The 3 ways ASX boards get strategy horribly wrong

Strategy is not an exact science. To get it right boards and management need to be open to discussion, challenge and big thinking. These are elements that stretch and shape not just disruptive organisations, but even the most staid businesses. Yet so many ASX boards get their approach to strategy fundamentally wrong.

In over twenty years as a company director I’ve seen the best and the worst of strategy development processes. In my experience there are three major mistakes that inevitably lead to bad strategy:

    1. The assumption that there is a “business as usual”
    1. Believing strategy can be built from the bottom up
    1. A lack of opportunity for the board to engage in and challenge the strategy and the process

1. There’s no ‘business as usual’

The biggest flaw in how the average Australian CEO thinks about strategy is that they actually believe their business has a “business as usual” state. The term implies that nothing’s really changing, and you can continue to succeed with small and incremental improvements.

I deeply believe in the world we live in today, there’s no such thing as “business as usual.” The rate of change and threats in the business environment are just too great to assume that what’s worked in the past will continue to work into the foreseeable future.

To confront this challenge, directors need to bring foresight to the strategic process. They should be engaging with the business and thinking about the challenges and risks that lie ahead, and then looking at ways to be inventive in responding to these challenges.

The most topical area where all businesses need to embrace transformation is in dealing with the challenges of the digital world. If a board is not considering what their company would look like in a digital world, with a digital platform, then they are missing a huge opportunity and are oblivious to the fact that big risks lie ahead for them.

In the world we live in today, there’s no such thing as “business as usual.” The rate of change and threats in the business environment are just too great to assume that what’s worked in the past will continue to work into the foreseeable future.

2. Bottom-up isn’t a strategic approach

While there’s no such thing as a typical strategic process, far too often Australian businesses use a bottom-up approach. There’s an assumption that if each division puts forward their plan or budget for the year, then somehow the sum of the parts equals the grand vision and strategy.

Directors are expected to take this as a fait accompli with nothing to contribute and no opportunity to challenge or tear it apart. In reality, this approach just results in business as usual. It’s not strategy. Strategy is about getting into the future, not repeating the past.

Good strategy is more than a bottom-up process of adding up budgets. Good strategy engages with the challenges and risks that lie ahead. And good strategy starts with a deep examination of the business that you’re really in, and the reason the organisation exists. These are important and foundational conversations that directors must be deeply involved with.

3. Boards need to engage in and challenge the strategy

If all you are doing as a director is attending a strategy off-site and sitting through PowerPoint slides that detail hundreds of very resolved strategic positions, then you’ve missed your opportunity to engage in and challenge the strategy. Death by PowerPoint is a very bleak experience for a director.

It’s counter-intuitive for businesses to operate this way when developing their strategy. After all, they put together diverse boards, bringing experience from many places to provide perspective on strategic issues. Management is there dealing with the bushfires day to day, but directors have time to think about and engage with the future.

Ultimately, strategy must be management led. After all, management is responsible for executing the strategy. They must be excited and committed to deliver. But the benefits of having your directors engage in the strategy and think about reinventing the way you do business are large.

By embracing an approach that enables your board to engage, it opens your business up for transformation and to challenge yourself about the future. Whether it’s the pressing digital needs of your business, or addressing the rapidly changing expectations of consumers. These require proactive thinking about the future.

While some directors may be apprehensive to the idea of challenging management, this approach can actually be quite liberating for both the board and management. While management owns the view of the present, nobody owns the future. So when considering the future, everyone can actually go into that space without the politics, without the egos that come in talking about the business today.

What are your frustrations?

I know this is a space that many directors have strong perspectives. I’d love to understand your frustrations with the typical Australian corporate strategy process in the comments below.

If you’ve got examples, I’d also love to hear how you’ve resolved these issues and moved towards a healthier strategic process.

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