Creating a sound but not necessarily brilliant strategy that is relentlessly executed beats a constantly changing (and therefore doomed to poor execution) search for perfection. We'll call that perfect strategy true North. There’s not an executive in the free world who doesn’t at least say he has a strategy. Most of them actually have one, of sorts. It may even be a good one. After all, what is a strategy but a description of a company’s problems and opportunities along with what it takes to solve them? But the creation of a strategy, whether brilliant or not, is only one small step.
So after considering all the necessary factors, determining a sound strategy and getting it to the “good enough” stage. get on with it. Don’t get bogged down by the worries of this or that issue; work them out as you go. This is your Northwest Strategy. Everyone (management, directors, owners and security analysts) knows it’s not perfect. Hopefully everyone also knows it’s virtually impossible to have a perfect strategy. But if the course is sound, it makes sense, it contains no non-starters, it fits with the communal knowledge of the various stakeholders, it is describable and communicable, and it creates purpose and eliminates distractions, you and your business will be a winner.
Creating a sound strategy can be simple or unbelievably complicated. Typically the simple ones are the best, at least for a while. They are frequently developed by a combination of analysis, common sense, instinct and perhaps a little luck.
The highly instinctive approach is typical of a new or start-up company. Larger organizations frequently get so caught up in analysis the process becomes numbing. A mid-market sized company has a nice advantage: it’s neither so small that someone’s pet idea can supplant an intelligent strategy nor so large that paperwork galore needs to be generated to satisfy all the people who need (want) to be involved.
Out of all the mid-market companies, clearly some have great strategies, many have okay strategies, and others have crappy strategies. We tend to view companies with great strategies as being led by a brilliant strategist. My observations suggest that a good number are led by someone who happened to do something that made sense. Good luck and good execution make the strategy seem brilliant.
Management then uses various techniques to implement that strategy, to explain it to the key operatives, to enlist insiders and outsiders to that strategy, and to keep it an open book. He enlists the thinking of the remainder of his organization; he encourages feedback and is relentless in pursuing it. He gets everyone pulling Northwest and makes substantial progress.
Over time, because the strategy is a living, breathing entity, it improves. The CEO carefully adjusts to a more northern course. Because it’s an open book, modest steering changes are understood and supported.
Don’t make the common mistake. The manager or CEO, when assessing a strategic direction, starts out okay. Assuming he’s not a highly decisive individual or is easily influenced by new or even old inputs, he continues to change, constantly reacting to input, and taking too much account of all recent readings, hallway inputs, and current trends. He is reluctant to communicate specifics broadly because he knows they might change or he might be criticized.
The CEO may appear exciting to his management, directors, owners and security analysts because of his savvy, brilliant, with-it mentality and elocution; he’s always on top of the latest headline. He may actually get to true north in his own mind and in his presentations. Frequently this type of CEO enjoys accolades and a higher share price, at least temporarily.
However, what are the long-term results? If he is constantly updating and changing directions, utilizing the latest lingo, it will be difficult for his team to make substantive progress. In the end, progress is all that matters.
The 2001 acquisition of AMI is a great example. Both Francisco Partners and CitiCorp Ventures knew they had acquired a diamond in the rough. However, the strategy and the CEO were both seriously lacking. In April of that year I became CEO with the principal objective of improving the company’s operational functionality, creating and implementing a rational strategy, and hiring a permanent CEO.
It was obvious that many people in the stakeholder community, especially the new owners, could develop and present more brilliant, true north strategies than I could considering my limited semiconductor knowledge. That wasn’t important at that moment. We needed to construct an okay, Northwest Strategy and clear the air to begin making progress.
The company was encumbered with strategic conflicts: standard products (those produced to mass-market specifications) vs. custom or application-specific products; technology driven vs. fabrication facility/manufacturing driven; participation in a dozen end vertical markets vs. dominating in a smaller number; and creating information- or data-based operational decision processes vs. the existing expediting processes. Decisions were made on these issues and a new direction launched.
Within six months, we reformulated the company so it could be effectively and efficiently led by an industry-experienced CEO, by relieving that CEO of the principal responsibilities for getting the company on track, thereby allowing that CEO to optimize future performance. Eliminate distractions (several dysfunctional businesses, a cadre of unproductive employees, and conflicting strategies) to optimize opportunities for constructive change.
The company turned over to the new CEO six months later was quite a different entity. Resolving these issues required no brilliance and did not lead to a scintillating, public equities market-ready, true north strategy. But in this phase of the company’s existence, replacing the wandering path with a more commonly understood one made sense. A Northwest Strategy was determined and implemented.
Another example was Globespan, a throw-in to the Paradyne acquisition, an orphan, yet one to eventually peak with a 5$Billion market cap. The company was offering a non-standard CAP-based DSL technology in the face of already locked-in industry standards for a DMT technology solution, and losing 1/2M$ per month.
Unless some progress made was quickly determined and some success demonstrated, it was a shutdown candidate. Two weeks after acquisition a quick fix NorthWest strategy was established. This “good enough” plan and its successful implementation allowed investors to continue to fund operations. Eventually it achieved remarkable market valuations.