The strategy setting process in any organization is always an interesting one. Given its centrality to the idea of managing an organization you might think people had the process down. You would be wrong. Vikas Mittal and Shridhari Sridhar look at the strategy setting process through extensive interviews and surveys. It isn’t always a pretty picture that they uncover. My favorite challenge — perhaps not surprisingly given what I research — is the belief in mythical numbers.
Strategy Setting In The Wild
The core of the book are extensive studies on strategy setting. This allowed them to detail a few basic approaches. Some organizations use more numbers, others are more intuitive. Yet more organizations use an emergent (less directed) process. The fact that the process is not at all standardized means you will get as many different processes as their are companies. Throughout the book the authors return to interesting examples of different types of firms and their challenges and even occasional successes.
Mission Statements
Do you like mission statements? If so you will be disappointed to know that the authors don’t see much value. Their research shows that:
The existence or lack of a mission statement does not predict a company’s financial performance.
Mittal and Sridhar, 2021, page 61
In conclusion, the mission statement does not make any difference. I guess the good news is that the mission statement isn’t doing much harm. Plus they give managers something to write at the front of the annual report. (It can’t all be pictures of happy employees and customers).
Belief In Mythical Numbers
The authors uncover a lot of examples of typical decision challenges. For example, the authors note status quo bias and the sunk cost fallacy. They point to the fact that managers are much more likely to start a new project than kill an old one. The result of which is a proliferation of projects. There are soon too many projects to do a good job on them all. Still no one wants to end any.
My favorite finding was the extensive belief in mythical numbers. These are poorly sourced, or even non-credible, numbers, are advanced to make a point.
Most mythical numbers originate from consulting studies and are intended to establish board and eye-popping trends or provide a snapshot of an entire industry.
Mittal and Sridhar, 2021, page 108
The message is to be careful when you encounter a mythical number. Indeed be careful when you encounter any number in a consultant’s deck.
For more on strategy see here, here, and here.
Read: Vikas Mittal and Shrihari Sridhar (2021) Focus: How to Plan Strategy and Improve Execution to Achieve Growth, Palgrave Macmillan