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Strategy & Leadership

How leading companies are stretching their strategy

Nicolas Kachaner Michael S. Deimler
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Nicolas Kachaner Michael S. Deimler, (2008),"How leading companies are stretching their strategy", Strategy & Leadership, Vol. 36 Iss 4
pp. 40 - 43
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How leading companies are stretching their
Nicolas Kachaner and Michael S. Deimler

Nicolas Kachaner is a ven well-established firms with the resources to analyze the future find that it is
senior partner in the Paris
office of The Boston E increasingly less predictable. As a result, the value of any reliable strategic foresight
executives can wring from their planning systems can be priceless. Strategy
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Consulting Group development because it can offer a head start in competitive markets and even define a
(kachaner.nicolas@ new course remains essential to gaining or holding an advantage. Increasingly, leading companies are changing their strategy-development processes to keep up with the
Michael S. Deimler is a transformations in the global competitive environment. Leading companies have learned to
senior partner in BCGs
focus on developing great strategists teams and individuals who are prepared to spot
Atlanta office and global
shifts early on, and are agile enough to do what it takes to seize or retain market leadership.
leader of the firms Strategy
practice (deimler.mike@ So what are companies doing to get ahead in the race for strategic foresight? On the basis of our recent study of strategy-development processes, which included interviews with more
than 100 executives from 20 leading companies, we think that the answer is that they are
stretching the strategy process along three mutually reinforcing dimensions.
B Stretching time horizons to give the short, medium, and long term each its due.
B Stretching their thinking with new techniques to boost creativity and insight.
B Stretching the engagement process to foster dialogue, preparedness, and alignment
across the organization.

Stretching time horizons

When we surveyed firms about their strategy development process only a few firms
reported that they had set up a system to consider business strategy over three distinct time
horizons: long, medium, and short term. Yet setting up a process to separately consider all
three time frames is critical for gaining superior strategic insight.
Separate strategy sessions focused on each of the three time horizons can enable a
company to see opportunities and risks that competitors miss. Trying to address multiple
time horizons with a single process just doesnt work. Each horizon calls for different skills,
techniques, and deliverables and should involve different people on different schedules.
Long-term visioning. This time horizon has two objectives. One is to envision and prepare for
macro changes 5, 10, or 20 years out and to establish a plan to shape the future competitive
environment to the companys advantage. The other is to define both the companys
long-term aspirations and the high-level business models that will support them. Thinking
through possible moves in likely and less likely futures enhances preparedness. For
example, Shell was among the first to practice scenario planning in the late 1960s and one of
the few companies ready when the oil crisis hit in 1973. More recently, one industrial
company has taken a novel approach to the long term. It convened a team of
up-and-comers under the leadership of a respected senior executive and charged the
team with identifying significant long-term growth opportunities adjacent to the companys
core business. This team brainstormed relevant opportunities at the intersections of a short

PAGE 40 j STRATEGY & LEADERSHIP j VOL. 36 NO. 4 2008, pp. 40-43, Q Emerald Group Publishing Limited, ISSN 1087-8572 DOI 10.1108/10878570810888768
Instead of feuding over how to increase resources, a typical
budgetary debate, ask how to operate with significantly fewer
resources, or even without them.

list of critical megatrends, and then winnowed them down through an interactive process.
There were experiential learning journeys to pressure test the hypotheses with real
customers and classic economic analysis to assess their attractiveness. Ultimately this
process enabled the leadership to settle on a manageable number of potentially high-value
Medium-term business strategy-setting. Here the focus is on defining the path to enhanced
competitive advantage. What are the critical business initiatives that will drive relative
advantage? And what internal rules of the game guidelines, controls, and incentives
will best support the realization of medium-term strategies and position the company to
outperform competitors and to meet or exceed the markets expectations for growth,
profitability, and asset utilization? For example, shortly after A.G. Lafley took the helm as
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Procter & Gambles CEO in 2000, he issued a clear new set of strategic guidelines. Attention
and resources should be focused on core brands. Innovation shouldnt all be
internally-generated and intellectual property should be opened to competitors after
two to three years. And a focus on total shareholder return should ensure forward-looking yet
prudent investment decisions.
Annual business reviews. This time horizon has a dual objective. The first is to review the core
assumptions of the long-term vision and medium-term business strategy in light of weak
signals and market developments. And the second is to define the specific activities that
bring inherently-abstract strategies to life in the rough and tumble of day-to-day business
realities. Leading companies are replacing cumbersome template- and budget-driven
strategic planning with constructive strategic dialogue between the center and the
business units guided by well-articulated questions. This dialogue-based approach also
leads to a shorter process in which better and more timely decisions are made. At Nokia, for
example, each annual business-review cycle starts with a business environment outlook
session that challenges current business assumptions. This session seeks to identify major
long-term trends and possible disruptions in Nokias businesses that need to be
incorporated into medium-term strategies. Then with an updated medium-term strategy in
hand, specific short-term initiatives and budgets as well as the long-range financial plan are
refined to realize it.

Stretching the thinking

The traditional approach to strategy development combining an external perspective
(analysis of markets, competitors, channels, and economics) with an internal perspective
(assessment of resources) is useful but not sufficient. After all, tools frame the thinking.
Using the same strategic tools year after year is likely to result in strategies that are
incremental and that dont address emerging opportunities or changing competitive
patterns. There is a need for new methods that foster lateral thinking and enhance strategic
Stretching the thinking is about multiplying the viewpoints through which you evaluate your
business. Consider the following approaches:
Invest in the art of questioning. This approach is based on the Socratic practice of asking the
right questions to stimulate thinking. Few companies in our research believe that they
spend enough time and attention on articulating the questions their strategy should address.
Yet when they do, teams come back not only with the answer but also with a higher level of
understanding and ownership of the chosen course.

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Turn issues upside down. Instead of asking how to grow the business, ask how to kill it. A
well-known example is the initiative led by Jack Welch to
prepare General Electric for the digital world. Instead of feuding over how to increase
resources, a typical budgetary debate, ask how to operate with significantly fewer
resources, or even without them.
Deconstruct your business. Mentally break the business into pieces along the value chain
and determine in which segments the company has a superior competitive position, which
should be outsourced, and which must be defended against capture by external players.
Role play. Put yourself in the shoes of a stakeholder, either internal (a union leader or head of
another business or functional unit) or external (a competitor, supplier, government body, or
the consumer) and evaluate your business and potential strategic moves from their
perspective. While this tool is commonly used by marketing to understand consumer needs,
it is far less often used for strategy development.
Think like an owner. Understand what your owners value in your strategy, what they expect,
and what keeps them invested while recognizing that owners may have a variety of
specific needs and objectives. Also model the key drivers of your share price based on
financial metrics such as Economic Value Added (EVA) and Cash Value Added (CVA) and
assess how operational plans will, or wont, contribute to the desired level of growth in
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long-term shareholder returns.

Bring in external perspectives. Many leading companies are too inward looking. They may be
linked with suppliers for electronic data interchange, or EDI, but few invite outsiders to help
shape strategy and challenge internal beliefs. Exceptions include S.C. Johnson & Son and
Toyota, both of which involve key suppliers in designing aspects of their strategy. Others
invite professional investors and even unions to be part of the dialog.
Challenge strategies against megatrends. Identify how critical trends (social, economic,
political, technological, legal and environmental) may affect your competitiveness, and
provide either headwinds or tailwinds to potential threats and opportunities.
Build scenarios. In a world of increased uncertainty and complexity the value of scenario
planning is increased. There is no single future to predict, but rather a portfolio of different
possible outcomes each of which has different strategic implications and is associated with
different potential moves. Effective use of scenarios can offer a company a real head start in
seeing and mentally preparing for critical shifts in the evolution of customers and the basis of

Stretching executive engagement

In our study, few executives described their strategic processes as fun, motivating, or
engaging for the organization. At best, they described them as beauty contests with rosy
PowerPoint slides. At worst, they deride the process as bureaucratic, time-consuming, and
insight free. Whats needed are engagement practices that inspire people at different levels
of the organization to think and act strategically that eliminate the outmoded distinction
between corporate thinkers and business-unit doers. Bringing front-line employees into
strategy debates, at certain points, might add a refreshing perspective. After all, an
organization that has had a robust dialogue on how the market is evolving and where it
seems headed is both more aligned to pursue current opportunities and more prepared to
see future shifts in the basis of competition.

Bringing front-line employees into strategy debates, at

certain points, might add a refreshing perspective.

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The best strategies result from collaboration across levels between staff and line
managers, for instance, or among line managers, the executive committee, and the strategy
department. To get there, companies need to stretch their engagement model in three ways.
Alter the tone. Replace the tyranny of planning templates with real, no-holds-barred strategic
dialogue. The idea is to focus on the hard questions. To ensure ample time for rich
discussions, some companies are capping the number of slides presenters may use. At
LOreal, over the past decade, there was a place at headquarters called the confrontation
room to which even junior managers were invited to discuss their strategies with the
executive committee. This challenging and dynamic process nurtured strategists. After all,
most great strategists are mentored, not born or book taught. And dialogs in LOreals
confrontation room also brought the executive committee a rich and current perspective on
market signals.
Change the rhythm. Increase the frequency of reviews, but focus on a small number of
issues. While the traditional annual three-day off-site seminar still prevails in many
corporations, we see a trend toward speeding up the organizations body clock with more
frequent, more focused, and shorter business reviews. Major benefits of on-going strategic
discussion are more adaptive strategies, a tighter coupling between strategy and short-term
actions, and more mature decisions. At Nokia, for example, the process is continuous,
enabling frequent reviews of the existing strategy. Corporate strategic themes are followed
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by a small group of top executives including the CEO called the strategy panel. This
panel addresses a rolling agenda of two to four topics every month. The panel then can ask
either the business leadership teams, technology, or brand boards to follow up on the topics.
In addition, some companies have reconsidered their one-size-fits-all annual review
processes and have worked to fit the frequency and depth of reviews to the fundamentals of
the business. At Textron, for example, the duration of annual strategic reviews varies based
on the value at stake within each business unit. And regularly scheduled strategic dialogue
throughout the year concentrates on the issues with the highest value at stake across the
Expand the forums. Multiply the opportunities to discuss and debate strategy. Strategic
conversations should occur at different levels throughout the organization, each with its
corresponding format and resources. Involvement of people at multiple levels allows
strategies to be better thought through, internalized, and implemented. The primary
responsibility for fostering a productive environment for this dialogue falls to the executive
committee and the strategy team. Some leading firms set up alternative forums such as
special project teams or standing strategic committees with high-profile staff to discuss
strategic issues. For example, banker ING has chartered teams to explore new growth
opportunities and, indeed, its ING Direct unit was established this way. Other firms have set
up permanent strategic committees staffed with high-potential managers from across the
organization to study critical strategic issues.
Although no single company in our research was at the forefront on all three stretching
dimensions, some leading companies are making good progress on one or more. Stretching
empowers the organization to shape its destiny through shared strategic aspirations, to
enhance preparedness and agility, and, by developing and engaging people, to foster
affiliation and enthusiasm.

Corresponding author
Nicolas Kachaner can be contacted at:

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This article has been cited by:

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Management 15, 245-257. [CrossRef]
3. 2008. Stretching the strategy process. Strategic Direction 25:1, 17-20. [Abstract] [Full Text] [PDF]
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