Straight from the Boardroom: Why Organizations do not know their own Business Strategies?

Story goes back when I had just joined a large conglomerate. My reporting was to the CEO. Following the 'corporate rituals' meant for the  CXOs, I too was asked within few days of my joining to formulate a befitting functional strategy for HR and present the same to the board. Although the company was having a 'working' strategy for the past more than a decade. Keeping in view the prescribed thumb rule that says that all the functional strategies should be in line with the overall Business strategy of the company, one fine morning I reached out to the CEO innocuously, requesting him for his time to discuss the business strategy. Additionally, at the back of my mind, I was carrying the impression that as he being my manager and also the CEO of the company, he is the right person to hear from him about strategy. My first mistake in the company.

Anyhow, story went on like this. My first assumption was wrong, still I dared to continue with it.

One day I got a call, we both sat down in his cabin and started the discussion. He started talking about the strategy that was in practice. For the next half an hour, as a good disciple, I kept listening to him. In nutshell with all conviction, he said the strategy is to increase revenue, to increase profitability, to increase market share, to launch new products, to enter new geographies etc. I was in the middle of my struggle to comprehend whatever he said and when I failed in it, I committed second mistake in the flux of the moment by requesting him to rephrase it again as I could not understand. My learning out of this incident is that one should not repeat a question to a higher authority and absolutely not when the authority does not know the answer. But I was not aware of it. Reaction was bad, obviously for all the reasons. But sometimes few good things fly out of the worst. I guess that he did realize his mistake, although not on the same day.

After few days, he invited me for a cup of tea, later it became practice. The pretention was to discuss the HR strategy, but in reality, meeting was to decipher the Business strategy. As the saying goes, “every cloud has a silver lining" so was it for me. The meeting ended with a direction that we would both keep meeting & discussing till we finalize the business strategy for the company. Meetings so planned for a week, ran for weeks and months later. The good part to mention here is that after around couple of weeks, we could zero down on a new Business Strategy that was rolled out. Posters were pasted all around in the company premises. 

For me personally, I had a sense of accomplishment as I contributed to one of the most critical aspects of the business - Business Strategy.

Leaving this story here, the question that one day struck me, was this an exception or is it a commonly spread reality in industry?

Inquisitively, I started searching for more information to dig deep into the situation around. It was not hard to find out because of Google and my close friends. The finding did surprise me that revealed that ‘it is not an exception.’ There are umpteen cases wherein people at the higher levels do not know the overall business strategy of their own companies. More revenue or continuous higher profit is believed to be the business strategy and may be true to certain extent. Consequent to the general feelings, actions of all employees’ day in day out are directed towards increasing revenue or profits. Monthly MISs are prepared to keep a tab on it. Month on month, many people are put to the task of preparing MIS to ensure this monthly ritual keep going uninterruptedly to know the delta change in apparent variables of revenue or profit. It is easy to do against figuring out the real strategy. I worked for a company where the first couple of days every month all seniors along with a bunch of juniors would spend their time in the preparation of MIS and the last two weeks in the month for data collection; one week in between for rest. Month Over. Salary Paid.

Who is at fault? My interpretation of the situation is as the CEOs come from certain functional backgrounds who carry with them years of behavior formation out of their functional needs & corresponding actions. It is not humanly to shed this acquired behavior of years in a day or two. It is on the other hand easy for any human to continue with the acquired behavior. This is the point where the problem lies.

Organizations must go for a planned succession before someone is elevated to a new post. This way companies will help chosen people to shed their functional limitations and acquire the new behavior, must for the success in new roles.

Fast forward, it is a reality that most organizations struggle not because of external competition alone, but because internal clarity is weak. These organizations do not fully know what business they are in, who they serve, or how they win. When business clarity is fuzzy, everything downstream - starting from strategy, org design, performance management, incentives, tech investments become noisy and contradictory. 

Making the situation even more complex is the readily available Business Models – 36 major and minor countless. It is quite easy to ‘Pick any suitable and apply.’

It is a known fact that every business model is developed for a particular business situation and applicable in certain market conditions only. Each of them have certain related dos & don’ts. None of them have a universal panacea for one & all business challenges. On the other hand, a business model is chosen for adoption exclusively depending upon the liking or the knowledge of the CEO without referring to the contours of a business.

What I understand now, ‘Business fronts are countless, but solutions are limited.’ One has to start from the basics and the easiest is following the Michael Porter Model. It convincingly distributes all business into two segments, one following Differentiation Strategy and the remaining Cost Leadership. Simple.

But the real implications start from here and that is ‘the Execution’. Execution of these two are entirely different, which has been made simple by the RT Business Model.

All businesses aim for continuous clocking of higher revenue and profits and similarly, all business models suggest certain actions to achieve it. Only limitation with these models is that none of them provide a solution how to align actions of all employees. The RT Business Model removed this limitation. For a brief reference here, the RT Business Model lays down a framework which ensure that every individual employee is aligned for its actions to the growth and profits, directly or indirectly. Making it easy for organizations to check and take corrective actions depending upon the chosen strategy.

There few more points which hold back organizations in achieving their business strategy. These include:

1. No Clarity on Value Proposition to the customers

When you are under tremendous pressure to generate revenue, it is easy to serve every customer that comes your way. And mostly the customers are served with the ‘Opportunistic Pricing’ and not the ‘Satisfying the Actual Need.’  If the core customer problem and unique advantage aren’t explicit, decisions become subjective and function driven.

2. Assumption based Decision Making

Assumptions generally prevail, as it is easy to fantasize. Data collection and sanitizing it for decision making is painful and time consuming.

I remember a day, when I and my CEO sitting in his ‘Drawing Room’ concluded the meeting with a strategy to set up 10 large-sized manufacturing plants. Fantasy could have been seen with bare eyes all around in the room; the strategy was meant to meet its doom day at the earliest and that happened within few days.

Market size, willingness to pay, unit economics, adoption friction, etc are few critical data points to build a strategy.

3. Disconnected operating system

How the work is done in a company is critical to the strategy. It is a strategy that decides the way work is conducted. Processes, incentives, org structure, if it does not match the strategy, chances are that the company will fail in its business strategy eventually.

4. Fragmented accountability

A common saying in the industry is ‘when accountability is spread too thin, tasks often fall through the cracks because no one feels truly responsible.’  Psychologists summarize this tendency as “Diffusion of Responsibility”.

Companies have to ensure that every single employee is clear for their ownership and accountability in teams and businesses.

5. Role of Unit economics in Success

Efforts should be made to train if not all employees, at least managers, for the financial basics of the businesses. Here comes the role of HR Strategy & HR Managers. Every HR process should be designed and defined in such a manner that it helps Functional Managers in their becoming ‘Business Managers.’ It would not be out of context mentioning about the PrajjoHR Solutions. The company is determined to offer HR solutions which directly or indirectly make managers, Business Managers in real sense.

Kenbox Technologies through its Prajjo HRMS platform offers 07 Copyright HR Solutions, all of them employs Artificial Intelligence [AI]. In the context of this article is The BUSINESS SUCCESS MODEL, a copyright product to help you ensure continuous success.