Strategy is the story | Strategy is the story - London Business School BSR
Stevie Spring, who recently stepped down after a successful stint as CEO of Future plc, the specialty magazine publisher, once told me, “I am not really the company’s CEO; what I really am is its Chief Story Teller.”
What she meant is that she believed that telling a story was her most important task as a CEO. Actually, she insisted, her job was to tell the same story over and over again. And when she said ‘a story’, she meant that her job was to tell her representation of the company’s strategy: the direction she wanted to take the business and how that was going to make it prosper and survive. She felt that a good CEO should tell that kind of story repeatedly, to all employees, shareholders, fund managers and analysts. For, indeed, a good strategy does tell a story.
Not fiction
All successful CEOs whom I have seen were great storytellers. Not necessarily because of their oratorical skills, but because the characteristics of the strategy they had put together lent themselves to being told like a story — and a good one too! The most important thing for a CEO to do is to provide a coherent, compelling strategic direction for the company, one that is understood by everyone who has to contribute to its achievement. For that, a story must be told.
When I say this, I am not implying that CEOs need to engage in fiction, nor do they need to be overly dramatic. In my view, a good business strategy story has three characteristics.
First, the story must provide clear choices. Stevie Spring’s choices were as clear as her forthright language: “We provide specialty magazines, for young males, in British.” Hence, it was clear what was out; there were to be no magazines on, say, ‘music’ (that is too broad), no magazines in German (although that could be a perfectly profitable business for someone else) and no magazines on pottery or vegetable gardens (unless that has recently seen a surge in popularity among young males in the UK without my knowing it). A good strategy story has to contain such a set of genuine choices.
Moreover, it has to be clear how the choices made by the company’s leaders hang together. For example, Frank Martin, who as a CEO orchestrated the revival of the British model-train maker, Hornby, by turning it from a toy company into a hobby company, put his strategy story in just 15 words. “We make perfect scale models for adult collectors, which appeal to some sense of nostalgia.” He decided to focus on making perfect scale models because that is what collectors look for. Moreover, people would usually specifically collect the Hornby brand because it reminded them of their childhood, and with it a nostalgic, foregone era. Frank Martin’s choices were not just a bunch of disconnected strategic decisions; they hung together, and, combined, made for a logical story.
Second, the story must tie to the company’s resources. Importantly, the set of choices has to be clearly linked to the company’s unique resources, those that can give them a competitive advantage in an attractive segment of the market. Although Hornby had been hovering on the brink of bankruptcy for a decade, it still had some valuable resources. First of all, it possessed a valuable brand that was very well-known and appreciated by people who had owned a Hornby train as children.
Additionally, the company had a great design capability in its hometown of Margate. However, these resources weren’t worth much when competing with the cheaper Chinese toy makers. The children who wanted a toy train for their birthday didn’t know (and could care less) about the Hornby brand. The precision modelling skills of the engineers in Margate weren’t of much value in the toy segment, where things mostly had to be robust and durable. However, these two resources — an iconic brand and a design capability — were of considerable value when making ‘perfect scale models for adult collectors’. It was a perfect match of existing resources to strategy.
I observed a similar thing at the Sadler’s Wells theatre. Ten years ago, before the current CEO Alistair Spalding took over, the theatre put on all sorts of grand shows in various performing arts. Yet, the company was in dire straits, losing money evening-on-evening and by the bucket. Then, Spalding took over and highlighted his leadership with a clear story. He started telling everyone that the theatre was destined ‘to be the centre of innovation in dance’.
He did this because the company was blessed with two valuable resources: (1) an historic reputation for dance (although it had diversified outside dance in the preceding years) and (2) a theatre once designed specifically with dance in mind. Spalding understood that, with these unique resources, he needed to focus the theatre on dance again. Beyond that, he made it the spider in the web, a place where various innovative people and dance forms came together to create new art, a place where stars were formed.
Third, the story must create a competitive advantage. The story must not only provide choices that are linked to resources, it must also explain how these choices and resources are going to give the company a competitive advantage in an attractive market, one that others can’t easily emulate. For example, Hornby’s resources enabled it to make perfect scale models for adult collectors better than anyone else, but those adult collectors also happened to form a very affluent and growing segment, one in which margins were much better than in the super-competitive toy market. It isn’t much good to have a competitive advantage in a dying market; you want to be able to do something better than anyone else in a market that will make you grow and prosper.
Thus, it has to be clear from your strategy story why the market is attractive and how the resources are going to enable you to capture the value in that market better than anyone else. The story of the CEO of Fremantle Media, Tony Cohen, for example, was that his company was going to make television productions that were replicable in other countries, with spillovers into other media. Because of their worldwide presence, Fremantle Media were better than their national competitors at rolling out productions such as the X-factor, Pop Idols, game shows and sitcoms. While their local competitors could also develop attractive and innovative shows, Fremantle’s multinational’s presence enabled it to reap more value from them. Therefore, that’s what they focused upon: shows that they could replicate across the globe. It was their competitive advantage, and they built their story around it.
Only a beginning
Of course, a good story alone is not enough. A leader still needs good products, people, marketing, finance and so on. But, without a good story, a leader will find it impossible to combine people and resources into a forceful strategic thrust. A good story is a necessary — although, alone, not sufficient — condition for success.
My message for leaders: if you get your story right, it can be a very powerful management tool indeed. It works to convince analysts, shareholders and the public that where you are taking the company is worth everyone’s time, energy and investment.
Perhaps even more importantly, it can provide inspiration to the people who will have to work with and implement the strategy. If employees understand the logic behind a company’s strategic choices and see how it might give the company a sustainable advantage over its competitors, they will soon believe in it. They will soon embrace it. And they will soon execute it. Collective belief is a strong precursor of success. Thus, a good story can spur a company forward and eventually make the story come true.
