Why a CEO’s job is to design a strategy, not decide a strategy.

overcoming-challenge
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Too often we think of the work of creating a strategy as making a choice or decision. Creating a great strategy is not about deciding which is the best option amongst a list of alternatives. No such list of clear choices exists in today’s business world.

Today the work of strategy needs to be approached as a design problem where various interdependent factors such as talent available, business intelligence, leadership, organizational structure, and the financial model are considered as a total system and linked together.

A good strategy intentionally designs a solution to coordinate all the internal systems into a focused competitive advantage.

In my first job at Procter & Gamble as a systems engineer, I faced a design problem I had to work out involving Betty Crocker cake mix and specifically, the main ingredient, flour. In 1984, it was common practice for farmers to fumigate their flour bins using Carbon Tetrachloride (Carbon tet). In order to ensure the flour arriving at the manufacturing plant in Jackson, Tennessee didn’t exceed what then was deemed safe levels of Carbon tet, a solution needed to be designed to ensure that samples from rail cars en route were delivered to a lab for testing in Cincinnati and the results of those samples could be obtained at the plant receiving dock prior to unloading the rail cars. This sounds simple until you factor in hundreds of rail cars and the time it takes to perform the lab test. To provide some context, this was back before the manufacturing plants had PCs and before the internet existed. Communication technologies available to me for solving this problem were:

  1. The telephone
  2. Overnight mail
  3. Fax machine
  4. Terminal (think monitor/keyboard) dial-up to a corporate mainframe computer

If I wanted to use option 4, I’d have to personally write the software solution on a mainframe as there were no such things as off-the-shelf apps for this kind of thing.

In creating a solution for the problem I had a number of elements to consider.

  1. I could build a manual workflow based on faxing and phone calls. This option wouldn’t require any technical risk, nor much training, and I could have a solution in place in no time. However, the downsides were it added more labor and had more room for human error. Plus, sorting through physical file folders in case of a recall would be time-consuming and expensive.
  2. I could build a database and screens to input data, install terminals at the lab and at the plant, and have a “real time” solution with data tracked and reports available to the home office as samples were analyzed.  The upsides of this option were in data accuracy, timeliness, and having multiple parties see the same data.  The downsides were many on this option as well. I didn’t know any database programming languages, Terminals and modems were new technology for the lab and the plant, and I had no reference for or precedent providing me an example of how to build such a solution. .

To make the best choice, I had to look at the challenge as a sequence of choices that were linked.  The time it took rail cars to reach the plant balanced against the time it took for samples to be processed at the lab had to be considered in addition to the chance of human error in data entry balanced against adoption of change for new technologies had to be considered.  And lastly, an honest assessment of how difficult it would be to learn a new software language and build a working model under the time constraints without having experience needed evaluated.

The answer needed designed along each link in the chain. As a young 22-year-old who, after all, was a systems engineer, the answer ended up being door number 2.

And so the Pesticide Information System (PIS) was launched.  And then quickly relaunched as the Pesticide Residue Information System or (PRIS)  as senior management over-road my naming scheme.  

What does PRIS have to do with Strategy?

In solving for the challenge of coordinating samples and rail cars, it was clear it wasn’t about just considering one option over  another option. The answer was to design a solution that looked at every link in the chain.

The same is true for CEOs trying to find the right strategy to grow their company. The work of a CEO is to design a solution that solves the market challenge and outperforms the competition, along a linked chain of connected decisions.

CEOs doing strategy work are not deciders, they are designers. Great strategies are designed, not chosen.

One of the best books I recently read on strategy is Good Strategy, Bad Strategy by Richard Rumelt. He brings tremendous clarity to how great strategy is done today and the role of the top leader in designing strategy solutions. It is chock-full of insightful learnings about how to think about strategy today and how to get it done in an ultra-complex and dynamic world.

Here are a few quotes from his book that I found helpful.

 “The term ‘strategy’ should mean a cohesive response to an important challenge. Unlike a stand-alone decision or a goal, a strategy is a coherent set of analyses, concepts, policies, arguments, and actions that respond to a high-stakes challenge.”

“The core of strategy work is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.”

“Use your relative advantages to impose out-of-proportion costs on the opposition and complicate his problem of competing with you.”

“A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge. If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy. And if you cannot assess a strategy’s quality, you cannot reject a bad strategy or improve a good one.”

“To achieve leverage, the strategist must have insight into a pivot point that will magnify the effects of focused energy and resources.”

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