Speech delivered at the European Communication Summit in Brussels on 6 July 2012
About strategy
Strategy requires foresight, decisiveness, and persuasion. That’s why most of what is labeled strategy is no more than an action plan.
I have been dedicated to strategy since the early nineties. As university student, I was fascinated by nation building strategies. As assistant professor, I explored strategies how to prevent and solve social and political conflicts resulting from such processes. During the last twelve years I have been advising companies and institutions on finding and communicating strategies. Since 2009, I have been teaching the subject at university. It intrigues me how many strategists miss the point. One example:
Missing the point
What do „Capital“ by Karl Marx and „The New Normal“ by McKinsey have in common? Good analysis, but no solution to the real problem.
Marxism seems to have fallen out of time irreversibly. McKinseyism has not. Nevertheless, both have something in common: good analysis, bad proposal. Just after the collapse of Lehman Brothers, the global managing director of McKinsey proposed a fix to the complexity of the business world after the end of Wall Street’s unrivaled global hegemony. Bottom line: Companies just need to analyze larger quantities of more kinds of information at higher frequency. Harvesting the Big Data ocean, corporations will not only survive uncertainty, but flourish through making use of opportunities their competitors are not even aware of. In other words: You just need better technology to reduce complexity.
Complexity
Leading neuroscientists like António Damásio or Gerald Hüther strongly disagree. They have a different understanding of why we are struggling with complexity and how we can handle it.
Data overflow
We face complexity whenever it is impossible to consider everything we would need to know for basing a far-reaching decision on facts.
According to system theory, we deal with complexity whenever we find it impossible to consider everything we would need to know for basing a far-reaching decision on facts. Every second, our senses deliver 100 Gigabits of information to the brain. The human working memory is able to process a volume of 160 Bits per second. This means: the RAM of our brain uses only a tiny fraction of the incoming data.
Irrationality
Decision-making is influenced by factors we are not aware of, e.g. codes resulting from family tradition and social learning.
The information filtering process is part of our genetic program to survive dangerous situations. Which data are selected for decision-making depends on factors, most of which we are not conscious about: our current state of mind and body, knowledge, own and mediated experiences or family traumata. e.g., one of your ancestors was bitten by a snake and now you have a snake phobia, although you never made a bad experience yourself. The challenge of coping with complexity is as old as mankind. It was complexity that made our ancestors invent deities to explain fate and natural phenomena. So far, scientific progress has not solved the issue. It did the opposite.
Volatility
Globalization has intertwined players, activities and impacts. Digitalization has increased the speed of action and the level of unpredictability.
Today, we are living in a global village and do business on global markets. The BRIC countries are approaching eye level with the OECD economies. Their governments are bailing out Western banks and countries, their businesses have taken an active role on the M&A market. And not only the number of players has been growing constantly. Digitalization still continues to speed up the global economy in a way, that already ousted human traders from large parts of stock exchange.
Change
To cope with unprecedented volatility, companies and societies need to increase their readiness for change. This requires the application of three guiding principles:
Flexibility
The fundamental prerequisite of a transformational organization is its willingness to adapt to changes in the environment.
The first is flexibility. Operating in an environment where change is the only constant, organizations must be able to adapt. They need to develop the ability to react to unforeseen developments. And they need to do this more quickly and effective than competitors or challengers of any kind. More than anything else, this requires a positive attitude towards change.
Awareness
The second premise for becoming change-ready is being attentive of events and situations that bring along new possibilities.
The second key success factor is awareness. Transformational organizations not only embrace changes they cannot avoid. They are open for change in an active way. They are on the lookout for signs of change to make use of any opportunities that might be related to it. Samuel Reshevsky, demonstrated this high level of awareness at the age of eight. In 1920, he defeated several chess masters at a simultaneous exhibition in Paris.
Resilience
Who tries something new might fail. Therefore, readiness for change also includes the ability to regain shape after failure.
Innovation always bears the risk of failure. It is one thing to take a risk. The greater challenge is to deal with painful failure. This is a matter of leadership culture. What happens to the courageous risk-takers who fail? Who gets promoted: the flawless cautious or the innovator who goes for bigger gains and sometimes loses? The way an organization answers this question determines its ability to regain shape after catastrophic experiences.
Leadership
Being flexible, aware and resilient cannot be ordered. Driving change is a matter of leadership. In an environment of growing complexity the main task of corporate leaders is managing uncertainty. What does it take to fulfill this task?
Conviction
Leadership requires the skill to convince others to do what seems right without having reliable information about the future oneself.
More often than not, change is uncomfortable. It means to stop doing what we are used to do. We have to acquire new skills and explore ways, we have never walked before. Change is always related to risk of failure. In a complex environment, leadership requires the skill to convince others to do what seems right – without knowing oneself how the future will look like.
Direction
In times of uncertainty, a leader needs the courage to establish a clear common goal, if he wants the organization to keep moving.
Therefore, in times of uncertainty, a leader needs the courage to establish a clear common goal, if he wants the organization to keep moving. Let’s take Samsung as an example: In 1993, the company was focused on producing massive quantities of low-quality goods and facing insolvency. Lee Kun Hee, then CEO of Samsung Group, changed course dramatically. He reduced the workforce by a third and asked the remaining employees to „Change everything except your wife and kids“. The new vision was to focus on high quality and profitability in order to become a premium brand. Creating better products than anybody else became the new guiding principle. The shift is now widely considered a success. Samsung leads the world market in 19 industry segments and already ranks #17 among Interbrand’s Best Global Brands.
Empowerment
Unleashing the full problem-solving potential of the organization requires to enable its associates to make and execute their own decisions.
The third requirement for leadership in the era of hypercomplexity is empowerment. Probably all of you will know the famous quote by Saint-Exupery: „If you want to build a ship, don’t drum up people to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.“ This is exactly what empowerment is about. In times when organizations need to cope with unexpected events and situations every day, decisions need to be taken all the time and quickly. Employees need to be encouraged to take more responsibility. Managers have to provide the target coordinate and a detailed topographical map, not only a sketch of the route they want their staff to take. Otherwise, employees need to turn back, once they find the proposed road blocked. There is hardly any large company that has given employees more autonomy and responsibility than Google. They have been applying the principles of empowerment throughout their organization. Just think of the 20 percent rule or the way project teams are initiated. This has immensely contributed to the success of Google.
Strategy
Those who don’t believe that empowerment also works in „normal“ companies fear the risk of chaos. But Fredmund Malik, currently the most prominent representative of the St. Gallen school of management, sees one way to cope with this problem: strategy. According to Malik, „Strategy is to do what’s right, when we don’t know how the future will be, but nevertheless need to act — having in mind that doing nothing is a kind of action.“ Unfortunately, the term strategy is prestigious but not clearly defined.
Or as Henry Mintzberg diagnosed: „The word strategy has been around for a long time. Managers now use it both freely and fondly. It is also considered to be the high point of managerial activity. […] business schools usually have as their final required capstone a course in strategic management. The word strategy is so influential. But what does it really mean?“ Let me introduce a very pragmatic approach. It is based on three key deliverables:
Vision
Strategy is the art of deducing from the future what needs to be done now.
First of all, developing a strategy needs a goal that is ambitious enough to require a strategy. Otherwise, a simple operational plan would do.
If such a goal is set, developing the strategy means moving backwards until it is clear, what needs to be done now. This includes immediate operations as well as creating potentials to enable further action on the way to realizing the current vision.
Anticipation
Strategic planning requires to think in constellations and to realize which of them promise greater success than others.
As said before, strategy is needed to deal with unavoidable lack of knowledge. Strategic decision-making is based on the principle of selection. Because we are unable to consider every possible influence factor, we have to make assumptions. Which factors seem to be more important than others? Which scenarios are possible? Which of them promises the greatest success? How likely is it to make this happen?
Engagement
Even the best strategy is worthless without the ability to win over others to realize the most promising constellation and make use of it.
Once the most promising constellation is identified, the difficult part of strategic management begins: creating a joint venture of interests between organizational leadership, employees and relevant stakeholders. All groups, whose cooperation is needed, have to be engaged in bringing about the desired constellation and make use of it.
Communication
In case you haven’t realized that long before: Now it should have become apparent that communication is a fundamental part of managing complexity. To a large extent, leadership is nothing else but effective communication. The same goes for strategy, the art of directing a group of people towards a common goal. Without proper communication, strategy cannot come to life.
Litmus-testing
The best way to make sure a strategy can be conveyed to employees and stakeholders is to involve corporate communication in formulating it.
Unfortunately, many strategies are designed in a way that makes it very difficult (if not impossible) to pass them on to all stakeholders who need to cooperate in the execution. Time and again, I come across corporate strategies that remind me of ruins of ancient Greek temples. Their elements are not related. They just stick in the sky. The roof is missing, there are no interiors.
Let me give an example: Just imagine an airport operator who is going to build an additional runway. The goal behind is to increase the number of incoming and outgoing flights. Now imagine a second pillar of the corporate strategy is to „be a good neighbor“. In that case, the success of the strategy depends on whether the company will find a way to solve the conflict between its business interests and interests of the communities that will be affected by the additional air traffic.
As far as I know, it still happens quite often that the head of corporate communication only receives the final strategy together with the assignment to communicate it. If he or she was deployed for litmus-testing, a chief communication officer could check and safeguard the coherence of a new strategy.
Story-telling
To be convincing, the elements comprising a strategy must form a consistent story. All stakeholders need to be able to connect the dots.
In that case, the following questions need to be asked:
- Does the strategy present a vision that is attractive for all who need to get involved?
- Does it consider the hardships specific groups will have to face because of it?
- Does it provide solutions for how to meet these challenges?
- Is it in line with the existing identity, culture and values of the organization?
Separate pillars are not doing the trick. You’ll need a complete house with a roof, walls, floors and staircases. And you’ll need apartments that fit the needs of the tenants.
The House of Strategy is a useful tool to organize the process of strategic planning and management. It integrates all elements that comprise corporate strategy: The roof contains vision, mission and Key Results Indicator. The staircases represent the strategic initiatives. Each floor accommodates a key stakeholder group. The rooms link the stakeholder perspective to the corporate initiatives. All aspects are intertwined, conflicts or inconsistencies become apparent, the strategy is relevant for all relevant constituencies and can be told as a story.
Alignment
All communication activities must be aligned with strategy. Planning starts with an essential contribution to achieving a corporate goal.
Once the House of Corporate Strategy is agreed it needs to translated into the House of Communication Strategy. This way all communication activities are aligned with corporate strategy. Planning starts with defining contributions that are essential for achieving the corporate goals. From there it moves backwards along a chain of questions that form a corridor of plausible cause-effect-relations. Which stakeholders co-decide whether the organization is successful? What do they need to do to make that happen? How do they need to perceive us? How do we engage our stakeholders in purposeful communication? Which communicative offers do we need to make? What do we need in order to produce the necessary content and make it available to the stakeholders?
Reputation
This assignment to corporate communication is in line with the oldest university textbook on public relations. 60 years ago, Scott Cutlip and Allen Center defined PR as „a management function that seeks to identify, build, and maintain mutually beneficial relationships between an organization and all of the publics on whom its success or failure depends.“
Relationship
Reputation is the key to stabilizing useful relationships between an organization and its stakeholders.
Subsequent to the downgrade of PR to media relations, Cutlip’s and Center’s 1952 definition applies to what is called reputation management today: the task of stabilizing useful relationships between an organization and its stakeholders. This means a challenge to communication managers who are used to reduce their assignment to goals their department can achieve on its own. Accepting this point of view leads to the conclusion that managing corporate reputation is impossible.
Responsibility
Every associate has contact with at least one stakeholder group and needs to play a role in developing the corporate reputation.
Who would deny that every member of an organization plays a part in building, maintaining and protecting the reputation? All employees have contact with at least one stakeholder group. Every manager is accountable for providing a framework for acting on this responsibility. And corporate leadership provides the quid pro quo.
Service
Enabling executives to activate employees and stakeholders for shaping the reputation is the key assignment of corporate communication.
Unfortunately, there is hardly any university teaching future business leaders how to understand the motivations of associates and to align them with a common goal. Most executives focus on avoiding mistakes in decision-making. Winning hearts and minds for the corporate strategy is a task that only a minority of corporate leaders can fulfill themselves. Lacking the necessary skills they need support from professional communicators. This makes enabling executives to activate employees and stakeholders for shaping the reputation the key assignment of the corporate communication function.
The Challenge
Eye level
PR is more than media relations. It’s a management function. Communicators just need to deliver to the promise.
Accepting this assignment would be the first step towards being accepted as a management function. Living up to it would expand the scope of corporate communication significantly. Someone has to organize, manage and control the interdisciplinary activities aimed at strengthening and protecting the corporate reputation. If communication executives don’t go for this expansion of their playing field, I’m sure: HR managers and chief strategists will.
Copyright Prof. Dr. Christopher Storck 2012
Strategie braucht Kommunikation 