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Contents

Contents

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Chief Strategy Officer looks at the changes that we are

likely to see in strategy in 2014
Gary Cokins looks at the effects that business analytics can
have on a company strategy
We look at how and why shared workspaces are becoming
a big deal in company strategies
Falguni Desai takes a look at how companies need to be
looking at versatile strategists to prosper
Lisa Renner, acclaimed strategy author talks to us about
the importance of strategic collaboration
George Hill talks to Price Floyd from BAE about the rapidly
changing digital communication landscape

Versatile Strategists

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Int Ste

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De sion
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Storyteller

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ea Solv

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Portfolio Manager

The Versatile Strategist

Falguni Desai
Managing Director, Strategic
Development & Growth Planning
BDO

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Versatile Strategists

Corporations have long recognized the benefits of having

some type of strategy, even if it
is formed through less than perfect processes. Strategic planning at corporations has taken
hold in the form of Chief Strategy Officer roles and large planning teams which handle annual
and multi-year goal setting and
market entry analysis, along with
having a hand in acquisitions
and overall corporate portfolio
management. In concert with
the CFO, CEO and other C suite
executives, the CSO today plays
a critical role in synthesizing
company objectives with market realities to create winning
positions. This role has become
all the more critical as globalization, new financing options and
investor scrutiny have grown in
recent decades. While corporations have filled the need for
strategic planning through combinations of in-house teams and
external consultancies, other
firms have lagged in this regard
particularly professional services partnerships which practice law and accounting.
Corporations and Partnerships
When companies face a strategic dilemma or business problem, they either call on their in
house CSO or hire a strategy
consulting firm to tackle the issues and present a solution.
Large corporations will generally
have a consulting firm of record,
which handles their strategy
needs, while also having a large
in-house strategy team. This,

in stark contrast to small and

medium size accounting firms
and law firms, most of which are
governed through partnership
structures. These firms may
have a designated CFO or small
suite of senior partners charged
with important decisions, but
lack substantive teams when it
comes to marketing, technology, and strategy, favoring an
outsourcing model which calls in
such services as needed. While
small partnerships of a few hundred might be able to survive,
larger firms face the risk of monumental blunders without having well thought out strategic
plans or analytical brain trusts,
in an increasingly complex landscape.
The lack of strategic planning,
while risky at some level, has
generally been brushed off by
many small and medium size
firms, as a nice to have function,
with bankers and advisors
playing pseudo-strategy roles, haphazardly.
Large
partnerships,
have only recently introduced the strategy
function into its executive ranks. The CSO
role within law and
accounting
firms
still
remains
ill-defined
and challenged in
its ability to truly impact

Versatile Strategists

decision-making, begging the

questions: How should CSOs approach their roles in accounting
and law firms? Can CSOs truly make a contribution in these
settings? What are the governing factors for strategists to
consider when operating inside
a corporation vs. a partnership?
Here, well examine the versatile role of the strategist and
dissect its effectiveness in both
partnerships and corporations.
Three factors shape how strategy professionals should approach their roles in these settings: Stakeholder Structures,
Access to Capital, and Business
Models.
Stakeholder Structures
Stakeholder and ownership
structure is perhaps the most
striking contrast, when looking
at a corporation vs. a partnership. Take for instance, the partnerships leadership selection
process, generally done through
a vote of existing partners, while
CEOs are selected by the Board
of Directors, oftentimes consulting an executive search firm and
weighing existing talent against
a criteria list of skills and experience.
Or consider the
profit sharing
and distribution requirements of a
partnership,
which
differ
from
t h e

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retained earnings and resulting

capital available for investment
at corporations. Partnerships,
by definition, are a collection of
partners who own units in the
firm, thus creating a paradigm
which results in ownership, decision-making and operating
rights, residing in the same set
of individuals. Corporations, by
contrast, have shareholders who
sit outside the company and carry voting rights, a Board of Directors and executive management team, and business unit
leaders and functional leaders
who have responsibilities over
large staff pools. What impact
does the stakeholder structure
have in strategic planning?
In both settings, strategists must
first convince the executive team
of their plans and ideas. Generally this takes place annually in
the form of a planning session
with presentations and discussions. Thereafter, the executive
team will usually message the
strategy to the entire company,
with a cascading flow of communications. In a partnership,
the execution is then left to all
of the partners in the firm, all of
whom have a direct stake in the
firms profits, but not always the
interest or discipline to follow the
stated strategy. While executing
the strategy might be the right
thing to do, partners are owners in the firm, and are free to
choose their own course of action for their own fiefdoms within
the partnership. In a 2012 ALM
survey of AmLaw200 law firms,

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Versatile Strategists

80% of firms reported having a

strategic plan, with execution
metrics that the executive team
was monitoring. However, only
48% of the other equity partners
in these firms were monitoring
or using these metrics to drive
their practice areas. In these
situations, the strategist must
act as a storyteller to the partners, giving anecdotal examples, interpreting market trends,
providing insights and updates
throughout the year, in order
to keep the partners engaged
in executing the strategy. Socializing the strategy enables
it to be heard, questioned, and
evangelized throughout the firm.
The art of persuasion becomes
very important in this setting.
Contrast this with public corporations, where even functional
leaders and business unit managers, layers below the executive team, are
habitually
measured
by
metrics.
Corporations
are routinely
tracking revenues, profits
and other key
performance
indicators,
not only for
their
internal management
purposes,
but
for external
shareholders and Wall

Street analysts. In this setting

the strategist must become an
analytical animal, proving to
various functional leaders and
business unit managers that
the strategy is financially sound
and will result in the promised
returns to shareholders. Strategic planning takes on a very
numbers-driven approach. An
investment plan must be accompanied by a financial model
and scenarios, acquisitions must
be measured for ROI and synergies following a deal, and portfolio decisions must be based
on rigorous profitability analysis.
While persuasion remains an
important factor, accountability
and execution are heavily tied to
incentives, target metrics, and
continued employment. Strategic conviction is less dependent
on emotional engagement. (Figure 1)

Versatile Strategists

Access to Capital

short-term. This obviously limAccess to capital varies for com- its capital intensive strategies
panies based on their cred- and constrains the strategist
it worthiness, but partnerships into suggesting short-term inand corporations are funda- itiatives which can be executmentally different in this regard. ed through bootstrapping. The
While the corporation may have ALM survey showed that acquithe necessary cash on hand, sitions and opening new offices,
through years of amassed prof- ranked among the 9th and 12th,
its, partnerships, must distribute out of 12 different growth meththeir earnings to the partners of ods. Strategists would do well to
the firm who own units. Raising explore joint ventures or alliancmore capital, would mean invit- es, which alleviate the need for
ing more partners into the mix, large capital outlays. The stratwhich is generally not appealing egist must solve the mandate
to existing partners. Partner- of growth through creative deal
ships may take out loans, but structures, in effect playing the
these are usually short-term and role of problem solver. Corporamay not provide enough capital tions have very large cash pools,
for initiatives. Corporations, on and in recent years, much has
the other hand, are able to raise been made of the large amounts
debt or equity by accessing the of cash sitting on balance sheets
public capital markets and in- of companies. In a recent Factcreasing the ownership pool, set study, as of end of Q3 2013,
with little financial impact to the S&P500 companies had a combined total of $1.36 trillion in
executives of the company.
cash and marketable securities
As a result of this setup, part- on their balance sheets. This
ners will naturally be reluctant to represents 8.5% of the US GDP.
give up a larger earnings draw With coffers full, corporate
in the current
year, to fund
an investment
which may take
several years
to bear fruit.
This is almost
c o u nt e r i nt u i tive, given that
most would assume a private
form of ownership
alleviates the pressure to think

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strategists are in a position to

design a robust growth agenda
which can range from organic
investments and acquisitions, to
geographic expansions and corporate venturing. The strategist
can play the role of visionary
dealmaker, architecting a portfolio of opportunities.
The corporation
must, however,
report its success on these
initiatives, as
shareholders will have
risk and return thresholds,
which
need to be met,
if the share price is
to increase. (Figure 2)
Business Model
Finally, there is the difference
in business models. In any professional services partnership,
the underlying business model
is revenues generated based on
hourly fees billed to clients. The
model is basically one that drives
the employees and
partners of the
firm to generate
as
m a n y
hours of
billable
w o r k
as possible.
T h e
f i r m
is
reliant on its

brand reputation and its talent

base to generate fees, with the
assumption that a smarter or
more experienced talent base
and a prestigious reputation will
drive higher volumes of work at
premium billing rates. These
two assets, while intangible, are
the key growth drivers in most
partnerships. In this setting, the
strategist must become the intangible asset steward. A partnership must consistently invest
in public relations and talent development, in order to project a
competent and prestigious image to its clients and prospects.
Strategist should consider suggesting cutting edge leadership
development programs, building
attractive branding campaigns,
implementing rigorous hiring
standards and designing effective sales skills seminars to drive
growth and win in the competitive field.
Contrast this with a corporation
which produces goods, transports resources, or provides online services. Assets are not only
limited to brand and talent base,
but can also include factories,
machinery, patents, distribution
facilities, software systems and
product inventory. The corporate ecosystem includes multiple
assets which can be improved in
quality, refined for efficiency and
increased in quantity to gain
advantage over competitors
or respond to customer needs.
Strategists must see themselves
as a portfolio manager that can
leverage several different as-

Versatile Strategists

sets to meet the growth plan.

In some cases, this might even
involve divesting certain capabilities which arent core to
the company or expanding capabilities by moving vertically
in the value chain. Strategists
need to consider competitor
capabilities and innovations in
the marketplace, which might
deem their current assets outdated or inefficient. Multiple
dimensions must be considered in order for the strategy
to be effective. (Figure 3)
Strategy, in any setting, is a
difficult discipline. Professors
and business moguls who
have championed strategic
planning recognize that it is
a craft that faces many biases and politicking, leaving
it misunderstood and sometimes used as propaganda.

However, strategic planning,

when applied genuinely, can
be a very educational and enlightening process which harmonizes the various assets
and people within a company. Strategists must decipher
their surroundings and company culture to play an effective role. And most importantly, they must realize that the
most valuable skill they must
develop is the art of persuasion, regardless of the setting.

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