with flexibility, counterbalance the inertia of business as usual, and unify disparate parts of the business. The article describes seven characteristics of effective strategic priorities and offers practical diagnostics that managers can use to assess their companies' strategic priorities. 1. Managers should limit the number of priorities to a handful. A small number (three to five) is easier to remember and communicate throughout the organization. 2. Companies should focus on mid-term objectives (things that can be accomplished in three to five years) as opposed to short- or long-term goals. Once the goals have been set, they should discourage managers from revising them. 3. Managers should concentrate on things that will pull the company forward (as distinct from what worked in the past). This might involve entering new markets or adding new capabilities. 4. Managers need to be prepared to make 'the hard calls.' 'The discipline of whittling down priorities to a handful,' they write, 'can force a leadership team to surface, discuss, and ultimately make a call on the most consequential trade-offs the company faces in the next few years.' Many companies try to avoid these decisions and pay a price. 5. Companies should address their 'critical vulnerabilities' - the elements of the strategy 'that are most important for success and most likely to fail in execution.' They should understand whether the risks are tied to external factors (such as new competitors) or internal factors (such as culture). 6. The objectives should provide guidance to people within the organization on what to prioritize. Although revenue and profit goals are specific, companies don't always provide sufficient guidance on how the company can reach them. 7. Finally, companies should develop agreement among top managers on the strategic priorities. The authors found that, at many companies, senior executives either didn't know or couldn't agree on the key priorities.