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expert in the subject. If the client is not able or willing to participate, the consultant may decide to give the best expert advice possible, which the client may decide to use or to ignore. However, in strategy and general management consulting, the risk of rejection is extremely high, as witnessed by countless consulting reports, plans and proposals that have been ignored by the clients. Furthermore, core issues concerning the very existence, mission, strategic direction or restructuring of a client company can hardly be fully understood and properly resolved if handled by outsiders only. All the reasons that speak in favour of participative consulting in any area of management are doubly valid when dealing with strategy, organization, corporate culture, corporate governance and similar general management issues.

12.2 Corporate strategy

The concept of corporate strategy has made a significant contribution to the advancement of management practice and theory over the past 30 years. Consulting in corporate strategy (business strategy, strategic analysis, strategic planning, strategic restructuring, etc.) is a rapidly growing area of management consulting. Some consultants have made corporate strategy their main or exclusive field of intervention. Consulting in corporate strategy has been strongly influenced by changing fads and fashions. During the 1970s there was a growing use of quantitative techniques and models, and strategic studies began to be dominated by young econometricians and operational researchers, with excellent education but often without business experience, and with little knowledge of people, or of social and other problems that determine strategy in reality. The following decade saw a welcome swing back to pragmatism.

A further development of the 1960s and 1970s was that many business firms created strategic planning units, and planning was seen as a distinct staff department function. The 1980s saw a strong swing away from such departments, which in any case rarely commanded the attention or respect of top management. It is now increasingly recognized that strategic planning is far too important to be left to planning staff, and that participation in the formulation of strategies is an intrinsic part of the work of senior management.

Even though the role of the planning department has diminished, however, the need for external consultants has increased. Senior operating executives always have some difficulty in stepping back from their immediate priorities and thinking about the longer term. Their workloads make it difficult for them to track all the developments in the company’s environment that need to be taken into account in the formulation of strategic plans, and it is notoriously difficult for them to make an honest evaluation of their organization’s weaknesses relative to competition. The consultant brings an open mind to these issues. Many boards of directors develop long-term relationships with consultants who advise them on strategy development, and clearly find such advice invaluable.

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Strategic vision

Corporate strategy is usually defined as the organization’s response to environmental opportunities, challenges and threats, consistent with its resources and its competencies relative to its competitors. This latter point is so important that some writers define strategy entirely in terms of the search for competitive advantage. It is important to remember, however, that strategy is not an aim in itself but a set of paths and choices for achieving the organization’s goals in the future. This is where a consultant can start helping the client. Many organizations practising strategic planning actually lack a vision of the future. Some do not even have a clear understanding of the present; they have not asked the strategist’s fundamental question: “What business are we in?” Yet an understanding of this must be the starting-point of any sound strategic analysis.

A strategic vision should be as rational as possible and not a result of wishful thinking. However, total rationality is not achievable for one simple reason – the future is unknown and is being shaped by a myriad of independent actions all over the globe; the client’s own actions will form only a tiny fragment of this future, however important the business is. Nor is it possible to evaluate every possible course of action. The personal values and judgement of the key decision-makers therefore play a vital role in positioning the organization for the future. Harold Leavitt has described this role as “pathfinding”.1 Other writers describe it as a “sense of mission”.

It is for this reason that current thinking on corporate excellence and strategy puts so much emphasis on organizational leadership. A leader is an individual (or team) with a vision of the future position of the organization. Furthermore, a leader is able to express this vision in goals understandable to people in the organization, and influence and motivate people to achieve these goals. There is a unity of vision, and a unity of actions guided by this vision.

Industry and competitor analysis: determining competitive advantage

A competitive advantage is a key dimension of survival and success in environments where organizations must compete with each other. This advantage is not a trick that can last a few months (e.g. a smart advertising campaign), but an inherent capacity to sustain superior performance on a long-term basis. The search for such advantage must therefore start with a systematic analysis of the industry and sector in which the enterprise operates, and of the competitive forces at play.

Much of the most important development in strategic thinking in the past 20 years has been in concepts and models that facilitate this kind of analysis. The “five forces” model proposed by Michael Porter identifies five key areas that management needs to understand: (1) the competitive structure within the industry/segment itself; (2) the threat of new entrants; (3) the threat of substitute products or technologies; (4) the power of suppliers; and (5) the power of customers.2 Kenichi Ohmae suggests “key success factors” on the basis of

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which the business unit should compare itself with its competitors.3 Another of Michael Porter’s concepts, the “value chain”, assists in determining where in the enterprise’s operating cycle these key factors are to be found. Products and market positions can be brought into better perspective by using product/market life-cycle models. None of these models claims to describe reality for any one particular company: rather, they are an aid to thinking about reality. They are certainly tools which any consultant working in this area needs to have.

Equipped with such tools, the consultant can be most helpful in examining whether the client business does indeed enjoy any competitive advantage, or in developing a strategy for achieving one. He or she can draw the client’s attention to the ways in which organizations regarded as excellent achieved and maintained their competitive advantage. He or she can point out certain factors that tend to be characteristic of all firms that possess such an advantage (for example, priority attention paid to the clients’ needs and satisfaction, and to the quality of products and services). But above all, the consultant can help the client to think honestly about the industry’s characteristics, the keys to success, and just how the client’s enterprise matches up to the competition in these key areas.

After the analysis comes the moment of truth: specifying the strategy to be followed. The consultant can help the client organization choose among the alternatives that are available to it, bearing in mind the real capacities of the technical and production staff, production facilities, marketing networks, business experience and the like. Once again, thinking on the subject of corporate strategy has provided insights that can clarify the decisions that have to be made. Michael Porter has highlighted the distinction between two fundamental approaches or, as he terms them, “generic strategies”. One of these is to concentrate upon becoming competitive through “cost leadership”, i.e. by having the lowest costs in the industry (though this does not, of course, necessarily mean having the lowest selling prices). The other is to concentrate upon “differentiation”, which means offering the customer superior quality and a unique package of features. Clearly, no enterprise can afford to ignore either costs or quality completely. Porter believes, however, that no company can hope to dominate its field in both cost and differentiation, and that any attempt to do so will lead to being “stuck in the middle” with neither the most competitive costs nor superior product features.

Practical examples of the strategic choices to be made are:

–offering state-of-the-art technologically advanced products not available from other firms or available from very few (differentiation), and regularly abandoning these products and moving on when the technology becomes common and prices start to drop;

–providing service to clients with speed and reliability superior to that offered by competitors (a further form of differentiation);

–selling high-quality and particularly reliable products for relatively high prices, and/or products tailored to the particular needs of clients who find standard products unsatisfactory (differentiation again);

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–selling standard products of acceptable but not particularly high quality at very competitive prices (cost leadership).

In defining a competitive advantage, emphasis is put on the notion “sustainable”. The client will have to evaluate, and enhance as appropriate, his or her ability to adapt to changed conditions, and to innovate. For example, only organizations that are closely linked to technological research and where the flow of technological innovation has become a permanent internal process can choose the provision of state-of-the-art technology as their business strategy and hope to sustain differentiation on this basis.

Technology in corporate strategy

The role of technology in developing differentiation and implementing a winning corporate strategy is another area where management consultants can be extremely useful to their business clients. There are several reasons for this:

A company that integrates technology into its strategy significantly improves its chances of reaping benefits from technological changes. Whether it decides to be a technological leader or not, the results of integrating technology into strategy can improve a company’s determination of priorities among technology options, identify the technical resources needed to achieve business goals and speed up the movement of ideas into production.4

However, technological developments occur simultaneously in so many areas, and so rapidly, that even large companies with well-staffed R&D departments and information services find it increasingly difficult to keep abreast of developments, and think of possibilities offered by technologies and materials created in other sectors and countries.

Increased emphasis on technology strategy and its impact on manufacturing, marketing and other strategies is a new challenge to many management consultants, who often used to handle strategy simply as a factor affecting marketing and finance decisions. Some consultants have already responded by establishing research and development (R&D) departments which can both participate in consulting assignments in corporate strategy and undertake specific R&D tasks for their clients. Evaluating the potential of new technologies and providing technological information analysed from the viewpoint of its potential business applications has become a rapidly growing service. Several important consulting firms already offer such a service to their clients. Consultants advising on business development opportunities and projects in developing countries are increasingly involved in questions of technology transfer, helping to choose both the appropriate technology to be used and the terms under which such a transfer can be effectively implemented.

This trend is likely to continue, and management consultants who devise new services in response to clients’ pressing needs will themselves gain a distinct competitive advantage. It is clear, however, that the technology that will

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be most influential in the future is information technology – with all its associated ramifications in telecommunications and the Internet. The implications of these developments are discussed in section 12.3, and in Chapters 13 and 16.

The environment of business

The environment in which organizations operate is becoming so complex, variable and even confused that managers find it more and more difficult to identify significant information and monitor changes that should be reflected in corporate strategy. Writers in the field of strategy increasingly refer to the need for systematic “PEST” analysis – a convenient shorthand for the areas that such an analysis needs to examine:

●the political environment;

●the economic environment;

●the social environment;

●the technological environment.

Here again, management consultants can be of great help. Some clients may need guidance in order to become more aware of the environment and so realize that ongoing or forecasted environmental changes can have far-reaching consequences for their businesses. Other clients may be aware of the scope and depth of environmental changes, but lacking the skills and resources needed to collect necessary information and draw the right conclusions from its analysis. They find it difficult to determine what information is relevant, or may be relevant in the future.

As a result, many consulting firms increasingly provide services to clients in matters of corporate strategy which focus on environmental information and analysis. In addition, these firms help clients to devise systems and procedures in which environmental analysis is internalized to become a standard part of the strategic management system. In some cases (e.g. in small and medium-sized firms in rapidly changing industrial and service sectors), clients may require long-term support from a competent information agency, which screens and monitors the environment, or some aspects of it, on their behalf. Some consultants are already building up a new client service for this purpose.

Environmental analysis tends to embrace new issues in addition to classic marketing, economic, demographic and financial information. Analysis of the social environment is necessary if the company is to address effectively social responsibility issues and determine their place in corporate strategies (Chapter 23). New regulations concerning product quality, safety, or the protection of the natural and living environment can determine the life or death of firms whose products or technologies are affected. Some of these regulations have a long gestation period, while others are adopted very quickly. Political and social interests, as well as organizations, are involved in the promotion of new

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regulations. Seen from another angle, new regulations also offer new opportunities to firms that can adapt their products faster than their competitors, or that come up with new products that specifically serve the purpose of increased safety or reduced pollution.

As regards the legal environment of business in general, many companies find it impossible to keep track of all strategically significant changes in their home country, let alone changes having an impact on foreign operations. Management consultants can help clients with this task, in collaboration with law firms if appropriate. Even so, the environment can never be completely understood, let alone predicted – a problem that is discussed in section 12.3.

Emergent strategy

Everything written above is based on the assumption that strategy formulation is a logical and rational process. An analytical structure has been developed which facilitates a structured step-wise approach: understand the environment in which the organization operates, understand the industry and the key success factors in that industry, understand the company’s own strengths and weaknesses, understand its competitors, and understand what competencies the organization will need to have. All of this is valid and correct. However, consultants who give the impression that such an approach will produce the correct strategy will appear naïve. At best, it will produce the strategy that fits best with the available information, but that information can never be complete.

Virtually all business decisions are made in a state of uncertainty, and the uncertainty in strategic-level decisions is often even greater than in other areas. Changes in the social, economic and political environment are notoriously difficult to forecast and anticipate. However much time is devoted to understanding the strengths and weaknesses of competitors, it is rarely possible to have access to their strategic thinking. The rate of scientific and technological development has consistently outstripped all expectations. Developments in any or all of these areas can invalidate the most carefully planned strategies. A wellreasoned strategic plan to make a major investment in a developing country, for example, may be made redundant if the democratic government of the country is replaced in a military coup. A new product that was about to be launched may have to be cancelled if a competitor introduces a clearly superior one.

It must be clear, therefore, that the strategy that is actually implemented will never be quite the same as the one developed from the rational analysis. Strategic thinkers and writers now make a distinction between intended strategy and emergent strategy. It is of course necessary to have an intended strategy, because without one the organization will be completely reactive rather than proactive. As time passes, however, the various uncertainties will start to be resolved, and existing strategies will need to be modified accordingly. The emerging situation will reveal unforeseen problems, and possibly also emerging opportunities. The mission and strategic objectives may remain largely unchanged, but the strategies by which they are to be achieved should be subject to continual review and modification.

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Implementing strategy

Strategy that remains on paper is of little use. Further, as outlined above, what is implemented is never the same as the “paper” strategy, but something emergent and dynamic. Strategy implementation is, in fact, much more difficult than strategy formulation. The consultant must help the client to develop operating systems, procedures and technical capabilities for putting these constantly evolving strategies into effect. This raises a number of issues, including that of communication. While certain strategic choices may have to be kept strictly confidential, the failure to communicate important choices to staff will mean that no one in the organization, except the planners and top managers, will adhere to the strategy chosen. Activities such as production planning and control, inventory management, quality improvement and staff development, as well as leadership and management style, are critical to the successful implementation of strategy.

The consultant can help the client, too, in developing competence for adapting strategy to new opportunities and constraints. No strategy is valid forever, and the rapid pace of change in the business world and its environment means that strategy formulation and review must be an ongoing process. There is a clear need for a monitoring, or “early warning”, system to detect trends, events and ideas that may lead to a change in corporate strategy. Once again, internal management may have neither the time nor the detachment to undertake this task properly. The company’s management system, including procedures for auditing and redefining strategy, should be flexible enough to make adaptation possible. This means, in particular, encouraging people in marketing, production, R&D and other departments to keep their eyes and ears constantly open for signals and ideas that may have a bearing on strategy. The consultant’s role is to pull all of this information together and determine its implications.

Consistency with internal capabilities

In consulting on strategy, consistency with the internal capabilities of a company is as important in consulting on strategy as the alignment of the firm with the business environment. Every pattern of corporate strategy has its own requirements as regards the technical profile and capabilities of the staff, as well as managerial and work style and employee motivation. Clearly, an ambitious differentiation strategy intended to maintain the company at the cutting edge of technological innovation, without much concern for costs and prices, requires a different style and working climate from a strategy that is not too demanding as regards latest technology but seeks to achieve cost leadership through rigorous cost control of standardized, high-volume work operations.

Ideally, not only management but also other staff members should be associated with strategy formulation. The process of defining strategy is even more important than the content for achieving staff commitment and a shared belief that the strategy chosen is a way to success.

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