Alliance Perspectives

January 22, 2019

Case categories include: Founder’s Insights   Leadership   Strategy & Planning   

In 1991, I was asked to develop and lead a new strategy for the $1 billion U.S. subsidiary of Air Liquide, the global leader in industrial gases. The industrial gas business is profoundly capital intensive, and at the time, profitability was declining due to fierce market share competition. How I approached this opportunity speaks volumes about how strategic planning has evolved over the past 28 years.

Before tackling my challenge, I reread Michael Porter’s seminal book, Competitive Strategy, which at the time was the blueprint for creating competitive advantage in the 20th century. Afterwards, I brought together a diverse team of executives to discuss how we might change our approach. We found that our extreme focus on market share had resulted in a lack of understanding how and why we actually made (or lost) money from each of our thousands of customers, who were of all sizes and types. Next, I put together a team of bright, young executives who could aggregate data from our disconnected databases and then undertake a deep analysis to gain a much clearer understanding of our customers and our business.

Armed with new insights, we changed our competitive strategy from gaining market share to providing greater value to customers who also valued us. We then identified those customers with whom we could provide a sustainable competitive advantage and focused on being their preferred provider. To be successful, we needed our entire organization to understand that we would no longer be willing to lose money on customers with whom we were at a disadvantage.

The most difficult part of the strategic shift was not the analysis, but changing from a culture of competing for new customers at any cost, to a culture of seeking long-term, profitable customer relationships. To make this shift our sales people needed to be willing to walk away from customers who were not willing to have a “win-win” relationship. Also, all our employees needed to be educated on the reason for the shift in strategy and buy into it. In addition to the new strategy, we restructured our compensation plans—not to drive the new behaviors, but to align with the new strategy and reward successful outcomes. Our financial results improved dramatically.

Ever since this experience, I’ve loved working with other CEOs to challenge conventional wisdom and identify fresh insights and new approaches that lead to breakthrough results. But much has changed in the past 40 years since Porter’s book debuted. The world has become globally networked, and industries no longer have distinct boundaries. Companies such as Airbnb, Uber and WeWork are proving that disruptive new companies can come from anywhere at any time, and both large and small companies are finding new ways to transform.

Greg Satell, author of Mapping Innovation, believes that industries are now irrelevant, and what matters now is ecosystems. He states that “competitive advantage is no longer the sum of all efficiencies, but the sum of all connections. Strategy, therefore, must be focused on deepening and widening networks of information, talent, partners and consumers.”

Indeed, we are now living in an age in which technology cycles outpace planning cycles, and we are undergoing an exponential pace of change. We can no longer depend upon creating a plan to be executed. Agility and speed will typically trump a larger competitor’s size or ability to scale, which seems to be why a growing number of CEOs have found an enduring military leadership strategy to be particularly helpful in such chaotic times.

I first learned of Commander’s Intent from Alliance Director Russ Harrison, who forged his passion for effective leadership as a platoon leader in Vietnam. At one point, Russ’ platoon was ambushed, and the battle plans had to change in an instant. Since then, Russ has fine-tuned his philosophies on leadership during his 40-year career in both FORTUNE 500 and entrepreneurial organizations.

Essentially, Commander’s Intent empowers soldiers—or in this case, employees—to take initiative and improvise when situations change to do what’s necessary to achieve the mission. In a 2010 Harvard Business Review article, Chad Storlie wrote that “Commander’s intent is the description of what a successful mission will look like. Military planning begins with the mission statement that describes the ‘who, what, when, where and why’ of how a mission will be executed. Commander’s Intent describes how the Commander (Read: CEO) envisions the battlefield at the conclusion of the mission.”

The Commander’s Intent strategy was not front and center in my mind in 1991, but times have certainly changed. To succeed in today’s world, I believe CEOs must apply this concept to enable their organizations to adapt quickly and effectively with unanticipated surprises, dynamic environments and chaos. At the very least, CEOs must constantly challenge their notions about leadership—because what worked yesterday could easily spell disaster tomorrow.

Summary

Greg Satell stated that “Strategy must be focused on deepening and widening networks of information, talent, partners and consumers.” I founded the Alliance of CEOs in 1996 to bring leaders together to understand the changes happening in virtually every sector, and to challenge each of us to develop fresh approaches that will drive our organizations and achieve our missions. The current pace of change forces a strategic imperative – the need for leaders to broaden and deepen their access to ideas, information and other leaders.