Business Case Studies, Executive Interviews, Donald N Sull on Why Good Companies Go Bad

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Executive Interviews: Interview with Donald N Sull on Why Good Companies Go Bad
January 2007 - By Dr. Nagendra V Chowdary

Donald N Sull
Associate Professor for Management Practice at the London Business School

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  • What new practices have you observed in the last decade as regards strategy formulation and strategy execution? Are these practices radically different from the earlier practices? What factors do you think would have brought about this new line of approaching strategy?
    One of the most promising new ways to approach strategy is viewing the organization not as a hierarchy of power, or a bundle of processes, but rather as a network of commitments to get things done. Critical initiatives stall for a variety of reasons employee disengagement, a lack of coordination between functions, complex organizational structures that obscure accountability, and so on.

    To overcome such obstacles, managers must fundamentally rethink how work gets done. Most of the challenges stem from broken or poorly crafted commitments. Thats because every company is, at its heart, a dynamic network of promises made between employees and colleagues, customers, outsourcing partners, or other stakeholders. Executives can overcomemany problems in the short term and foster productive, reliable workforces for the long term by practicing what I call promise based management, which involves cultivating and coordinating commitments in a systematic way. Good promises share five qualities: They are public, active, voluntary, explicit, and mission based. To develop and execute an effective promise, the provider and the customer in the deal should go through three phases of conversation. The first, achieving a meeting of minds, entails exploring the fundamental questions of coordinated effort: What do you mean? Do you understand what I mean? What should I do? What will you do? Who else should we talk to? In the next phase, making it happen, the provider executes on the promise. In the final phase, closing the loop, the customer publicly declares that the provider has either delivered the goods or failed to do so. Leaders must weave and manage their webs of promises with great care encouraging iterative conversation and making sure commitments are fulfilled reliably. If they do, they can enhance coordination and cooperation among colleagues, build the organizational agility required to seize new business opportunities, and tap employees' entrepreneurial energies.

  • Strategy execution has always been one of the more difficult problems in business. Creating a brilliant strategy is nothing compared to executing it successfully. It has always been much easier to create a strategy document than to get employees to abide by it. Many employees dont even know the details of strategies. Plans by senior management are neither attended to nor executed. Performance expectations arent met. How do you think the companies should get everyone rallying around the grand vision/strategy?
    Reconceptualizing strategy as an iterative loop, as described above, is simple enough, but putting that new mindset into practice is not. Here, the crucial thing to remember is that discussions formal and informal, short and long, one on one and in groups are the key mechanism for coordinating activity inside a company. Thus, to put the strategy loop into practice, managers at every level in the organization must be proficient at leading discussions that reflect the four major steps (making sense, making choices, making things happen and making revisions). It is always surprising to me how much time many executives devote to crafting a great strategy, and how little time they devote structuring and leading the discussions to ensure it is executed vigorously.

  • Tom Davenport recently argued that strategy execution has for too long lurched between two extremes. One camp, which she calls strategic engineering, envisions strategy execution as an engineering exercise, and views employees as cogs in a machine well-oiled by computers. The other extreme, which she labels strategic anarchy, encourages executives to simply get out of the way of their employees entrepreneurial and innovative energies. Neither extreme, of course, is very useful for organizations attempting to perform well in difficult and changing business environments. What according to you should be the right approach?
    The discussions through the strategy loop and promise based management are useful mechanisms to bridge the gap between entrepreneurial employees and top executives.

1. The Good, the Bad and the Ugly Case Study
2. ICMR Case Collection
3. Case Study Volumes

The Interview was conducted by Dr. Nagendra V Chowdary, Consulting Editor, Effective Executive and Dean, IBSCDC, Hyderabad.

This Interview was originally published in Effective Executive, IUP, January 2007.

Copyright © January 2007, IBSCDC No part of this publication may be copied, reproduced or distributed, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or medium electronic, mechanical, photocopying, recording, or otherwise without the permission of IBSCDC.

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