An introduction: We like Mike Kipp, and we’ve never met him. Over time, we’ve come to admire this fellow blogger’s ideas on strategy – and we’re a bit picky on that topic. (He also has some pretty interesting perspectives on health care, which is his main focus.) Anyway, he is a sharp thinker and writer and has consented to share one of his gems one over here at our outpost.

Regardless of the type of your organization – small business, big business, non-profit, or government – there’s something here for you. Thanks, Mike!

Wendi & Bill

The Challenge of Strategy: Seven Lessons

Mike Kipp

“There is nothing more difficult, nor more dangerous to handle, than to initiate a new order of things.” -Machiavelli – 15th Century

Each year, thousands of companies go through a ritualized process they hope will prompt new vision, renewed energy and sufficient focus to enable them to prevail into the next century. Nearly 70% are disappointed.

Under the best of circumstances, the intended outcome for Strategy Development is, in the words of James Brian Quinn, “a sustainable pattern of response to market needs, consciously selected in light of probable shifts in the environment, relative competencies of the firm and the anticipated moves of intelligent competitors.” Such patterns initially develop through superior business insight and are maintained through entrepreneurial instinct. Sooner or later, though . . . and increasingly sooner . . . it becomes necessary to formalize the call for insight and instinct.

Four Threshold Challenges

All my work with companies in developing and executing on strategy finds leadership confronting a quartet of concurrent challenges:

• The intellectual challenge of discerning a unique competitive posture within an evolving business environment;
• The social challenge of sustaining healthy dialogue among parties who, for a variety reasons, see the world through different lenses;
• The organizational challenge of aligning activities and processes with strategic intentions; and
• The ethical challenge of living that posture, day in and day out.

Seven Lessons About Strategy Formation

Against this backdrop, seven fundamental lessons about strategy emerge. Three of these concern themselves with content; three with process; and one with leadership:

One: The “Right” Process is the one that gives you the most direct confrontation with your core challenge. In recent years, management has become something of a packaged goods industry with both consultants and academics proclaiming victory through new formulas for business renewal. No size fits all. Although the result of strategic thinking must be managed, strategy making is not a neat, analytical, administrative process. Leadership does best when it endorses an approach which promotes passion and synthesis through an “in your face” relationship with both vulnerability and opportunity. Avoid the temptation to shop for the new “Rosetta stone.” Ask first what the core challenge is under all that third class mail. How is it disguised? Construct all design decisions regarding participation and pre-work so as to keep what it takes to WIN . . . what’s important now . . . at the center of your attention.

Two: Most people are more interested in business as usual than bold moves. As much as we want change, most of us would rather counterfeit the process than undergo the pain of abandoning a past that worked so well. Rather than opening the whole system – market dynamics, organizational design, leader behavior, etc. – to inspection, most teams really want the same business case to work better as an outcome of their deliberations. Focus on concepts and context rather than forecasts and fixes. Proceed on the assumption that operational issues such as on-time delivery have been rectified. What’s the enduring question beneath that question? Engage people in regular dialog around strategic issues to develop cognitive capabilities and maximize the opportunity for ideas.

Three: New initiatives seldom come from old insights. The gathering of new knowledge is essential to new thinking. At its most effective level, this goes well beyond the accumulated experience of customers, suppliers, distributors and internal process managers. Nor is fact gathering the sole purview of a Strategic Planning, Research or External Affairs department. Everyone should be involved in gathering primary data outside the range of their normal experience so as to equip themselves for true dialogue on strategic intent. Make the building of a robust fact base an ongoing project, constantly extending the boundaries of inquiry. Do not settle for cumulative experience alone. Organize your analysis around categories such as Industry, Competitors, Company and Financial Dynamics. Catalog and mine the hundreds of “fugitive studies” that are conducted by people throughout the organization.

Four: Dysfunctional teams prevent both breakthrough and follow-through. Executive teams often handle conflict poorly, conduct themselves according to unwritten rules that limit their effectiveness, and waste time in “violent agreement.” Members bludgeon one another over differences in mindset and style. They tacitly consent not to learn from their collective experience for the sake of keeping peace in the family or “staying safe.” Alternately, everyone speaks his or her mind but no one ever changes it. Unless these dysfunctions are addressed squarely, no process will produce meaningful change. Conduct regular biopsies on the “health” of the Executive team from a process standpoint. Review incentives for (and injunctions against) appropriate and relevant team behavior. Genuinely encourage managers to bring a whole person to work rather than a role and a persona. One of the greatest strengths a team can develop is the capacity to be vulnerable with one another.

Five: Organizations are perfectly designed to achieve the results they are getting. While management texts argue that “form follows function,” form once cast invariably limits function. A three-business unit design, for example, will often impede cross-selling, geographic focus or the achievement of enterprise-wide synergies. Deliberations on strategy that don’t consider design barriers to new behavior unwittingly accept the limits imposed by reporting relationships, work flows and other elements of organizational architecture. Spend time on identifying how key initiatives, best practices or even operations are thwarted by design elements. Ask what unintended consequences might be traced to organization design, going beyond a general critique to a specific taxonomy of design decisions . . . structure, reward systems, information flows, decision protocols, etc. Consider how design will influence decisions regarding participation, the organization of data and the articulation of strategy itself.

Six: People do better at things they had a hand in creating. Executives often ask how they can get “buy in” as if there were an after-the-fact communications program that might “win the hearts and minds of men . . .” At a profoundly important level, however, strategy is not just about facts; it is about meaning…and meaning grows from the opportunity to engage around important matters. Companies that execute well at the “muzzle end of the system” have found creative ways of engaging people in both the development of strategy and its meaning for their work lives. Seek out opportunities to substantively involve people in the strategic dialog . . . stretch assignments; fact-finding missions; supplier councils; customer visits; role swaps, etc. Never be lulled into the view that “all hands” meetings, tee shirts, newsletters or Vision statements communicate depth or behavior.

Seven: All organizational change begins with personal change. It is virtually impossible for an organization to “transform” itself if its members – particularly at the executive level – think “that’s just the way I am . . .” For an organization to truly change, a critical mass of people must fundamentally alter their perspectives on themselves, their working relationships and the world in which they live. Individuals always undergo significant change before organizations do. Any genuine assessment of “readiness to change” must go well beyond markets, channels, technology or “them.” It’s usually not up to them. It’s down to “us.” Ask what the change you profess to desire might call for from you. Use the “more of . . . less of” formula. Ask those who love you, as well as those who clearly do not . . . and listen. Then tell people what it is you are willing to leave behind for the sake of the future you want.

© Michael F. Kipp, May, 1998, 2009, 2011

This article was originally published as “The challenges of strategy: seven lessons” in Strategy & Leadership, 1999, Vol. 27:1

A speaker and consultant, Mike has written for Emerald Press’ Handbook of Business Strategy and McGraw Hill’s Handbook of Consulting based on his role in the development of IBM’s consulting skills school. He has authored articles (quite Google-able) such as, “Seven Mindsets in Strategic Governance,” “The Accidental Leader,” “Mapping the Business Innovation Process,” “Governing Boards at the Crossroads,” “Frameworks for Board Development,” “Strategy and the Board,” and “Rethinking the Non Profit Board.” He blogs regularly at www.thetripleaim.com about leadership for a re-formed healthcare.

There are plenty of theories on change management, and this isn’t one of them. This is a simple checklist for anyone driving big, complex organizational change.

But first, you have to recognize when you are facing what we’ll call “Big Change.” Some examples: You are changing leaders, and the new person is bringing new “direction.” Or, you are downsizing or consolidating. Or, you are fixing an organization-wide problem with maintenance, safety, or something. Or, you are moving the location of a factory. The list is endless, but you get the picture.

It’s the “Soft Side” That Makes Change Hard

There are two sides to the Big Change coin (pun intended). First, there is the “hard side,” the physical details that will – or had better – end up in a project plan, complete with pretty Gantt charts. The other side of the coin is the “soft side,” the people stuff. Of course, it’s the soft side of change management that makes Big Change hard. And if you think that the soft side is too squishy to be managed in any hard-headed way, you might be surprised. (And for Pete’s sake, don’t try to get off the hook by appointing a “change manager.” If you’re leading the change, you are the change manager!)

8 Transformational Levers: MICE ROAR

There is a handful of “people systems” that can be your transformational levers on the soft side of Big Change. If these people systems are aimed in the same direction as your change, you’ll probably succeed. But if they are pointed in a different direction, then it’s like driving a car with its wheels out of alignment: while you’re steering in one direction, invisible forces will pull you in a different direction.

This checklist calls out those invisible forces and makes them available as transformational levers. The point is to put transformational levers IN YOUR PLAN, right alongside “select moving company.” You want to get all the arrows to point in the same direction at the right time.

Most of these transformational levers can be used to get you through the change, and they can also be used on the other side of the change to sustain it. Here, we’re just talking about using them to get you through the change. For example, the first lever, Measurement, could remind you to measure how many people are, say, trained in a new process, how many have adopted the new process, how much re-work is required as they get used to the new process, and so on. On the other side of change, you will want to measure outcomes, such as the degree to which you are getting the benefits of the new process (reduced costs, cycle time, up time, whatever). But that’s another story and not the point we’re trying to make here.

So, as you read the list, think about how you might use it to get through the change; if you think about it for other purposes, that’s a bonus.

We call this our MICE ROAR checklist (thanks to Jeff Kenyon, software guru and graduate of our Implementing Strategic Change course, for sorting our list into a clever acronym). If you have thoughtfully addressed these levers in your planned change, you should do pretty well. They are:

• Measurement
• Involvement
• Communication
• Education & Training
• Reinforcement
• Organizational Structure
• Accountability Processes
• Resourcing

Here’s a little more detail on each one:

1)   “What gets measured gets done” isn’t exactly true; you must attach consequences to your outcomes. However, there is no better spotlight, nor better foundation for consequences, than measurement. You can measure processes: how well you are doing what you say you’re doing. Or, you can measure outcomes: the results of your processes.

2)   Everyone writing about change agrees that involvement of people affected by the change is important. The underlying reason is that people hate feeling out of control of important parts of their lives. In a change project this lack of comfort quickly leads to massive resistance. To avoid this you must give the people affected by the change a serious opportunity to influence the nature of the change and how it is implemented, and you must take their ideas seriously. (Some helpful clarifications on this paragraph: “opportunity” does not mean that all must give their opinions; “influence” does not mean control; “ideas taken seriously” does not equate with getting one’s way.)

3)   Along with the generalized resistance to change that occurs when people feel out of control, is the anxiety that comes from not knowing what’s going on. The problem is that people don’t hear well when they’re resisting, so their uncertainty doesn’t go away when rational explanations are offered. If anything, resistance increases, causing another escalation of anxiety and resistance. The only way to break this vicious circle is communication, and lots of it! (As a good starting point, consider William Bridges’ 7X7 principle: Communicate it seven times, seven different ways. His wise book, Managing Transitions, is highly recommended.)

4)   Education (and training) is straightforward. It simply means that people must be knowledgeable of the vision, values, goals and objectives of the organization, and must be equipped with the skills necessary for their new jobs. People must also be educated about the transformational change and trained on the skills necessary to execute the transformational change. Keep in mind the principle of just-in-time training, which means DON’T teach somebody how to do something wayyyy before they’ll be able to use it; they just forget.

5)   We all know that people generally do whatever gets them rewarded. It’s pretty obvious that the reinforcement system needs to be changed whenever there’s a strategic change to the work that people do. We take a broad view of the reinforcement system, and include in it the way people get paid (and what they get paid for), their benefits, other financial rewards, and non-financial forms of reward and recognition.

6)   The term Organizational Structure refers to three things: (1) Accountability Hierarchy, the lines and boxes on an organizational chart (who’s accountable to whom for what), (2) process design (the lines and boxes on a process flow chart), and (3) position descriptions. If you have names that you plan to match with positions, that is good to include also. As with all transformational tools, you will have some elements that you install only during the transformational change, and some that will endure after the transformational change. Therefore you will have some Organizational Structure considerations that are temporary – say, the design of the project team. And you will have some design considerations that are permanent, such as the design of the organization being changed.

7)   Accountability Processes – sometimes called performance management – are the processes by which you hold people accountable. Implementation of strategic change, by definition, affects the work for which people are held accountable. So at this time it is especially crucial to have processes through which to ensure the three elements of accountability (clarity of request, buy-in, and performance consequences). During the change you will need more frequent review goal setting/review intervals. For example, during a big change with the entrenched staff of a not-for-profit organization, we found weekly review intervals to be especially helpful in turning things around. As the change took root, then monthly intervals sufficed.

8)   Resourcing is about getting the right people into the right jobs, either by external recruitment or through internal postings. It also includes succession planning. Big change often shifts the requirements of key positions, calling for different personal attributes and skills by the people in those positions; when it does, resourcing efforts need to have been thought out in advance and kicked into gear.

We are big believers in checklists (for inspiration on that point, see Atul Gawande’s The Checklist Manifesto) and we hope you find this one useful.

Are there other “people systems” you would add to this list?