PoS Mar 2015 | The Critical Need for A Corporate Strategy Office
Most mid-sized firms, some large ones too, do not have a Corporate Strategy Office (CSO), a small team dedicated to monitoring the firm’s strategy and scanning the environment. It is a curious omission considering that strategy needs to be critically examined at regular intervals, and its implementation tweaked and adapted.
Usually business and function heads are responsible for formulating and executing strategy under the guidance of the CEO. Unfortunately, their operational responsibilities do not leave them enough time to monitor and course correct strategy on regular basis. That is the main reason why a firm needs the Corporate Strategy Office.
Being authors of strategy clouds senior managers’ perspective and weakens their ability to uncover and question underlying assumptions. Confirmation bias leads to systematic disregard of contrary evidence that often appear early as mere wisps.
Successes are emphasized, again owing to human bias, and signs of trouble ignored. New opportunities also sometimes elude the company as the consequence of being a human organization. That is why a team charged with the responsibility to critique strategy is invaluable.
Many senior managers lack expertise in strategy. They are experts in their respective fields but they have rarely had the opportunity or requirement to be proficient on strategy. The CSO fills this gap and strengthens the company’s strategic orientation.
The principal role of the Strategy Office is to audit and monitor the firm’s strategy. They identify, measure, analyse, and interpret true indicators of effectiveness of the company’s strategy. CSO provides inputs on course correction and, where necessary, champion a radical departure. They scan the environment to perceive threats and help explore ways to sidestep pitfalls. Looking for new opportunities is another responsibility.
The CSO works as the extended arm of CEO and the Board, It is a friend and guide to the senior management team while leveraging their capabilities and insights. No company that wants to be competitive, adaptive, and nimble should do without the Corporate Strategy Office.
The case of a $300 million software company
For a number of years since inception, the Company had hired and deployed software engineers with 5-8 years’ experience. Corporate and other overheads being small, the business remained competitive in spite of the higher cost manpower. It led to rapid growth and healthy profits.
Lately, growth had slowed and profitability weakened. In a senior management workshop, the Chief Strategy Officer presented his finding that the cost structure was no longer competitive. Peers and larger brethren were aggressively hiring, training, and deploying fresh graduate engineers. Their costs were lower and offerings more competitive.
The Company had clung to the original strategy blind to its growing irrelevance. The evidence was compelling. The company woke up and quickly reorganized itself to a lower cost regime. It kindled growth, and improved margins in two quarters.
The Corporate Strategy Office had rendered valuable service by questioning a deeply rooted practice and a principal pillar of the firm’s strategy. Every company needs a small team of experts whose only job is to help the senior management team improve the effectiveness of their strategy.