6 minute read 9 Jan 2019
EY - DNA of the Chief Strategy Officer

Does your first move have to be the perfect move?

By

Lance Mortlock

EY Canada Strategy Partner and Oil and Gas Leader

Forward-thinker. Strategist.

6 minute read 9 Jan 2019

Strategy has never been more important to Canadian companies. Knowing what makes a CSO successful can help you unleash their full power within your organization.

In a market where the only constant is change, strategy has never been more important to Canadian companies.

Even as foreign direct investment in the Canadian economy hit its lowest levels since 2010, unprecedented change and constant innovation are profoundly transforming businesses across all sectors, proving uncertainty isn’t just about capital.

From recent ups and downs around the future of NAFTA – and a need to now understand its USMCA replacement – to an energy sector plagued by upheaval, a financial industry disrupted by fintechs, and everything in between: ours is a whole new world.

Enter strategy, and the need for leadership to have a holistic understanding of where they’re going and how they’ll get there. Because good strategy isn’t just about looking for your next move. It also means getting into an optimal state, where you can make changes with strategic foresight.

For EY’s The DNA of the Chief Strategy Officer survey, conducted in the third quarter of 2018, we canvassed 40 senior executives across eight industries on strategy development, preparation, execution and planning. Then, we asked which dimensions of the process were the most important for them to succeed in their roles – mapping each to our EY Strategy Framework for a deeper dive.

Businesses must adopt a strategic mindset to approach competition and look beyond current times to observe and predict what changes, risks and disruptions might impact their business in the future.
Lance Mortlock
EY Canada Senior Strategy Partner

So, what makes a Chief Strategy Officer (CSO) successful, and what do the best of the best focus on?

1.  Look at external factors and what competitors are doing.

We call this strategy development: outside in. It’s not surprising that respondents rated the future market analysis component of this phase as the most important. Knowing where the market is headed provides a foundation for strategic decision-making.

What does it mean for specific industries? Intensely competitive industries (including automotive, financial services, and consumer products and retail) all rated competitor analysis as highly important. This underpins the importance of the strategy leader in driving conversations to ensure they’re focused on differentiating the organization in some way. On the other hand, government and public sector respondents emphasized the importance of stakeholder expectations; a likely result of their focus on balancing diverse, and often vocal, stakeholder groups.

2.  Look within the organization at performance and factors that impact strategy.

We call this strategy development: inside out. It’s largely about taking stock of the company’s internal tools and capabilities to consider its strengths and weaknesses while developing the strategy. Most of the elements of this dimension were highly rated, but mergers and acquisitions were low on their agendas. This may be due to the traditional way responsibilities are divided in some mature organizations. Corporate development and strategy aren’t always aligned, but they should be connected through regular communication.

What does it mean for specific industries? The more regulated or publicly scrutinized an industry is — think government entities, regulators and energy producers, among others — the more likely they were to focus on risk management. Energy industry respondents placed a higher-than-average emphasis on portfolio management. That’s likely because of the industry importance of maintaining a strong balance sheet, acquiring assets to aid inorganic growth, while also strategically disposing of underperforming and misaligned assets.

3.  Consider what will be necessary to successfully execute the strategy.

We call this: preparing for execution. Pulling the components of the strategy together sets the stage for successful execution. Executive respondents rated the performance management element of this dimension highly, reinforcing the idea that “what gets measured gets done.” Operating model development was left behind, though, showing many may not consider it a core business component. This is a mistake. Without a strongly linked and consistently understood operating model, quality of execution can suffer. 

What does it mean for specific industries? Industries value talent development differently. Sectors where employees have common skills and can be easily replaced were less likely to emphasize this area. Automation may also play a role here. Organizations with workforces that may be candidates for automation were less likely to invest time and effort in talent development.

4.  Drive strategy formulation and integrate its various components together.

We call this: strategic planning. It’s about integrating the moving parts, involving the strategic planning process and the strategic plan itself. The importance of strategic planning cuts right across organizational size and industry.

What does it mean for specific industries? Government and public sector respondents consistently ranked the importance of the strategic planning process at the highest level. This is not surprising given such organizations are typically understood to be highly process and planning centric. On the other end of the spectrum, health and life sciences execs rated this same component lower than respondents in any other sector, likely due to the pace of change in the industry which makes planning less certain.

5.  Oversee the elements of the strategic plan through to fruition.

We call this: strategy execution. This final stage is where the development, planning and preparation are put into action. Good strategy is useless without great execution. The most successful strategy leaders are those who can maintain alignment and line of sight with those responsible for execution. Executives rated roadmap execution as the most important execution element. Larger companies were more likely to emphasize execution in general, as a result of execs maintaining a narrower focus. The smallest organizations were most focused on cost management and execution, likely because leaders tend to have broader scopes of work.

What does it mean for specific industries? The automotive and oil and gas industries are highly capital intensive. As a result, M&A activity in those industries, particularly between big players, tends to be limited. Meanwhile, the data showed significant differences between industries and the focus on internal programs and governance. Where government and public sector organizations placed a lot of importance on these initiatives, likely due to policy direction, the financial services industry seemed much more static, relentlessly focusing on financial returns and shareholder value.

Where do we go from here?

The staggering pace of change in today’s business landscape is driving massive disruption across industries. Consumer demands are not only increasing but also changing. Global shifts mean bigger players are competing on an international stage. And digital technology has upended some industries entirely, causing business models to evolve and industries to converge.

All of this intensifies the strategic complexity for companies as they try to stay relevant. Simply put, organizations must have a senior leader who’s focused on strategic direction with a holistic, end-to-end approach: the CSO.

Choose them carefully. Define their role clearly. Map their scope well, and make it fit for purpose to your organization’s size and unique culture. In a world changing as quickly as ours, that’s no small feat. But doing it – and doing it right – can play a significant part in your future success.

Summary

There’s never been a time when strategy has been more important to Canadian companies than it is today. Our business environment is increasingly complex, and dynamic as technology, the geopolitical climate, a changing workforce, and consumer demand have intersected for radical disruption in many industries.

To combat these increasing threats, businesses must adopt a strategic mindset to approach competition and look beyond current times to observe and predict what changes, risks, and disruptions might impact their business in the future. That means understanding both the pace of external changes, and the internal aspects of the organization that could enable success.

About this article

By

Lance Mortlock

EY Canada Strategy Partner and Oil and Gas Leader

Forward-thinker. Strategist.