Minding Your ‘Whats’ and ‘Whys’

People talk about strategy, but too often boards are overly focused on the “whats” of strategy making and don’t pay enough attention to the “whys” of a company’s success.

Nancy Drozdow, a founder and principal of the Center for Applied Research (CFAR), and Caleb White, also a principal with the management consultancy, say their advice is applicable to any business, whether privately or publicly owned.

Strategy, Drozdow says, is most easily defined in a corporate sense as “how a company comes to market to make money (short term) and build value (long term).

“In practice, strategy is what binds a company together to align things people actually do — working towards a set of goals for achieving success — with shareholder expectations as a central driver but not the only driver,” Drozdow says. “To the extent you take the broader view as to who matters to your success, you have to understand that everyone matters — customers, shareholders, family board members; it all goes together.”

Drozdow and White point to four main areas that usually drive a strategic reboot:

• When what worked forever isn’t working as well now — “when the gears seem stuck.”
• When the board and leaders see business change ahead.
• When resource allocation becomes misaligned with the current “pulls” of stakeholders (e.g., ownership liquidity/priorities, estate planning, growth in one area at the expense of another).
• When the risk profile of the business or shareholders changes.

“When there is any kind of transition in a board or company — generational, leadership, ownership — strategy is a way to collectively revisit assumptions about success,” Drozdow says. “It can be a very effective reset to make sure everyone is on the same page.”

Emphasizing the “whys” and not just the “whats” of a company’s success, Drozdow and White share CFAR’s strategy method, “Telling the Strategy Story,” as a way to uncover the assumptions, beliefs, norms and behaviors that have driven the business but are often taken for granted.

Their method includes three main actions:

• Make what has become invisible more explicit, especially for issues around risk and choice.
• Take into equal account the analytics of performance and people’s points of view, including their ways of seeing the “facts” of their situation and their view of the way things are, and why.
• Drive outcomes that yield both improved performance and deeper relationships and understanding — both are key to strategy understanding, alignment and execution.

“We know that stories are memorable, and people can find their place in the story,” Drozdow says. “Even if they’re not a character in the story, people find themselves. Stories are a way of holding parts of the alignment together.”

White says boards sometimes fail to recognize when beliefs about the business don’t match up with the analytics — what the numbers reveal. In such cases, changes must be made, he says.

Drozdow and White say there are several questions a board, its CEO or empowered owners can ask themselves to support a successful strategy process.

• What mix of talent would we/do we want on the board?
• What mix of inside and outside views do we need?
• What relationships do we want with management, shareholders, employees, the larger community?
• What questions should be asked about customers?
• What questions do we want management to address in its analysis of the industry, markets, competitors and our own business?
• How will the board keep its fingers on the pulse without meddling?

“A board can help with good questioners and the courage to ask good questions,” Drozdow says.