A point-to-point approach to strategic navigation requires CEOs to move their businesses forward in logical, small steps. It also requires them to turn back to look for an alternate route if the path taken doesn’t work out.
Currently, we expect a CEO to know exactly where they are taking their organisation at all times, despite overwhelming evidence that this is an impossible task. We expect them to have a strategy; to lay out a plan. They must provide reliable earnings guidance, and avoid disappointing the stock market and its impatient analysts and investors.
Yet one of the great success stories of Australian business had the courage to reject this approach. Wesfarmers’ former managing director, Michael Chaney, left the firm in July 2005 after 13 years in the top post. During his term, Wesfarmers’ share-market value swelled from just over $1 billion to more than $15 billion, elevating it into Australia's top ten companies.
So how did he do it? In an interview with Chris Cheatley, Chaney ascribed Wesfarmers’ growth to the concept of ‘logical incrementalism'.
“You can't predict the future, so we just go forward in logical, small steps,” he says. “If it works out, we keep heading in that direction; if not, we pull back and look for another direction.”
This is point-to-point navigation. But if this idea of a more dynamic, act-learn-act-learn approach to managing strategy is so compelling, why isn’t it more prominent in today's leadership orthodoxy? I think it's because leading this way asks leaders to openly acknowledge that they don’t have all the answers. It requires the periodic destruction of ideas and business models that aren't working.
Ask yourself: To navigate today's complex and challenging business environment, do you have all of the following?
- A market-sensing radar system that warns you about oncoming competitive threats or industry disruptions and requires you to rapidly change course
- A detailed, reliable map of the market territories in which you operate–one that clearly shows the depth and breadth of customer needs, the high and low points of industry value creation, and the edges of dangerous operational terrain you must avoid
- A compass that continually points true north for you, giving you the right bearing on which way to steer your company's profitable growth, through good times and bad
- Clear visibility of economic and market conditions, all the way to the 3-5 year time horizon against which you must frame major investment decisions
- An old sea-dog in your management team, who knows your market and customer needs like the back of their hand.
I doubt any organisation has all of these things. So, I think it makes sense to take a long, hard look at how we expect a CEO to operate, and what this means for organisational leadership and culture.
The Austrian American economist Joseph Schumpeter coined the term ‘creative destruction’ in his seminal book, Capitalism, Socialism and Democracy, which was first published in 1942. Explicitly derived from Marxist thought, creative destruction describes the disruptive process of transformation that accompanies innovation. He explains that capitalism is, by nature, a form of economic change that can never be stationary, and argued that, “The process of creative destruction is the essential fact about capitalism.”
I think this idea neatly sums up the need for agile, restless and flexible business leadership in today’s context. A point-to-point approach to strategic navigation prevents us from simply standing still–doing what we've always done before–yet blindly hoping to succeed.