I love the story of the tourist in Ireland asking an old local “what’s the best way to get to Killarney”. After much deliberation and scratching of chin the local…

The Strategic Review Imperative

I love the story of the tourist in Ireland asking an old local “what’s the best way to get to Killarney”. After much deliberation and scratching of chin the local replied, “I wouldn’t start from here if I was you.” In many ways, that is exactly the situation many CEOs find themselves in. They have a destination in mind but find it difficult to see how to get there from their current position.

In a very fast moving, fast changing business and technology environment, working out if your strategy to get to that destination, or achieve that business vision, is still fit for purpose often gets put on hold. There are all the daily operational battles to fight, this year’s revenue and profit targets to meet. A strategic review, by its very nature, implies a longer view. Making the time and space for a review of an existing strategy, which presumably had everyone’s backing when it was first devised, feels like an expensive and time consuming luxury.

However, a recent McKinsey study found that a majority of the most successful CEOs, those whose companies delivered an increase on shareholder value of over 500% during their tenure, derived the biggest benefits from carrying out a strategic review. These CEOs were 60% more likely to conduct a strategic review in the first two years of their tenure than the CEOs McKinsey identified as average. They focused on changes to their business models, customer relationships, target markets and product strategies, rather than engaging solely on internally focused organisational changes.

Changing strategic direction requires an initial investment of time, effort and money; things that are in short supply for most organisations. It is no surprise then that the McKinsey survey highlights the focus on cost savings by the most successful CEOs, who were almost 20% more likely than their average counterparts to undertake cost reduction programmes. The emphasis here needs to be on understanding what to stop as much as on how to reduce operational costs. How can I re-use and re-deploy my scarce and valuable people rather than making them redundant?

The strategic review needs to identify what skills, experience and processes are core to your business, and what merely add context and can be outsourced. What products and services need to be dropped, and how can I redeploy the resources released back into developing new ideas? Geoffrey Moore’s excellent book, “Dealing with Darwin”, has some excellent examples of how to identify core vs context and suggestions about the way in which you can retrain and reskill your people and re-deploy resources.

What about information technology (IT)? At the very least IT is a key enabler for business. Modern mobile and cloud based apps offer the opportunity to bring new products and services to new markets faster and more cost effectively than in the past. Managing the costs out of your legacy IT environment and redeploying the savings and people into these new areas should be an important outcome of your strategic review.

The natural inclination for management is to do the strategic review themselves. After all they developed the original strategy and know the business inside out. Returning to the McKinsey survey it is interesting to note that exceptional CEOs are twice as likely to have been hired from outside as what they define as the average CEO. They reason that an outsider’s point of view can challenge the company’s culture with greater objectivity and overcome the organisational inertia that sometimes limits an insider’s span of action.

McKinsey point specifically to “the outsider’s edge”. You don’t necessarily have to find a new CEO from outside the company, you could look to the talent and experience that can be hired in from consultants and integrators. The evidence from McKinsey is that the “outsider’s edge” could result in your companies delivering total stakeholder returns at least 9% above industry cohorts each year. In today’s competitive climate that is an edge you can’t afford to ignore.

To book a meeting with Peter Borner directly, please do so here.

by Peter BornerPeter is the founder and Managing Partner of Percipience llp. He is an entrepreneur and successful business leader with board level experience and senior leadership roles with global firms including Sony Music, British Telecom, Liquid Audio and Axispoint. He currently holds a non executive position on the advisory board for Rise-To and is active in the third sector with Rotary and The Rotary Foundation. His expertise includes technology diligence for M&A and advising firms on IT consolidation and migration to consumption based costing through the use of Cloud Technologies, Agile and DevOps.

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