Wednesday, April 18, 2012

3 challenges in implementing a strategy

If designing a good strategy is difficult, then designing a strategy as if implementation matters is far more challenging. Louis Gerstner articulates the challenge in his autobiographical account of IBM turnaround1 “Who says elephants can’t dance” - It [IBM] had file drawers full of winning strategies. Yet, the company was frozen in place. IBM hadn’t missed predicting any technological trend and yet the company was paralyzed enough not to act on any of those effectively. What are the challenges in implementing a strategy? Here is my reflection based on Prof. Richard Rumelt’s video interview.

1. Not simple enough: A few weeks back I witnessed following conversation in a senior management meeting. It got started when someone asked, “How is our innovation program aligned with our strategy?” One response came, “What is our strategy?” This was followed by a noticeable silence in the room. Then answers started - One answer was “Our vision statement articulates our strategy”. Another one was “We have percolated our strategy through a balanced score card. Hence, our KRAs tell us what to do in line with our strategy”. Each answer had an element of truth. However, my conclusion after witnessing this discussion was, “If the company has a strategy, nobody in the room has articulated it in a simple manner.” Each member in the room was making various decisions – including selection of large impact ideas. And yet there was no coherent view on how they would win in the market – today & tomorrow. I like what Rumelt says in the interview, “A good strategy is essentially simple. If you can’t explain your business strategy in a few minutes and in a few pages, there is something wrong.”

2. No good progress indicator: Infosys announced its results last week and missed its annual guidance for the first time in two decades. Infosys revenue had grown by 15.8% YoY and profits by 14.5%. Market reacted harshly; the stock shed 13% in a single day. It has been little over a year since Infosys announced Infosys 3.0 goal of getting its revenue equally from transformation, innovation & operation. In March 11, 2011, transformation, innovation & operation constituted 25%, 10% and 65%. Last week, Infy CEO Shibulal emphasized their commitment to make the portfolio balanced. However, its “innovation” bucket portion seems to have dipped from 9.5% to 6.2% of its revenue. Is Infosys strategy working? There is no easy way to find out, especially for an outsider, perhaps even for an insider. As Rumelt says in the interview, “It is difficult to determine whether or not you are accomplishing your strategy by looking at current results. You can have a company that is producing excellent results but has a poor strategy. Vice versa, you can have a company that has poor results but an excellent strategy.” My friend Prof. Rishikesha Krishnan who visited Infosys Labs recently is right in pointing out, “It may be premature to knock Infosys off”.

3. Ambivalent messaging: Andrew Grove tells a story of his Intel days2, when he & CEO Gordon Moore made a significant strategic decision in the middle of 1985 – that of getting Intel out of the memory business. This was the business Intel had identified itself with for more than a decade. Initially when Grove talked about it to his team, he had a hard time getting the words out of his mouth without equivocation. In his own words, “Saying it to Gordon was one thing; talking to other people and implementing it in earnest was another”. Several months after this decision, Grove was visiting a remote Intel location. He was still not ready to announce that they were getting out of the memory business. He would usually give negative-to-ambivalent answers to questions pertaining to memories. And one of the senior managers attacked him aggressively, “Does it mean that you can conceive of Intel without being in the memory business?” In Grove’s own words – “I swallowed hard and said – yes, I guess I can. All hell broke loose.” Communicating an intent (like that of getting out of memory business) with clarity is not easy. Most companies mess it up. Rumelt says in the interview, “There is an essence of compromise that is part of human character. While competitive success comes from focus of resources, our natural tendency in the organizations is to satisfy multiple constituencies.”


1 “Who says elephants can’t dance” by Louis Gerstner, HarperCollins, 2003 (reference to drawers full of winning strategies is on page 16)

2 “Only the paranoid survive” by Andrew Grove, Doubleday, 1996. (reference to the visit to the remote location is on pages 89-90).

1 comment:

  1. Hindu carried an article on IndiGo airlines: How IndiGo escaped the blues. Aditya Ghosh, President, IndiGo, mentions following, "IndiGo stands for three things — being on time, being courteous and hassle-free, and offering low fares”. That's good clarity (simple to understand). Of course, saying it is one thing and day-in-day-out executing it is another. IndiGo seems to be executing it well so far.