It is one thing to write about Strategic Essence.  It is another to accurately identify it.

The interesting thing about Strategic Essence is that many times it is not known or is misdiagnosed.

"A huge mismatch." That's how University of Chicago Graduate Business School Professor James Schrager describes the 1998 merger of Daimler and Chrysler (DCX). Schrager, president of Great Lakes Group, a South Bend (Ind.) strategic consultancy, is an active consultant to a variety of auto-centric companies.

Schrager, who was named by BusinessWeek in 2000 as one of the top teachers in the University of Chicago's business program, recently spoke by phone with Special Correspondent Ann Therese Palmer about the strategic problems newly announced DaimlerChrysler CEO Dieter Zetsche faces, with Jurgen Schrempp stepping down on Dec. 31 (see BW, 08/15/05, "Dark Days at Daimler").

Edited excerpts of their conversation follow:

Q: Why were Schrempp's deals a mistake?

A: They were a mistake because the strategies - for Mercedes and Chrysler and all of its associated brands -- were so different. For years, Mercedes' car brand sat at the top of the world as far as prestige, durability, and reliability. Starting in the mid-1970s through the mid-'90s, with the iconic 450-series, it was the ultimate car brand. It was the finest-engineered car you could buy.

Contrast this with Chrysler. During the same period, it was constantly looking for what rabbit it needed to pull out of its hat to stay alive. Were it not for the minivan, introduced in 1982, Chrysler would have been gone sometime in the 1980s. Schrempp has done a great deal of damage to a company that had a rock-solid reputation by cobbling it together with a company that slithers from crisis to crisis. We have a huge mismatch here.

Bloomberg Businessweek Magazine

The failed marriage of Daimler Benz and Chrysler, is a classic example of massive damage caused by ignoring strategic essence.  Daimler Benz (Mercedes) has a driver of technical excellence, Chrysler has a driver of technical innovation.

Mercedes also innovates and they both make motor vehicles so it looked like a logical match.  In fact these differences in Strategic Essence were fundamental pointers to the failure of the merger long before it started.

Thus we have the interesting paradox, the executives of an organization, the custodians of the strategic essence, often do not know what the Strategic Essence is.

As an organization matures and new executives are recruited they frequently ignore the Strategic Essence, or misdiagnose it or do not even know it exists.  The decline of many once successful organizations and even nations, can be attributed to decisions that cut across or undermine the strategic essence.

Since Strategic Essence is frequently an intuitive consequence of organizational founders accurately reading a market need and then meeting it - Strategic Essence is not necessarily ever made explicit.

Even when the Strategic Essence has been made explicit, many modern managers who have been raised in an environment that suggests that strategy is invented and can be re-invented at whim, think nothing of changing course.  This, despite a robust body of knowledge which evidences that the strategic essence of an organization should be clearly defined and then refined with focus and more focus and more focus -- the strategic essence virtually NEVER changes.

The client was a highly successful specialist freight forwarding and clearing company with a market share of around 10%.

They had carved a niche for themselves with a service promise which could be summarized as "if we mess up and the clearing of your shipment is delayed for ANY reason, we will make good your loss NO questions asked".

I was called in to advise them with regard to a business systems project that had been stalled for a year.

As I interviewed the executive team I asked my standard questions in order to determine the strategic essence of the business, and lifted out the service promise stated above.  I also asked questions to understand the problems with the project.

The answers with regard to the service promise all focussed on exactly the same statement of excellence.  The answers with regard to the project all related to sloppy and poor service from the implementers, things that did NOT work the way they should, etc.

I then interviewed the owner of the software company, based halfway around the globe, his strategic goal was to become the biggest software company servicing my client's market, in other words his goal was to service the 90% of my client's market that did NOT offer such an extreme service promise.

There was a fundamental strategic misfit.  The client wanted quality, the supplier wanted quantity and was NOT concerned about quality.

At the end of the second day of my investigation I sat with the sponsoring executive and outlined my findings.  "The lights have just gone on!" he exclaimed, "now it all makes perfect sense!"

The next morning he cancelled the project and we set about interviewing other software providers.

The third software provider that we interviewed started his presentation by saying "we are committed to service excellence, if our software ever causes you to be late on your service promise we will make good your loss, NO questions asked!" it was clear that THIS was the correct software company.

This is an example of how strategic essence is critical in making a software or system buying decision. In fact, it is far more important than software functionality and all the other hype that generally confuses executives and results in inappropriate buying decisions.

This article outlines the method that I use to determine strategic essence in an interview situation as part of my routine investigations into failed and sub-optimal business information systems projects and also use at the commencement of any project to assist a client to procure a new system

When things are going badly, return to the essence.

But what if we never consciously defined the Strategic Essence?

Or if the old guard have left and we no longer know it?

Strategic essence leaves its fingerprints and tell-tale signature ALL over the organization, you just need to know where to look for it.

This article discusses the method that I have evolved for determining strategic essence and which I use consistently when I commence a new engagement of any sort and which you can apply in your organization with an appropriate facilitator:

Appoint an experienced strategic facilitator, the less they know about your organization the better.

This person should be research oriented with good listening and good analytical skills and a thorough understanding of strategy.

Using an internal facilitator you run the risk of their judgment being clouded by what they know or think they know.  Always remember that the executives of Daimler Benz got it wrong.

You need to find a facilitator who has not worked with your organization before.

The facilitator should be mature, experienced, worked with diverse organizations in diverse industries with diverse strategic drivers.  In fact, probably at least in their fifties if not older.  You are looking for the maturity and depth of experience that will allow them to hear the heartbeat of the organization and facilitate to achieve clarity.

Have the facilitator interview each executive starting with the Chairman, when applicable, and then the Chief Executive Officer, followed by the rest of the executive team.  If the executive team have only recently joined the organization and the organization is mature it may be desirable to interview retired executives.  If the founder and founding management team are retired but still available it is advisable to interview them.

I recommend a one hour one-on-one interview with each person selected, typically between five and ten people in total.

I also recommend that the people being interviewed are not prepped for the interview in order to avoid discussions that can skew the result.  Ideally the interviewees should hear the questions for the first time in the interview.

"Please will you tell me the essence of this organization and how it thrives? is the fundamental question.  It may be necessary to ask supplementary questions such as "how does the organization differentiate itself from its competitors?",  "how has the organization grown to its present size?", etc.

It is vital that the person conducting the interview understands the question, understands strategy and understands strategic essence so that they can facilitate the interview effectively.

If this process is being embarked on as part of an exercise to diagnose some aspect of the business that is NOT functioning as expected, such as a failed or sub-optimal business information system implementation; or in preparation for embarking on a new business information system acquisition and implementation; then questions relating to this component can follow the strategic essence questions.

It is vital that the person conducting the interview listens intently and active listens.  This assists the person being interviewed to dig deep and, in many cases they DO need to dig deep.  In some cases the answer may be immediately apparent to the person being interviewed, but frequently I find that they need to scratch their heads and think deeply and test these thoughts.

By "active listen" I mean the technique of feeding back to the person being interviewed what the person conducting the interview understands them to be saying -- " I am hearing you say that ... ".

In my experience this point is central to achieving a quality outcome.  I have found that most people share more and dig deeper when the person conducting the interview is taking detailed notes.  It is almost paradoxical, but, in reality, most executives will disclose more and dig deeper when they have the experience that they are being "heard" and that the person conducting the interview regards what they have said as being sufficiently important to take notes.  Taking notes is also a sign of respect towards the person being interviewed.

I have had executives disclose the most remarkable things in this type of interview while I am taking copious notes.

Clearly there must be trust and most organizations will require the person conducting the interview to sign a non-disclosure and confidentiality agreement.  The notes should not be shared with anyone except the interviewer and the interviewee and should remain in the custody of the person who conducted the interviews, or be destroyed once the strategic essence has been fully documented and agreed to.

In some cases, as alluded to above, it may prove necessary to interview other people, long serving staff members, retired directors, founders, etc.  The goal is to obtain an accurate and reliable definition of the strategic essence together with appropriate elaboration.   In many cases, by the end of the fourth or fifth interview a clear pattern starts to emerge and by the time the entire top team have been interviewed there is frequently complete certainty as to what the strategic essence is.

In contrast, in the case of an organization that has been in existence for many years and is currently not achieving its historic levels of performance, it may be necessary to undertake deeper research to get to the roots of the strategic essence.

The person who conducted the interviews must then, based on a clear analysis of all the interviews, formulate a concise statement of the strategic essence and any associated elaboration.

This may be supported by additional comments and observations but these are discretionary.

The fundamental goal of this engagement is a concise statement of "the essence of the organization and how it thrives".  The rest is secondary and can be elaborated on in time.

If an executive differs with the CEO then, unless the CEO has just arrived, the CEO's view should receive particular attention, particularly if the CEO is the founder or has been there for many years.

If the CEO or any executive has only recently joined the organization it is possible that they will be far off the mark.  Quite frequently new executives bring a worldview that is based on past experience and attempt to force-fit it to the new organization.

This will seldom if ever work and can be extremely dangerous.

In other cases new executives who have done their homework may have a better sense of the Strategic Essence than other longer serving executives.

There is no absolute rule.

Once the interviewer has produced a final outcome this should be tabled to the Chief Executive or Chairman and other senior executives for review and refinement.

Frequently, as in the example above, there is an "Aha!" moment when the finding is disclosed.

Refer to the previous articles on Strategic Essence for some suggestions on applying Strategic Essence.

I offer a concise light touch intervention based on the method outlined above which I have been applying successfully for over a decade and which is a refinement of a method that I have applied for over two decades.

Click here to email me for more information.

Yours faithfully,

Dr James Robertson PrEng

James A Robertson and Associates Limited
Assisting clients to thrive through effective and efficient application of Business Information Systems

A discussion of how strategic essence should inform ALL business improvement projects and particularly business information system projects.  This thread discusses the analysis of strategy, the planning of strategy and feeding strategy through into business system specifications and the management of business improvement projects.  Articles to date include:

Summary
1: Strategy Defined
2: Differentiation
3: The Essence IS Different
4: Strategic Essence is the Point of Departure
5: Determining Strategic Essence

A discussion as to why business information systems fail to deliver on expectations or fail outright.  Coupled to discussion of the Critical Factors that must be taken into account in order to achieve successful outcomes.  This thread is progressively discussing more hands-on specifics of achieving high value outcomes and builds on the Strategic Essence series.  Articles to date include:

1: Introduction
2: Mythology and Lack of Executive Custody
3: Lack of Strategic Alignment and Lack of Precision Configuration

Discussion of practical specific measures that can be taken in order to greatly improve the information yield of business information systems at both the operational and executive strategic level.  A number of simple steps that can be taken immediately and more complex measures that can be taken over time. 

This thread is discussing increasing business system and data warehouse value yield using techniques that lead to significantly improved business intelligence capability, including support for the ability to "obtain answers to questions we had not previously thought to ask ".  This builds on the content in the Strategic Essence and Real Issues threads.  Articles to date include:

1: Introduction
2: Principles of Data Engineering
3: Steps in Applying these Recommendations

In order to fully apply the methods and principles discussed in the threads above with regard to new systems it is vital that a robust and effective approach to procurement is applied.  This requires a tough procurement approach directed at achieving a tough business outcomes orientated project that ensures a high value outcome.

This thread discusses the components of such a procurement approach.  The individual documents and processes that make up the approach are outlined.  Thereafter the components are discussed in more detail.  Articles to date include:

1: Introduction
2: Bill of Services, Laboratory, Go-live Certificate, etc
3: Executive Engagement, Bid Compliance, Adjudication and other matters

To inquire about ordering the above service simply click on the link, enter your details in the resulting email and send it to me.  If for some reason the email does not open please just hit reply to this email and enter your contact details.  I will revert to you in the manner you request to answer your questions and make arrangements.

Should you require further information please email me and I will be delighted to connect by email, phone or Skype to answer all your questions.

I look forward to being of service to you.

Yours faithfully,

Dr James Robertson  PrEng