Why strategy making should not be a secret
“You see, Charlie, not so very long ago there used to be thousands of people working in Mr Willy Wonka’s factory. Then one day, all of a sudden, Mr Wonka had to ask every single one of them to leave, to go home, never to come back.”
“But why?” asked Charlie.
“Because of spies. All the other chocolate makers had begun to grow jealous of the wonderful candies that Mr Wonka was making, and they started sending in spies to steal his secret recipes. The spies took jobs in the Wonka factory, pretending they were ordinary workers, and each one found out exactly how a certain special thing was made.”
Of course, this is a fictional exchange from Roald Dahl’s beloved children’s book Charlie and the Chocolate Factory. Yet the real chocolate wars that waged during the author’s childhood were not all that different. The two biggest firms in British confectionary, Cadbury and Rowntree, really did send their own employees to work for the other and act as moles, leaking their rival’s closely guarded secrets.
Companies today are no less worried about divulging secrets, particularly when it comes to strategy. But executives forget a strategy is more likely to fail because too few people, rather than too many, understand the company’s plans.
Why do most strategies fail?
Most strategies fail because the execution is botched. This starts with members of the organisation being unable to identify the key strategic priorities.
According to a survey of 8,000 managers from 250 companies, only half of the C-Suite have a clear sense how major priorities fit together. This drops to about a third for their direct reports and to 16 per cent for frontline supervisors and team leaders.
If your own people don’t understand your strategy, the prospect of rivals discovering your plans is probably not your biggest concern. They are likely to be as confused as members of your own organisation.
The second big execution challenge is co-ordination. To pull off big new initiatives, different functions and divisions need to work together. According to the same survey, only nine per cent of managers state they can always rely on other functions and units. Deliberate efforts to work on strategic initiatives across departments are needed to tackle this issue. Concerns about secrecy hardly facilitate this.
The obvious solution to these execution challenges is a more open approach to strategy making.
Steelcase, the world’s largest office furniture manufacturer, for example, set up an online jam in 2017 to galvanize its 13,000 employees around a new strategy. In contrast to the usual top-down communication plans, the 36-hour jam allowed employees to explore strategy simultaneously.
This type of engagement creates personal ownership as staff can figure out what exactly is relevant for them. They also find ways to make connections and overcome the silo-thinking mentality. Transparency and inclusion, not secrecy lie, at the heart of this approach.
Transparency also trumps secrecy as far as shareholders are concerned. In a study of 900 public strategy presentations Richard Whittington, Basak Yakis-Douglas, and Kwanwon Ahn found that the average stock price rose by two per cent or the equivalent of $1.1 billion in market value on the day of the presentation.
The positive effect was even stronger for new CEOs who announced their strategy within the first 100 days. Stock price was up by more than five per cent, the equivalent of $2.8 billion in market value. And for new CEOs from outside the industry the upward bounce was 12 per cent (ie $6.6 billion in market value).
The message is clear: markets don’t like secrets. They want to understand your strategy. Of course, if investors don’t think your strategy makes sense, your stock price will still drop.
Secrecy simply matters less today
The notion that strategy needs to be secret is closely related to its roots in warfare. In the ancient Chinese manual The Art of War, Sun Tzu advised generals to closely guard their plans.
He wrote: “By discovering the enemy’s dispositions and remaining invisible ourselves, we can keep our forces concentrated, while the enemy’s must be divided.”
This is old strategy thinking. In today’s complex and interconnected world, a more collaborative approach will win the day.
This article was written by and originally appeared on Forbes and the Warwick Business School (WBS) website. For more information on WBS at The Shard, please visit wbs.ac.uk/go/london.