Emerald Group Publishing Limited
Copyright © 2004, Emerald Group Publishing Limited
These brief summaries highlight the key points and action steps to be found in the feature articles in this issue of Strategy & Leadership
4 A three-part plan for upgrading your marketing department for new challengesPhilip Kotler
The marketing department should be a key driver of business strategy and growth. Is this true in your company? If not, maybe the cause is one of three key problems, which are often overlooked:
the marketing department lacks effective organization;
the marketing staff lacks the knowledge, tools and capabilities to make maximum use of technology; and
there is constant friction between marketing and other departments in the company.
Separately, any of these problems can slow down a company's overall growth or prevent it from recognizing and taking advantage of opportunities in the marketplace. Any combination of the three could spell doom for even the smartest companies offering the best products or services. A company needs to learn the symptoms of these marketing department problems and prepare to take decisive action. To address these problems, three steps are offered.
Step #1: Assess the skill. Is the chief marketing officer (CMO) able to run the department effectively, win the confidence of the heads of other departments, and work well with the CEO to deliver on company growth and profitability? Does the marketing team's skills match the capabilities embedded in a modern marketing department?
Several capabilities are discussed: brand positioning; brand asset management: CRM and database marketing; partner relationship management; contact or customer interaction center management; internet marketing; public relations marketing; service and experiential marketing; integrated marketing communications; profitability analysis; market-driving skills.
Step #2 Assess the marketing team's use of technology. It becomes imperative that marketers have not only the equipment but also the training to best utilize technology. Better technological skills go a long way to turning a stagnant marketing operation into a cutting-edge innovator that will help a company better compete in this fast-paced, techno-centric business climate.
Step #3: Assess the relationship marketing has with other departments in the company. Initiatives that improve marketing's relationship with sales, engineering, manufacturing and finance are key to building a stronger overall marketing program. Ways to improve relations with sales, engineering, and production are discussed.
10 The strategy map: guide to aligning intangible assetsRobert S. Kaplan and David P. Norton
There are many tools and techniques available for businesses to amplify their competitiveness and success. One such tool is the balanced scorecard, introduced a decade ago. Now a new, complimentary tool is introduced: the strategy map. It is a visual representation of the components of an organization's strategy. The power of this tool stands upon these premises:
All organizations today create sustainable value from leveraging their intangible assets – human capital; databases and information systems; responsive, high-quality processes; customer relationships and brands; innovation capabilities; and culture.
Because an organization's intangible assets may easily represent more than 75 percent of its value, then its strategy formulation and execution need to explicitly address their mobilization and alignment.
Without a comprehensive description of their strategies, executives cannot easily communicate among themselves or to their employees. Without a shared understanding of the strategy, executives cannot create alignment around it. And, without alignment, executives cannot implement their new strategies for the changed environment of global competition, deregulation, advanced technology, and competitive advantage derived from intangible assets, principally human and information capital.
The balanced scorecard tool and strategy map offer a framework to measure intangible assets and to describe strategies as a series of cause-and-effect linkages among objectives. They provide a language that executive teams can use to discuss the direction and priorities of their enterprises.
This article presents numerous examples of its many descriptive points and a case study of Crown Castle International, Inc.
18 A simple M&A model for all seasonsSam Rovit, David Harding and Catherine Lemire
Acquisitions are a risky growth strategy, offering worse odds than a coin flip for most acquiring firms. To discern patterns of success, Bain & Co. performed a 15-year longitudinal study of 1,600+ companies in the US, the UK, France, Germany, Italy and Japan doing 11,000+ deals. They asked, "What is it about a company's approach to deal making that engenders success?", and "Are winning strategies transferable?"
Bain's analysis of the companies that succeed at deal making and integration shows that they share some key characteristics, which can be boiled down to this simple playbook:
Get into the game in good times and bad. If you're not doing deals, your odds of outperforming go down relative to your competitors that buy steadily. Do not try to time the market.
Start small. Cut your teeth on smaller, lower-risk deals before you try the big ones. Build your team and your expertise in an environment where mistakes will have the least impact.
Create a core deal team. Set up a standing team that will keep gaining transactional experience and will not be subject to much turnover. It could be at the head office or in the field. It's critical that the same core team get involved in all deals. Buying companies is too risky to be done by rookies who are learning the process as they go. Devise clear guidelines for the purchase and integration of acquisitions in advance. Institutionalize the processes and find ways to capture the knowledge learned from each acquisition.
Pull the line in early. Ensure that line managers buy into the deal and that they know what they're buying. After all, the operators are the ones who will have to integrate the acquisition and make it a success.
Chill deal fever. To cool down deal fever, insist on high-level approvals for deals or set up the compensation system to tie rewards to the long-term success of the business, rather than deal completion. Most important, set a walk-away price and be prepared to walk away from a deal that doesn't meet your high standards.
Companies that can master these techniques have a better chance to practice M&A as a strategy for profitable growth. The secret of success is to capture the knowledge gained from each deal and use it to make the next deal a bigger win.
25 Engaging the board in corporate strategyDavid A. Nadler
This article offers an action plan for CEOs who wish to constructively engage their boards in strategy development. In this approach, the board participates in the strategic thinking and strategic decision-making processes, adding value but not infringing on the CEO's and executive team's fundamental responsibilities. More specifically, in value-added engagement, the CEO and management lead and develop the strategic plan with directors' input, and the board generally approves the strategy and the metrics to assess progress.
The key elements of a value-added engagement process
Five key elements are critical to successful engagement of the board in strategy development: 1. view strategy as a process, not an event; 2. design parallel but lagged processes - if the executive team is somewhat ahead of the board, then they can pose the most pertinent questions to the board and engage them in a process of guided discovery; 3. inform and educate the board; 4. collect and analyze director input; and 5. generate strategic alternatives – the best practice is for executive teams to develop and present to their boards a set of viable strategic alternatives-distinctly different courses of action.
A framework for strategic thinking and decision-making
The recommended framework to be used is called the "strategic choice process"; it has six steps, with the CEO and his/her team leading the way:
agree on the company vision;
view the opportunity space;
assess the company's business design and internal capabilities;
determine the company's future strategic intent;
develop a set of business design prototypes; and
choose the business design alternative that is deemed best.
The benefits of strategic engagement
The process yields better strategic decisions that contribute to a more robust strategy than would have been developed otherwise.
The process results in an understanding of the company that will improve the quality of the board's work in the future, including more thoughtful discussion of and stronger support for proposals that are consistent with the strategic direction.
The process results in strong ownership and support; an involved board is much more likely to support management in times of dire need because it understands that its support is truly deserved.
34 Why you need to redesign your board of directors – an interview with Jay LorschRobert J. Allio
During the past few years, every month brings a new revelation of large-scale top management corruption and failure of board oversight in either the corporate or the not-for-profit arena. The root cause of board oversight failure lies in the inadequate attention given to the way each board is designed to handle its responsibilities.
Reform must be undertaken against an environmental backdrop where:
too many top managers behave as if it were acceptable to do whatever enabled them to make a lot of money;
the capital market overemphasizes the relationship between share price and quarter-to-quarter earnings; and
compensation schemes are designed for executives to reward short-term performance.
Going forward, the challenge for boards will be to do their oversight function will be very difficult:
more is expected of them by the business community and public;
they will have heavier workloads, in part due to new regulations such as the Sarbanes-Oxley Act;
for many boards, the real problem lies in the fact that the directors misunderstand their role and/or are either indifferent or behave as pawns;
boards must exercise more leadership, even if the CEO does not want they to have a more active role inventing in the company's business; and
a more active role means that directors will be challenged to understand increasingly complex business operations and finances.
Where to begin?
The first action needed is to get management and the board mutually to agree on what the financial and competitive goals of the company are. Second, the board needs to be clear on its role. Even though the spectrum of diligent oversight ranges from active participant to passive observer, the board needs to ask answer key questions:
What decisions is the board going to make?
What decisions need to be left to management?
How much oversight is necessary or appropriate?
What activities or programs is the board going to monitor?
Third, consider the design of the board and how it functions. How many people on the board? What kinds of people? How frequently will the board meet? For how long? What's on the agenda? What's the leadership structure? How many committees? What information does the board need?
38 A strategic reference framework for the boardGillis J. Jonk and Jan Schaap
New legislation aimed at insuring board and corporate officer accountability for a company's current performance pay too little attention to the future value creation potential of the company through strategic plans and initiatives.
For example, increasingly corporations employ complex strategic maneuvers including outsourcing, off-shoring, supply chain pooling, contract manufacturing, co-developing, co-branding, co-marketing, licensing and joint ventures. The risks of these long-term initiatives cannot be captured in quarterly performance data. Moreover, the number and variety of these initiatives strains the existing strategic corporate governance processes at most firms.
Corporate governance would be made more effective by defining explicit ways to evaluate new strategic opportunities and new sources of business risk.
A practical solution is to rebalance the corporate governance discussion, by bringing the dialog on strategic opportunities and business risk down to the sub-business level. This would effectively create a strategic reference framework for the businesses segments. Executives and boards would turn to the framework to quickly evaluate strategic initiatives and assess strategic business risk in much the same way as they use financial reference frameworks to evaluate financial performance.
A strategic reference framework calls for identifying the main factors that influence the company's strategic opportunities and sources of business risk. There are three main factors to consider when building a strategic reference framework:
Determine the relative importance of individual business capabilities for the overall business. The more important a business capability is for overall value creation, the more important it is to consider its optimization and leverage. The crucial business capabilities are what drive growth and competitiveness. When developing a capabilities map, focus on three main areas: major industry trends; translating the strategy into a deployment agenda; prioritizing business improvement opportunities.
Identify interrelationships between business capabilities.
Determine the relative performance of your business capabilities.
Examples of how to use the information in a strategic reference framework are included in the article.