The ability of a Board to make an invaluable contribution in the development of strategy lies principally in the hands of the Chair and how they guide the conversations. Boards have a vital role in validating and enhancing a business’s strategy, but sometimes it can become a free-for-all discussion that does not yield the best possible contribution.
Active Knowledge Question:
What is the most valuable contribution that a Board member may make to the development of a business’s strategy?
Strategy Is A Partnership
The most effective strategy is formed when there is a strong partnership between the Board and the Management team with a clear understanding and acceptance by each of their roles.
And whilst free-ranging discussions are valuable, ultimately, consensus must be reached. It becomes the focus and approval of specific elements that are important to allow the strategy to lead the organisation forward.
The role of the Board is never to form strategy but rather to validate and enhance the strategy presented by the management team. Many Board members will disagree with this view.
The Board’s most significant value, in my view, is that of independent assessment. The ability to know the business and be able to step away from the business and bring experience and technical expertise in judging the merits of the business strategy presented.
The management team will have been heavily involved in the hands-on development of the strategy and, therefore, will have lost some independent perspective. The Board, however, may not have been so involved and, therefore, can more readily find the flaws, weaknesses and challenges that need to be overcome. And also add new ideas and opportunities into the mix to be considered by the management team.
This independence is the compelling reason why the Board must be careful not to be drawn in too closely– or actually develop – the business strategy. Otherwise, they potentially place themselves in the position of evaluating a strategy they have, in fact, developed.
It is vital that the Chair of the Board establish and sustain the Board’s presence and role in the development of a business’s strategy. This can be challenging at times as some board members can be very vocal, whilst others may be quieter. But it is the voice of every board member that must be equally heard to validate and enhance strategy.
Strategy Formed With Stepping-Stones
Strategy is best formed by developing a shared view of all the elements that provide the window through which strategy should be framed.
Everyone at the table will hold their views of the world, but what is required is stepping through each of these elements to render a common and accepted understanding. Without this shared view, many will come into the discussion with preferred outcomes, which often only distract the strategy discussion. It is better that these preferred outcomes be considered through the shared framework, which provides a consensus view of the world ahead and the business’s likely place within it.
I have facilitated many workshops where team members have simply wanted to jump into the ‘deep end’ and not spend time building the shared framework on the belief that they all equally understand these elements, agree on them and do not want to waste time revisiting them. Individual pre-workshop discussions with each team member typically reflect that this is not the case at all.
Taking the time to develop the shared view leads to clear discussions and quicker decisions. Below is a brief overview of the key stepping stones that I would recommend are walked through to enable the forming of this shared view:
- History: Who are we as a business, what significant events have occurred in our life and how may they impact, positively or negatively, our ability to deliver on strategy. This may well include a reflection on the purpose for which the business exists and how that may be realised in the evolving marketplace. Knowing who we are and what we are capable of ensures strategy is crafted to match personality (culture), ability and also focuses on what needs to change to allow the business to compete effectively in the future.
- Strategic Analysis:
- Marketplace: What are the boundaries of the market in which the business presently competes, the characteristics of that market and factors that may impact it in the future. How may these boundaries evolve and change, and what does that mean for us as an organisation?
- Competitive Landscape: Who are our competitors within the relevant markets, the customer segments they target, their market share, and the basis upon which they compete? What customer value may they deliver into the market?
- Positioning: The strengths, weaknesses, opportunities and threats (SWOT) facing the business, an identification of the resources and capabilities, and what the business is best at, leading to a consideration of how to position and compete in the chosen marketplace so as to deliver on purpose and winning customer value.
- Competitive Posture: Your chosen market, who else is competing in that market, your strongest position, what change is occurring – all of these aspects should allow the team to land on a very clear view of how the business is going to compete effectively.
- The Organisation: Stepping out from the discussion of how the business needs to compete to be successful leads to a consideration of how it needs to organise itself so that it can deliver on that competitive posture. This is not a question of the organisational chart but rather how the business actually operates. The question of ‘whom we are’ considered under History often arises here as there needs to be growth from ‘who we were’ to ‘whom we need to be’. It will likely impact processes, decision-making, culture and other aspects of how the business works on a daily basis.
- The Future: Having formed a view of the competitive posture and organisational structure that will allow the business to compete effectively, it is worthwhile pausing and testing this strategy against various future scenarios, likely and very unlikely, to get a feel for how the strategy might stand up.
The formation of strategy is not yet finished with steps such as Financial Validation, Risk Mitigation, and Implementation to be considered, but the four steps outlined above provide a solid framework in which to develop an effective strategy and through which many options can be tested.
‘Process is my friend’ is a great phrase and carries a truth. A clear and good process can guide discussions and considerations without unnecessarily confining the debate nor leading to a predefined outcome. Without process defining a journey, the exploration of strategy can lose focus and be so wide-ranging that a clear landing is never reached.
If your stepping-stones are well defined, and your worked is focused in moving methodically through each step, you will find that an effective tailored strategy will be the natural outcome.
Strategy Is Robust
The ingredients of a robust strategy are found in the process through which it was formed but also through the presence of conditions precedent that provide the foundation upon which it may be built.
- Starts with leadership.
- Fulfils purpose.
- Has a vision.
- Defines success.
- Recognises changing seasons.
- Incorporates the life cycle stage of the business.
- Drives capital value.
- Tells a story.
- Has an able team to deliver it.
Each of these traits is critical for strategy to be successful. Leadership must lead strategy and understand its role in underpinning their leadership. It must align with the purpose of the business and establish an enticing vision of what the future can be and what success looks like. It must allow for the different seasons a business will experience and its lifecycle stage. It must compound the capital value drivers of the business, tell a compelling story, and engage the team that is capable of delivering on it with the support of the entire business.
Strategy is continuous and often emergent. It is said that the actual strategy is not important but rather the ability to implement that strategy. This is true, but only partially, as you cannot separate the process of developing a strategy from the process of implementing it and they must be seen as one continuum. One team should not be developing a strategy in isolation to another team who is then tasked with making it happen, it won’t happen under that approach.
As a business, you should see the development of a strategy process as a key ingredient of your success. Everyone should understand how you as a business go about strategy, creating it and delivering it. And everyone should follow that process. Remember a key outcome is that it unites and inspires the entire business behind a single vision and purpose.
At the head of the business is the Chair of the Board, who partners with the CEO. That is the partnership that jointly leads the Directors and Management team forward in the crafting of strategy. And the starting point for strategy must always be a shared view of the world in which their business is seeking to compete, and from that perspective options, opportunities and risks can be readily discussed and acted upon. And an effective strategy, capable of being delivered, can be formed with a strong unity supporting it.
An entirely new level of performance.
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All the best in the success of your business,