Communicating the strategy of a company is a complex and time-consuming task. Many companies invest significant hours developing strategies and outlining the necessary steps to achieve their goals. However, when it’s time to meet with key stakeholders – such as creditors – explaining the intricacies of a strategy can be challenging.
This is problematic in an economic environment where the lines between profitability and financial distress are often very thin. It’s a challenge that all corporates, including us, must collectively address and improve upon. I recently read an article on the Harvard Business Review (HBR) website, which provides insight into how to approach this endeavour differently.
Present the rejected alternatives
The HBR article points out that explaining why not can often help you explain why. In presenting a strategy, you can also present the alternatives considered and explain why they were not adopted. Consider, for example, the experience of the St Louis-based partnership of Edward Jones, a leading firm in the US brokerage industry. In an interview, the late John Bachmann, who served as the firm’s managing partner during 1980-2003, articulated their strategy as follows:
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“Unlike most other competitors in the industry, we target and sell only to individual investors, not to institutional ones. Within this segment, we focus on individuals in rural America, not in urban areas. What we sell to them is “peace of mind”, and, as a result, we do not sell exotic derivatives or risky products—instead, we select transparent and safe products to promote. Unlike our competitors that sell their own in-house mutual funds, we do not manufacture the products that we sell. Instead of big offices in large cities, we have small offices that are placed in small communities to be convenient for the customer. In addition, each office is run by one, not two and not three Investment Representatives.”
Note how prominently the word “not” features. Pharma firm Roche similarly places its decision to focus on prescription medicines and diagnostics in context by highlighting their decision not to invest in alternative sectors such as generics, biosimilars, over-the-counter medicines, and medical devices.
The article adds that communicating a strategy in this manner allows people to understand not only what choices were made but also what alternatives were considered for each choice. More importantly, it invites people to either ask for clarification as to why the alternatives were rejected or challenge the choices made by top management. It is the discussion that follows such challenges or clarification requests that eventually leads to a better understanding of strategy, not whether the original communication was clear.
Link to purpose
The article points out that you should also link your strategic decisions to your company’s purpose or goal. Explaining to employees how each choice is linked to the organisation’s purpose is a good way for people to quickly understand the logic behind the choice without needing to know all the deliberations that took place to make the choice.
Take DPG Media Group, the leading media company in Belgium and the Netherlands, which publishes largely in Dutch. In an interview with one of us, the Group Chairman, Christian Van Thillo, stated that the critical assumption the company had made at the outset of the digital era was that people would continue to rely on professional media rather than citizen journalism, blogs, and influencers. As a result, the company adopted the digital delivery of high-quality, professional journalism as its strategic goal.
The article adds that the company always uses this goal as the starting point to explain its strategic decisions to employees. For example, in presenting DPG’s decision to engage in acquisitions for the first time in its history, Van Thillo pointed out that to be a leading provider of professional journalism in the digital context, DPG needed to compete with Google and Facebook for advertisers, which meant they had to be big enough in their markets so that local advertisers and consumers would have them top of mind. Similarly, in explaining the decision to focus on just two markets, Belgium and the Netherlands, Van Thillo pointed out that DPG could not afford to be big in many markets without undermining the quality of its journalism.
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Involve employees in strategy development
The article points out that employee participation and inclusion in the strategy process can take many forms, from simply soliciting ideas and feedback to active participation in strategy workshops and testing of new strategic initiatives. At the upstream end, for example, we find the German drinks producer Premium-Kollektiv, which allows any interested employee to set a strategy dialogue in motion through a process that is entirely transparent. Issues can be raised or responded to by anyone in the collective via posting to an email list. Lively debates can develop, and decisions are largely reached through consensus emerging, sometimes gradually.
As strategic dialogues deepen, more employees will get involved, and with their involvement comes a greater shared familiarity with the context in which the strategy is developed. For example, at the gaming company Valve, employees proposing strategic initiatives must persuade at least two colleagues to form a team to implement initiatives. As the development proceeds, more people join, which means that more people get a sense of what the initiative is trying to do.
The article adds that technology is a great enabler of employee participation. For example, as part of its strategy development process, global tire manufacturer Bridgestone is experimenting with AI-powered surveying of employees. The technology enables interactive dialogue with staff, efficiently and at scale, aiming to uncover information and insights to inform strategic planning. Jake Rønsholt, who leads strategy and transformation in the EMEA region explains, “We want to involve and engage a broad range of staff in the development process. AI-powered surveying ‘prods’ interviewees to consider what lies behind their answers, creating deeper and clearer insights on which we can build.”
Value-based discussions
We often focus on the physical undertakings that a company needs to implement to avoid financial distress. However, more emphasis should be placed on the soft skills that add significant value.
If the interventions mentioned in the HBR article are implemented successfully, value-based discussions with creditors will become easier.
