Strategy is one of the most important business elements there is – but most business leaders don't make time to address it.
BDO Advisory Partner Phillip Roth is fond of quoting a telling Harvard Business Review finding from June – In one US survey of 10,000 business leaders, 97 per cent said being strategic was the most important leadership behavior.
But in another study, according to the HBR, 96 per cent said they lacked the time for strategic thinking.
That, says Roth, mirrors the New Zealand situation almost exactly: "At BDO [a leading business advisory service], we find many businesses rate strategy as hugely important; they just don't give it priority."
That's because many New Zealand companies are small-to-medium enterprises (SMEs) – powerful engines of the New Zealand economy; 97 per cent of all businesses have 20 employees or less, they provide jobs for roughly a third of all Kiwis and produce about 29 per cent of our GDP.
Yet many surveys have highlighted the depth of problems facing SMEs. One conducted late last year showed that 80 per cent of SMEs felt isolated and about a third lacked the knowledge and support needed to grow.
That isolation, says Roth, often stems from the fact that SME leaders become "the manager of everything", subject to what is often called the "tyranny of the urgent" – meaning everyday tasks often take precedence over the more valuable and highly necessary big-picture requirement to take stock of where the company is going.
The same point was made by the HBR article – pointing out that business leaders are often overwhelmed by an almost endless schedule of meetings and emails (on average 126 a day in the US).
"We often ask clients when was the last time they paused and took time to think about where their company might be in 5, 10 or 20 years. What we find is that when we persuade clients to make time to think strategically, they usually end up saying: 'Now I understand why it was important'."
Strategic thinking is particularly important for business leaders in these fast-changing days of disruption, says Roth.
But many businesses adopt a defensive mindset when they consider disruption – probably caused by the way disruptors like Uber, Airbnb and Amazon have upended traditional markets and the businesses that served them.
"Technology can affect and is affecting a lot of people. If companies don't change, they can become irrelevant faster than most realise.
"But disruption need not be negative. Yes, it challenges mindsets and attitudes but there is an upside to disruption: opportunity," he says.
One example was how some companies were struggling to find people with the right skillsets for their operations. Some had discovered they could fill the gaps with robotics – but needed people to control and direct the robotics, leading the company into new revenue opportunities.
International examples of the upside of disruption included other instances of traditional companies benefitting from disruptive technology. Roth says the first phase of internet disruption was mostly about cutting out unnecessary intermediaries and creating digital-only businesses.
Now the second wave is using technology to take traditional businesses in new directions – like the Danish software company which developed an artificial intelligence tool which helped emergency services detect cardiac arrests faster and more accurately.
Or the mining company which used Internet of Things sensors and analytics that could prevent breakdown of mining trucks by identifying, among other things, critical increases in engine temperature. That sounds basic until you realise that each breakdown was costing that company between $2m-$4m a day while it was unusable.
Other reasons for making time for strategic direction included the fast-changing nature of consumers, says Roth: "Increasingly, businesses are paying much more attention to ethnic, cultural, societal and diversity – the old one-size-fits-all is fast disappearing."
Even if a company and CEO take time for strategic thinking, there are still some basic requirements to make sure the efforts are not wasted, he says:
• Is the board supportive? If not, don't start until the leadership, particularly the chairman, are on board.
• Mine information – hold a lot of one-on-one interviews to elicit as much strategic thought leadership from within the company as possible – not just from the board and senior management but lower levels as well.
• Ensure alignment of the many different and complex layers that often make up a company to drive engagement with the new strategic direction. An example, he says, was Perpetual Guardian's drive to institute a four-day working week for its staff. It challenged that staff to come up with ways of increasing productivity while working fewer days – massively increasing engagement and loyalty by involving all layers within the company, not just top down.
For more information on BDO's strategic advisory services and to download BDO's free Defining Business Strategy eBook, go to www.bdo.nz/strategy