Links to previous articles
at the end of this article
It is one thing to write about Strategic Essence. It is another to accurately identify it.
The interesting thing about Strategic Essence is that many times it is not known or is misdiagnosed.
The Daimler Chrysler Debacle -- A classic case of strategic mismatch
"A huge mismatch." That's how University of Chicago Graduate
Business School Professor James Schrager describes the 1998 merger of
Daimler and Chrysler (DCX). Schrager, president of Great Lakes Group, a
South Bend (Ind.) strategic consultancy, is an active consultant to a
variety of auto-centric companies.
Schrager, who was named by BusinessWeek in 2000 as one of the top
teachers in the University of Chicago's business program, recently spoke
by phone with Special Correspondent Ann Therese Palmer about the
strategic problems newly announced DaimlerChrysler CEO Dieter Zetsche
faces, with Jurgen Schrempp stepping down on Dec. 31 (see BW, 08/15/05,
"Dark Days at Daimler").
Edited excerpts of their conversation follow:
Q: Why were Schrempp's deals a mistake?
A: They were a mistake because the strategies - for Mercedes and
Chrysler and all of its associated brands -- were so different. For
years, Mercedes' car brand sat at the top of the world as far as
prestige, durability, and reliability. Starting in the mid-1970s through
the mid-'90s, with the iconic 450-series, it was the ultimate car brand.
It was the finest-engineered car you could buy.
Contrast this with Chrysler. During the same period, it was
constantly looking for what rabbit it needed to pull out of its hat to
stay alive. Were it not for the minivan, introduced in 1982, Chrysler
would have been gone sometime in the 1980s. Schrempp has done a great
deal of damage to a company that had a rock-solid reputation by cobbling
it together with a company that slithers from crisis to crisis. We have
a huge mismatch here.
This is perhaps THE textbook example of
a situation in which failure to understand the strategic
essence of the two companies led to what was an
extremely unwise business decision. A decision
that clear understanding of strategic essence WOULD have
The method outlined in
this article is a simple way of surfacing the strategic
essence of your organization, provided it is
administered by an impartial and highly experienced
The failed marriage of Daimler Benz and Chrysler, is a classic example
of massive damage caused by ignoring strategic essence. Daimler
Benz (Mercedes) has a driver of technical excellence, Chrysler has a
driver of technical innovation.
Mercedes also innovates and they both make motor vehicles so it looked
like a logical match. In fact these differences in Strategic
Essence were fundamental pointers to the failure of the merger long
before it started.
Thus we have the interesting paradox, the executives of an
organization, the custodians of the strategic essence, often do not know
what the Strategic Essence is.
As an organization matures and new executives are recruited they
frequently ignore the Strategic Essence, or misdiagnose it or do not
even know it exists. The decline of many once successful
organizations and even nations, can be attributed to decisions that cut
across or undermine the strategic essence.
Since Strategic Essence is frequently an intuitive consequence of
organizational founders accurately reading a market need and then
meeting it - Strategic Essence is not necessarily ever made explicit.
Even when the Strategic Essence has been made explicit, many modern
managers who have been raised in an environment that suggests that
strategy is invented and can be re-invented at whim, think nothing of
changing course. This, despite a robust body of knowledge which
evidences that the strategic essence of an organization should be
clearly defined and then refined with focus and more focus and more
focus -- the strategic essence virtually NEVER changes.
An example of strategic misalignment causing business information systems project failure
The client was a highly successful specialist freight forwarding and clearing company with a market share of around 10%.
They had carved a niche for themselves with a service promise which could be summarized
as "if we mess up and the clearing of your shipment is delayed for
ANY reason, we will make good your loss NO questions asked".
I was called in to advise them with regard to a business systems project that had been stalled for a year.
As I interviewed the executive team I asked my standard questions
in order to determine the strategic essence of the business, and lifted
out the service promise stated above. I also asked questions to
understand the problems with the project.
The answers with regard to the service promise all focussed on
exactly the same statement of excellence. The answers with regard
to the project all related to sloppy and poor service from the
implementers, things that did NOT work the way they should, etc.
I then interviewed the owner of the software company, based halfway
around the globe, his strategic goal was to become the biggest software
company servicing my client's market, in other words his goal was to
service the 90% of my client's market that did NOT offer such an extreme
There was a fundamental strategic misfit. The client wanted
quality, the supplier wanted quantity and was NOT concerned about
At the end of the second day of my investigation I sat with
the sponsoring executive and outlined my findings. "The lights have
just gone on!" he exclaimed, "now it all makes perfect sense!"
The next morning he cancelled the project and we set about interviewing other software providers.
The third software provider that we interviewed
started his presentation by saying "we are committed to service excellence,
if our software ever causes you to be late on your service promise we
will make good your loss, NO questions asked!" it was clear that THIS was the
correct software company.
This is an example of how strategic essence is critical in making a
software or system buying decision. In fact, it is far more important
than software functionality and all the other hype that generally
confuses executives and results in inappropriate buying decisions.
This article outlines the method that I use to determine strategic
essence in an interview situation as part of my routine investigations
into failed and sub-optimal business information systems projects and
also use at the commencement of any project to assist a client to
procure a new system
When things are going badly, return to the essence.
But what if we never consciously defined the Strategic Essence?
if the old guard have left and we no longer know it?
Strategic essence leaves its fingerprints and tell-tale signature ALL
over the organization, you just need to know where to look for it.
article discusses the method that I have evolved for
essence and which I use consistently when I commence a new
engagement of any sort and which you can apply in your organization
with an appropriate facilitator:
1. Experienced strategic facilitator
Appoint an experienced strategic facilitator, the less they know about your organization the better.
This person should be research oriented with good listening and good
analytical skills and a thorough understanding of strategy.
Using an internal facilitator you run the risk of their judgment
being clouded by what they know or think they know. Always remember
that the executives of Daimler Benz got it wrong.
You need to find a facilitator who has not worked with your organization before.
The facilitator should be mature, experienced, worked with diverse
organizations in diverse industries with diverse strategic
drivers. In fact, probably at least in their fifties if not
older. You are looking for the maturity and depth of experience
that will allow them to hear the heartbeat of the organization and
facilitate to achieve clarity.
2. Interview each executive one on one
Have the facilitator interview each executive starting with the
Chairman, when applicable, and then the Chief Executive Officer,
followed by the rest of the executive team. If the executive team
have only recently joined the organization and the organization is
mature it may be desirable to interview retired executives. If the
founder and founding management team are retired but still available it
is advisable to interview them.
I recommend a one hour one-on-one interview with each person selected, typically between five and ten people in total.
I also recommend that the people being interviewed are not prepped for
the interview in order to avoid discussions that can skew the
result. Ideally the interviewees should hear the questions for the
first time in the interview.
3. Ask the Critical Question: "Please will you tell me the essence of this organization and how it thrives?"
"Please will you tell me the essence of this organization and how it thrives? is the fundamental question. It may be necessary to ask supplementary questions such as "how does the organization differentiate itself from its competitors?", "how has the organization grown to its present size?", etc.
It is vital that the person conducting the interview understands the
question, understands strategy and understands strategic essence so that
they can facilitate the interview effectively.
If this process is being embarked on as part of an exercise to diagnose
some aspect of the business that is NOT functioning as expected, such
as a failed or sub-optimal business information system implementation;
or in preparation for embarking on a new business information system
acquisition and implementation; then questions relating to this
component can follow the strategic essence questions.
4. Listen carefully and "active listen"
It is vital that the person conducting the interview listens intently
and active listens. This assists the person being interviewed to
dig deep and, in many cases they DO need to dig deep. In some
cases the answer may be immediately apparent to the person being
interviewed, but frequently I find that they need to scratch their heads
and think deeply and test these thoughts.
By "active listen" I mean the technique of feeding back to the person
being interviewed what the person conducting the interview understands
them to be saying -- " I am hearing you say that ... ".
5. Take lots of notes
In my experience this point is central to achieving a
quality outcome. I have found that most people share more and dig
deeper when the person conducting the interview is taking detailed
notes. It is almost paradoxical, but, in reality, most executives
will disclose more and dig deeper when they have the experience that they
are being "heard" and that the person conducting the interview regards what
they have said as being sufficiently important to take notes.
Taking notes is also a sign of respect towards the person being
I have had executives disclose the most remarkable things in this type of interview while I am taking copious notes.
Clearly there must be trust and most organizations will require the
person conducting the interview to sign a non-disclosure and
confidentiality agreement. The notes should not be shared with
anyone except the interviewer and the interviewee and should remain in
the custody of the person who conducted the interviews, or be destroyed
once the strategic essence has been fully documented and agreed to.
6. Interview others and further research
In some cases, as alluded to above, it may prove necessary to interview
other people, long serving staff members, retired directors, founders,
etc. The goal is to obtain an accurate and reliable definition of
the strategic essence together with appropriate elaboration.
In many cases, by the end of the fourth or fifth interview a clear
pattern starts to emerge and by the time the entire top team have been
interviewed there is frequently complete certainty as to what the
strategic essence is.
In contrast, in the case of an organization that has been in existence
for many years and is currently not achieving its historic levels of
performance, it may be necessary to undertake deeper research to get to
the roots of the strategic essence.
7. Analyse and Synthesize
The person who conducted the interviews must then, based on a clear
analysis of all the interviews, formulate a concise statement of the
strategic essence and any associated elaboration.
This may be supported by additional comments and observations but these are discretionary.
The fundamental goal of this engagement is a concise statement of "the essence of the organization and how it thrives". The rest is secondary and can be elaborated on in time.
If an executive differs with the CEO then, unless the CEO has just
arrived, the CEO's view should receive particular attention,
particularly if the CEO is the founder or has been there for many years.
If the CEO or any executive has only recently joined the organization
it is possible that they will be far off the mark. Quite
frequently new executives bring a worldview that is based on past
experience and attempt to force-fit it to the new organization.
This will seldom if ever work and can be extremely dangerous.
In other cases new executives who have done their homework may have a
better sense of the Strategic Essence than other longer serving
There is no absolute rule.
8. Present and Refine
Once the interviewer has produced a final outcome this should be tabled
to the Chief Executive or Chairman and other senior executives for
review and refinement.
Frequently, as in the example above, there is an "Aha!" moment when the finding is disclosed.
Refer to the previous articles on Strategic Essence for some suggestions on applying Strategic Essence.
I offer a concise light touch intervention based on the method outlined
above which I have been applying successfully for over a decade and
which is a refinement of a method that I have applied for over two
here to email me for more information.
Dr James Robertson PrEng
James A Robertson and Associates Limited
Assisting clients to thrive through effective and efficient application of Business Information Systems
Articles published so far in the article series to which this email refers:
Enriching your Business Information Systems
Discussion of practical specific measures that can be taken in order to
greatly improve the information yield of business information systems
at both the operational and executive strategic level. A number of
simple steps that can be taken immediately and more complex measures
that can be taken over time.
thread is discussing increasing business system and data
warehouse value yield using techniques that lead to
significantly improved business intelligence capability,
including support for the ability to "obtain answers
to questions we had not previously thought to
". This builds on the content in the Strategic Essence and Real
Issues threads. Articles to date include:
Principles of Data Engineering
Steps in Applying these
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and I will be
delighted to connect by email, phone or Skype to answer all your
I look forward to being of service to you.
Dr James Robertson PrEng