Topic: Executive Strategy

Reference: Rumelt, Richard P. “Strategy in a ‘structural break’. McKinsey Quarterly: http://www.mckinseyquarterly.com/strategy/strategic_thinking/strategy_in_a_structural. December, 2008.

This is the last posting of 2008; good riddance. 2008 featured some monumental challenges, catastrophic meltdowns, and the exposure of unjustified hubris in all facets of American industry. Out of this pessimistic and poisonous rubble a new order will rise and with it what has been chaotic will return to a new sense of order. Let’s hope that the cast of characters will change and that the ruinous tactics of the past decade will lose power to those less ethically challenged and more capable of enlightened thought. This discontinuation of the inane will require a structural break with recent dicta and generally accepted concepts that offer no solutions for the future. Smart management understands this and is looking at the structural break as a chance to reset business strategy and to build new organizational stability. In the referenced article the commentator relies on econometric theory to define the structural break as “the moment in time-series data when trends and the patterns of associations among variables change.” He recommends a multi-part strategy to benefit from the structural break. One is to survive the hard times and to understand that the competitive advantage of the past has declined.  Another is to understand that the government’s policy response will create new opportunities and new winners. “The wrong way forward in a structural break during hard times is to try more of the same. The break and the hard times are sure indications that an old pattern has already been pushed to its limits and is destroying value.” Instead the commentator argues that cutting costs is not enough there has to be real structural change and a transformation of business models. “At the corporate level, the first commandment is to simplify and simplify again.” On the business level a structural break requires a complete rethinking of how things are managed. The commentator suggests answering several of the following questions: which decisions and judgments can you standardize as policy rather than make in costly meetings and communications; how can you work with customers, suppliers, and the government to simplify their processes so that you can simplify yours? The concept of the structural break is a great one. Looking for ways to benefit in the market chaos is the first step to finding new value. The questions are a good first start. Others include how can you get more leadership at every level within your organization? Is there any opportunity to be gained from your biggest failures? Either way the structural break can be a launching pad for ’09. Let me know how you plan to use it for the benefit of your organizations.

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