Francis Wade | Tackling the problem of conglomerate strategy
How do you craft a strategic plan for a group of companies? Why do so many efforts end up with nothing more than last-year’s-plan-plus-5%?
Discard this path of least resistance if you hope to capitalise on COVID opportunities.
Conglomerates are, in the best of times, difficult to plan for. Units compete for resources in different markets, creating a headache for whoever must make an optimal allocation. It’s a challenge of comparing apples to oranges by executives who don’t specialise in either fruit.
The hope is that by the end of the day, each business unit has a unique set of marching orders: a custom breakthrough-strategy. It should be powerful enough to meet customer’s unmet needs, conform to disruptive technology trends and prevent competitors from gaining a foothold.
Furthermore, at the group level, the overall strategy shouldn’t be just a grab bag of ideas. Each individual plan should be part of a puzzle that makes up a single coherent picture.
However, I have sat in group meetings in which business unit managing directors, MDs, flounder when asked for their organisation’s strategy. After a bunch of PowerPoint slides, it becomes clear: they have no real strategy. At most, they have a list of tactics.
Furthermore, in these pandemic times, most are facing game-changing disruptions. This requires them to engineer the ‘next normal’. More often than not, they simply aren’t equipped to get the job done.
DON’T BE A HAS-BEEN
Before your business units drift into becoming another Nokia or Blackberry – that is, a has-been – here’s a guide for how your group of companies can prevent its component businesses from failing.
Step 1: Engage business units in long-term planning
The simplest request is for business units to lengthen their planning horizons. Ask them to look 15-30 years out. Give them the examples, support and templates they need to produce a feasible, detailed plan. While it needs to account for current trends, the team shouldn’t be limited by them.
After all, this is not an exercise in predicting the future, but crafting one which includes preferred outcomes.
For the average MD of a business unit, this is likely to be a tough activity. But even clumsy attempts will push executives into the right zone of discomfort.
Step 2: Develop leaders’ everyday planning skills
To improve C-suite skills, don’t turn strategy into a one-time or annual event. Instead, train them to think strategically at all times.
Some group CEOs mistakenly assume this is easy. In their role, they spend 80 per cent of their time on strategy, and 20 per cent on daily operations. However, the reverse is true for their business unit MDs. The fact is, in their progress up the ranks, the drumbeat for immediate results kept them awake at night. Their ability to adapt quickly helped them get promoted.
As such, your organisation may not be organised to think strategically, and MDs will find this to be a challenge. Don’t let them languish.
Instead, give them the training and coaching to implement their strategy from month to month. Their environment is changing so fast that if they don’t keep the big picture in mind, they could miss out on opportunities created by disruptions like COVID.
What if they fail to grow the required skills? Expect big mistakes that destroy value and produce a “diversification discount” in which the sum of the parts of your company is greater than the whole.
Step 3: Make clear proposals
Once a business unit has completed its planning, MDs must advance proposals to the central group organisation. This is pure lobbying: an appeal to support the business unit’s strategic plan with tangible resources.
CLARITY IS ESSENTIAL
Your leaders may also need to be trained to become balanced, fact-based advocates of the specific value they can bring in the mid to long term.
Their clarity is essential. Why?
As group executives hear a range of proposals, they need to make collective decisions about the direction of the entire organisation. Consequently, business units will receive good news or bad news, depending on decisions made to allocate funds, attention and power.
As such, MDs must be clear as the future of the organisation relies on the quality of their analysis. If they do a poor job, bad decisions will be made: a harsh reality.
But the worst decision of all is not to make any. Some companies drift along, sitting back to watch what happens next.
By then, the most savvy staff members have found jobs elsewhere, looking for real leaders to follow. Customers uncover better products and services, and value is destroyed.
While it’s hard to marshal a conglomerate strategy, it’s a problem which must be tackled to assure the future of the entire organisation.
- Francis Wade is a management consultant and author of ‘Perfect Time-Based Productivity’. To receive a Summary of Links to past columns, or give feedback, email: email@example.com