Playing To Win
The Proper Role of the Chief Strategy Officer
I find there is much uncertainty and even confusion over the role of the Chief Strategy Officer (CSO) in the modern company. It is not entirely surprising in that it is a relatively new role — compared for instance with Chief Financial Officer. Business strategy as a thing has only been around since the 1960s and CSOs have only appeared broadly in organization charts over the past twenty years. The modern CxO convention tends to imply that the person with the role is responsible for doing/performing whatever the x specifies. So, the CFO does the finance and accounting of the company. The CLO does the legal work. But the CSO role is a bit more subtle and nuanced than that, which is why I am dedicating my 46th Playing to Win/Practitioner Insights (PTW/PI) piece to The Proper Role of the Chief Strategy Officer: It Isn’t Doing Strategy. (Links for the rest of the PTW/PI series can be found here.)
Strategy is a Line Responsibility
In my experience, the confusion stems principally from strategy being seen as a staff rather than line responsibility. This is unsurprising in that the company that was most critical to the rise of the strategy function, the then-iconic General Electric (GE), treated it as a staff responsibility for the better part of two decades. Under CEOs Fred Borch (1963–1972) and Reginald Jones (1972–1981), GE built a huge strategy function, with hundreds of budding strategists, that set strategy for the company and its businesses. By the time Jack Welch succeeded Jones, the function had become sufficiently unpopular with line managers that Welch downsized and downgraded it. But because in those days and indeed up until the relatively recent past, GE was seen as a paragon of management, the legacy of Borch and Jones left a broad and long shadow across management practice.
Vestiges of that era remain, which holds that you can’t leave strategy to regular managers: you need super-smart specialists to do strategy. It is arguably perpetuated by the now-gigantic strategy consulting firms who are hired by line management to do strategy for them, because they are, of course, super-smart and some of them even specialize in strategy. The notion is buttressed by the analogy to other CxOs. You need a JD to do the legal work as CLO. You need a CPA to do the financial work as the CFO. You need an electrical or computer engineering degree to do the IT work as CIO. While they don’t do it in complete isolation, the CLO is expected to come to the CEO with a recommendation as to how to handle the important legal matters, similarly for the CFO on, say, a debt financing decision, and the CIO on, say, the choice of ERP system. It follows logically that the strategy specialist CSO should do the strategy work of the corporation and present it to the CEO for ratification because it is a staff function like the rest of the staff functions.
The problem is that it is not. Strategy is not the job of the specialist. It is the job of the General Manager (GM) of the business in question, whether that GM is a CEO, Business Unit President, Product Line President, or even Brand or Product Manager. It is the GM’s job to make the few key high-level choices that define the Where-to-Play and How-to-Win (WTP/HTW). I don’t particularly care whether it is called strategy. Many entrepreneurs deny to me that they have a strategy — claiming it is ‘too theoretical’ for them. But their strategy is revealed in the choices that they very consciously make. If I ask entrepreneurs why not change the product line or the store layout or the website, they will fiercely defend the current choice. That it because it is their strategy — not what any strategy specialist told them to do.
But I do care that the WTP/HTW choices are made and are made both consciously and well. That is the singularly most important job of the GM — at every GM level from the lowest product or brand manager to the CEO. If they don’t make those choices well, their organizations will have a miserable future — working extra hard to make up for their GM’s poor choices but still never winning. If the GM doesn’t make those choices and instead outsources them to somebody either within or outside the organization, then that executive is not really the GM of the business in question. There is a shadow GM doing the supposed GM’s job. That situation should be fixed by getting a new GM who embraces the GM’s true job.
If the job of the CSO is not to make the strategy choices for the business, then does the CSO have a real job? Very much so! There are three critical jobs that the CSO can and should play: facilitate the creation of strategy, coordinate the creation of strategy, and ensure the consistency of strategy.
Facilitate the Creation of Strategy
I feel that strategy is becoming a lost art. Over the past half-century, two of the biggest sources of executive management have been MBA graduates and the alumni of the strategy consulting firms. But modern-day business school strategy courses mainly teach a slew of analytical strategy frameworks, and increasingly theoretical ones at that, not how to create a strategy. And today the large strategy consulting firms, do much more work completely outside the domain of strategy (e.g., post-merger integration, overhead cost reduction, sales force reorganization, logistics optimization, benchmarking, project management, etc.) than in strategy. Consequently, there is short supply of executives well-schooled in strategy, meaning that many of today’s GMs need support in performing this critical part of their job.
In the modern world, it takes a lot of motivation and a big investment of time to learn strategy on your own. As a result, CSOs who have invested heavily in becoming skilled experts in strategy can play a hugely positive, if not essential role in helping their CEOs by facilitating the process of creating that strategy. Note, this is not doing strategy as a CFO would create the financial statements and present them to the CEO for approval. It is helping CEOs work through the exercise of getting to the point of making their fundamental strategy choices.
Coordinate the Creation of Strategy
It is a modern business fallacy that strategy happens at the top of the organization and everything else is execution. Strategy choice happens at all levels of the corporation. It happens at the corporate level. If the corporation has business units — and most large ones do — each business unit needs a strategy. If business units have product lines, each needs a strategy. PepsiCo has a strategy. Its Frito-Lay business unit has a strategy. And Frito-Lay’s Doritos product line has a strategy. The CEO of PepsiCo is too far away to specify the strategy for Doritos. Similarly, the CEO of GE can’t specify the strategy for the jet engine maintenance business.
Consequently, in any sizable corporation, coordination is a huge challenge for strategy — a challenge that in my experience is typically not well-handled. A CSO can add enormous value by ensuring that strategy choice-making happens and happens well at all levels of the organization. This entails ensuring that all GMs across the organization have the strategy support necessary to make their choices.
Further, for the corporation to be successful, all those choices must be made in a way that they fit together and reinforce one another. That most assuredly doesn’t happen on its own. The only person in a good position to create and oversee a management process for coordinating across all these strategy choices is the CSO.
Ensure the Consistency of Strategy
Finally, the CSO has an important job in ensuring the consistency of strategy across the organization by installing a common language for strategy. I wouldn’t have had this third element on my list a decade ago, but my experiences in working with this era’s large corporations has caused me to appreciate the power of consistency of strategy. Large corporations often have multiple consulting firms working in its various parts on a variety of things. Each consulting firm has its own language system for strategy. Plus, the members of the strategy functions bring myriad language systems from their MBA education and/or work experiences. The result is that strategy becomes a proverbial Tower of Babel. It makes challenging if not nearly impossible the CSO task of coordinating strategy across the corporation on behalf of the CEO.
What I now believe — and wouldn’t have ten years ago — is that the CSO needs to install a single language for strategy in the company. It is not unlike the CIO deciding that the company is going to run Windows, not Linux, on all the corporation’s servers, or the CFO deciding that the company is going to use FIFO versus LIFO for inventory valuation across all business units. While I have my favorite in terms of a language for strategy, the more important thing is that every corporation adopt a single language system for strategy so that the CSO can ensure the consistent facilitation and coordination of strategy choices across the corporation.
If you are a CSO and you want to do strategy — i.e., make your company’s key strategic choices — you are in the wrong job. Get a GM job at whatever level is feasible for you now and work your way up the GM ladder.
If your CEO asks you to come up with a strategy for him or her, get a new job. You shouldn’t be working for anyone who doesn’t want to do their most important job.
Set your goal as enhancing the quality of all the strategy choices that happen around you. You and your strategy function colleagues help GMs throughout the company consider and make the strategy choices that need to be made. You orchestrate the strategy choice-making across the company to ensure the greatest level of fit and reinforcement among the strategy choices. And you install a language system for strategy that enables everyone to converse effectively on strategy, which will especially help your boss, the CEO, understand every GM’s strategy and how they can be made to fit together optimally. Together, these elements comprise a worthy, valuable, and exciting role for the Chief Strategy Officer.