CEO as a Strategist : Become the Guardian of all trade-offs
Great Strategies are causes, and the Chief Executives has to lead the cause and be the Chief Strategist.
The notion of empowerment of pushing down and getting many people involved, is important, but empowerment and involvement don’t apply to the ultimate act of choice. Strong leaders make choices and define the trade-offs.
The leader has to be the guardian of trade-offs. Thousands of ideas pour in every day : from employees with suggestions, from customers asking for things, from suppliers trying to sell things. There’s all this input, and 99 percent of it is inconsistent with the strategy.
A leader also ensures that everyone understands the strategy. Strategy is not some mystical vision that only the people at the top understand. That notion violates the primary purpose of a strategy- to inform each of the thousands of things that get done every day, and to ensure that those things are all aligned in the same direction.
If people don’t know how their company is different-how it creates value compared to its rivals-then how can they possibly make all of the myriad choices they have to make? Salesmen need to know the strategy; otherwise, they won’t know who to call on. Engineers must understand it, or they won’t know what to build.
The best CEOs are teachers of strategy. They go to employees, suppliers, and customers and say, “ This is what we stand for, “ until everyone gets it. In great companies, strategy becomes a cause. Strategy is about being different.
The myriad activities that go into creating, producing, selling and delivering a product or service are the basic units of competitive advantage. Operational effectiveness means performing these activities better-faster, or with fewer inputs and defects- than rivals.
Companies can reap enormous advantages from operational effectiveness, as firms demonstrated with total quality management. But best practices are easily emulated. As competitors adopt them, the productivity frontier- the maximum value a company can deliver at a given cost, given the best available technology, skills, and management techniques-shifts outward, lowering costs and improving value at the same time. Such competition produces absolute improvement in operational effectiveness, but relative improvement for no one. And the more benchmarking the companies do, the more competitive convergence you have-the more indistinguishable companies are from one another.
Strategic positioning achieves sustainable competitive advantage by preserving what is distinctive about a company. It means performing different activities from rivals, or performing similar activities in different ways.
Three key principals underlie strategic positioning :
1.Strategy is the creation of a unique and valuable position, involving a different
set of activities.
2.Strategy requires you to make trade-offs-to choose what not to do.
3.Strategy involves creating the right “fit”.
People need guidance about how to deepen a strategic position rather than broaden or compromise it; and how to extend the company’s uniqueness while strengthening the fit among its activities. Deciding which target group of customers and needs to serve requires discipline, the ability to set limits, and forthright communication. Strategy and leadership are inextricably linked.