The proof is in. Excellence in both Strategy and Execution can be achieved!
Functional Magnetic Resonance Imaging (fMRI) studies indicated that while the prefrontal cortex is engaged during strategic thinking, those that are the “best strategic performers” engage other parts of their brain when embracing the tactical side of executing a sound strategy.
Emotional processing, planning based on conclusions from prior outcomes, as well as sensory stimuli processing and anticipation of organizational reactions to plans all come in to play. See When Emotional Reasoning Trumps IQ in the September issue of HBR. The authors state:
“People associate strategy with rational thinking and other high-level functions of the prefrontal cortex but the best strategic thinkers show more activity in parts of the brain linked with emotion and intuition. Their nervous systems may even repress rational thought to free those areas up….
Of course, IQ-based reasoning is valuable in both strategic and tactical thinking – but it’s clear that managers integrate their brain processes as they become better strategists. When companies realize that, they may approach strategy and execution more holistically.”
I may put that on my resume…integrated brain processing.
Recommended reading in today’s NYT regarding crisis management. The article, “In Case of Emergency: What Not To Do”, reviews three recent huge imbroglios impacting Toyota, BP and Goldman Sachs and how they mishandled their crisis communications.
It’s a lengthy article but worth the read. A critical quotation by Howard Rubenstein (aka The Fixer) towards the end of the piece:
“These companies made the sames mistakes. They broke the cardinal rule of crisis management: They didn’t seem to have a crisis plan in hand. They sought to minimize the extent of their problems, and they never seemed to display an understanding for the situation they were in.”
A crisis is complex and paving the way for a common response from legal, regulatory, management, marketing and sales can be extremely tough…especially if not done in advance. In the heat of the moment, where response time counts, excessive caution may get in the way of saying what’s prudent and human to preserve your brand (and it’s corresponding contribution to stock value), retain customers, and maintain positives that will impact future purchase consideration and market entries.
Another relevant piece in the same section of the paper under the heading “Metrics”, “Three P.R. Nightmares” shows some interesting graphics related to brand health (Measured components of brand health: impression, quality, value, reputation, satisfaction and recommend) before and after Toyota, BP and Goldman Sachs’ crisis compared to top competitors. As you might anticipate, the crises has had an outsized impact on their brands’ health. However, with advanced preparation, that impact can be mitigated and potentially garner positives (Ex. J & J Tylenol recall in 1982).
In “The Coherence Premium”, featured in the June edition of the June Harvard Business Review, Booz & Co’s Paul Leinwand and Cesare Mainardi advance the idea that strategy should start with recognizing what your firm does well that customers value and that competitors can’t eclipse and then building a core set of best-in-class capabilities to uniquely deliver on those products/services. If done well, the authors contend, the market will reward the company with higher growth and returns.
The three elements to deriving a company’s “Right to Win”:
- Way to Play – organizational alignment around the company’s value proposition
- Product and Service fit – portfolio alignment around the enabling core capabilities
- Capabilities System – the “engine of value creation is the 3 to 6 capabilities that allow companies to deliver their value proposition”
Great examples are provided in Walmart and the consumer health business of Pfizer (positive examples) as well as Anheuser-Busch and ConAgra Foods (not so positive). Interesting chart correlating their “Capabilities Coherence Score” and EBIT.
It’s a very clean approach which is intended to create value for the corporation in the following four ways:
- Strengthens competitive advantage by continually enhancing capabilities (employees and systems)
- Focuses strategic investment (organic and inorganic)
- Produces efficiencies of scale, leveraging capabilities across a “coherent”portfolio
- Creates alignment between strategic intent and day-to-day decision making
“Most companies don’t pass the coherence test because they pay too much attention to external positioning and not enough to internal capabilities. They succumb to intense pressure for top-line growth and chase business in markets where they don’t have the capabilities to sustain success. Their growth emanates not from the core but from the acquisition of apparent “adjacencies” that are often anything but…”
Powerful idea, aligning your company’s “strategic capabilities system with the right marketplace opportunities”.