“Making Big Decisions Better — How to Set and Simplify Business Strategy” by Mark Lewko (Routledge, Taylor & Francis Group, $35).Lewko’s definition of strategy: “A framework of choices that defines the purpose and path of the organization.” While it looks straightforward, it’s quite complex because a “framework of choices” deals with the fluid dynamics of […]
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“Making Big Decisions Better — How to Set and Simplify Business Strategy” by Mark Lewko (Routledge, Taylor & Francis Group, $35).
Lewko's definition of strategy: “A framework of choices that defines the purpose and path of the organization.” While it looks straightforward, it's quite complex because a “framework of choices” deals with the fluid dynamics of execution around three elements — products, markets and capabilities. I'd add a fourth, the economy, and a fifth, regulations.
The framework sees strategy implementation as an ongoing decision-making process. As a process, its “appraise, decide, plan, adjust” steps can be used by small business units to the largest divisions. When applying these steps, Lewko believes that managers must understand the revenue (e.g. volume, price, value perception, product mix and age, competition, etc.) and cost (e.g. direct and indirect costs of labor and materials, inventory control, quality control, purchasing, distribution, administrative overhead, etc.) drivers that affect “the numbers.” In many cases, variance analysis can shape forward-thinking decisions. Trade-off analysis can also be useful.
There are also people and financial capabilities, which affect both revenue and cost drivers. Without the right people and sufficient funds, action choices are limited.
Lewko also believes that mixing strategic (what) and operational (how) measurements makes it difficult to distinguish between the two in reports on key performance indicators. He suggests creating a standalone “strategic performance indicators (SPI) report,” which focuses on products, markets and capabilities. By separating the what from the how, it's easier to determine where additional resources are required to maximize results or tweak underperforming plans.
He also believes that companies have way too many reports. In an effort to measure everything, people resources are tied up creating reports. Numerous complex reports often obscure meaningful information.
Lewko's strategy message: “Focus on the few things that matter most. Make people accountable. Find out why we're hitting the mark or coming up short.” Then adjust.
