Thought Leaders
Rethinking Strategy: A Holistic Approach to Planning and Implementation
The failures of General Motors will be considered in history and business books for decades. Its talent and capital made it the largest multinational company in the world. And yet as globalization changed that world, GM failed to take notice. Its strategies remained in place as if the United States was still the epicenter, wielding the power and control that helped make its businesses dominate in nearly every industry. As José Santos, who teaches in Wharton’s Advanced Management Program, notes, GM failed to become a global entity.
Santos, Affiliated Professor of Practice in Global Management at INSEAD, examined the managerial failure at a recent AMP session. “During the past two decades, GM could not recreate itself as a global company. It remained as separate geographic entities that didn’t work well together. The result was a catastrophic managerial failure.”
What’s needed is great planning and a knowledge of execution. That’s what breeds success.
–Larry Hrebiniak, Associate Professor of Management; Academic Director, Implementing Strategy: Leading Effective Execution
Leading AMP participants through a historical overview of globalization, Santos describes the current environment as globalization’s most current wave. “One hundred years ago there was world commerce, with considerable trade across countries. Today, however, trade isn’t just occurring between separate entities. Companies are internally importing and exporting. Both poles of the transaction belong to the same entity.” As globalization continues to transform business activity, managers must understand the critical role they play in the process.
Strategy Revised
The interdependent nature of today’s global business environment means managers must focus on global performance as the only meaningful measure of success. Thriving in one’s country of origin is insignificant when a company’s reach stretches around the globe. And, as Santos discusses, “strategy cannot be created in one country only for that country. The cognitive limits once placed around strategy must be revised if companies are to continue to be successful.”
Wharton Professor Larry Hrebiniak, author of Making Strategy Work: Leading Effective Execution and Change, agrees. The line between creating strategy and executing it must be rethought. “Five years ago, top managers saw execution as a lower-level issue. But they now realize that execution is not just a middle or lower management issue. It deals with critical decisions at the top. The type of strategy, the demands of strategy, developing capabilities to support strategy, changing structure and incentive systems to support strategy — these are top management decisions.”
Hrebiniak, academic director of Implementing Strategy: Leading Effective Execution, and Wharton Associate Professor of Management, explains why businesses fail to deliver on even their most promising strategies. “Where managers fall down is on the execution. What’s needed is great planning and a knowledge of execution. That’s what breeds success.” A recent study of 316 CEOs validates his point. Stephen Kaplan, Mark Klebanov, and Morten Sorensen showed convincingly that execution and related organizational skills were important for organizational performance and the best predictors of company success. As Hrebiniak stresses, an emphasis on effective implementation is important across all organizational levels, including at the very top.
Professor Santos takes the revision a step further, effectively removing the boundary between strategy and implementation. “Executives who view strategy as created above and implemented below are missing the point. Successful management is not linear or sequential. It must be seen holistically, using a systemic approach. Business leadership is about action, about interacting in an environment with performance as the ultimate goal.”
As business leaders position their organizations for an economic recovery, they must, as part of the process, reconsider their approach to strategy. Traditional models that carefully delineate between planning and action, between lower- and higher-level management duties, are over simplified. Today’s globalized environment is complex, challenging, and demanding of a more dynamic strategy framework.
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