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Strategic Learning
A Leadership Process for Creating and Implementing Breakthrough Strategies

William G. Pietersen
Professor of the Practice of Management
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THE LEADERSHIP CHALLENGE Rather than A-to-B change, the central L E A R N I N G F R O M N AT U R E tured a significant advantage that no
challenge facing business leaders other plant has been able to challenge.
What is the central challenge facing today is to create and lead an adap- What are the principles of successful
How does the natural world produce
business leaders today? tive enterprise. This means creating an adaptation? Nature is our best teacher.
such brilliant strategies? Nature gener-
organization with the built-in ability
Its no good The answer most management experts In nature, the creation of favorable ates variations through a massive and It is not the
to sense and rapidly adapt to changes
being on the will give you is the need for change. variations is the key to successful ceaseless set of experimentsmuta- strongest of the
in the environment on a continuous
This has been repeated so many times, adaptation. A wonderful example is a tions that test a wide range of survival
right track. basis. species that
in so many different ways, that it has plant, the common red clover, which strategies. Most of these variations are
If you just sit become accepted as a truism. But on As a practicing CEO for 20 years and has developed a flower with a unique failures. But a few succeed, enabling survive, nor the
there youll closer inspection, this answer is only now as a professor of management, featurea long, thin funnel leading individual organisms to live longer, most intelligent,
half true. And a half-truth, like a little I recognize that one of the biggest to the nectar at its base. Only bees, reproduce in greater numbers and out-
be run over. knowledge, can be a dangerous thing. hurdles facing executives is their which have very long tongues, can compete other species. These are the but the most
Will Rogers inability to mobilize their companies reach the sweet nectar. Other insects favorable variations that will come to responsive to
The problem with the need for change
behind new ideas. Change is disrup- are shut out. dominate future generations. change.
as an answer is that it strongly sug-
tive to organizations and is notoriously
gests that change should be a one- The beauty of this strategy is that bees The key is that nature never sits still. Charles Darwin
difficult to lead. And ongoing, continu-
time eventthat a company needs can fly farther than other insects. In What is stunning is that, in nature, the
ous change is even harder to achieve
only to go from point A to point B effect, the red clover has formed development of favorable variations
than one-time change. Yet building
in order to succeed. This A-to-B an exclusive alliance with bees that is a completely random, unconscious
an adaptive enterprise is the only path
approach is at the core of traditional ensures that its pollen is distributed process. The variations that arise are
to long-term survival.
strategy, but in todays fast-changing more widely than that of other plants. generated without apparent design,
world, that approach is badly outdat- This paper will lay out a practical This gives it a crucial competitive and the ones that will survive are not
ed. One-time change just isnt good leadership process for creating an advantage that promotes its long-term predictable. As a result, evolution is
enough. It simply gets you stuck in adaptive enterprise by mobilizing a survival. a low-odds game: 99 percent of the
a new place. Meanwhile, the market dynamic cycle of four steps: learn, species that ever existed are now
This strategy is not without risk, of
moves on and leaves you behind. focus, align, and execute. These steps extinct.
course. What if another plant produces
build on one another and are repeated
Todays competitive environment pres- a sweeter-tasting nectar and the bees What lessons does nature hold for
to create a dynamic cycle of renewal
ents unique challenges for organiza- switch brands? Or what if the bees organizations? As in nature, the rules
that I call Strategic Learning. It is a
tions: high levels of uncertainty and themselves are outmaneuvered and of survival in the marketplace are
process that offers a new way to lead
complexity, disruptive technologies, become extinct? The principle of essentially Darwinian. Never sit still.
companies in a world of unpredictable
and a premium on speed, choice, and risk/reward trade-off is hard at work Continuously generate favorable varia-
change.
innovation. These new challenges here! Nonetheless, at least for the time tionsthose that create competitive
demand a new type of leadership. being, the alliance strategy has cap- advantageor run the risk of extinction.

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But here is the twist. People have C R E AT I N G T H E may be its only sustainable competi- duce sustained success, companies
one crucial advantage over other ADAPTIVE ENTERPRISE: tive advantage. He thus captured returned to strategy to find ways of
organisms: the power to think and FA I L E D R E S P O N S E S the central insight of the learning driving growth.
learn. Natures low odds are due to organization movement.
The trouble is that most companies
two gigantic learning disabilities. Three approaches in particular have
In the world of It is an important insight but incom- are relying on the conventional It is not learning
When nature fails, it doesnt know held out the promise of improving
organizations, plete. De Geuss comment positions A-to-B strategic planning process. for its own sake,
why; when it succeeds, it doesnt an organizations ability to adapt: the
learning as an end in itself, rather than That model simply doesnt cut it in
effective learning know why. notion of the learning organization, but learning
as a means to an end. It doesnt tell us todays turbulent environment.
the resurgence of strategic planning
is at the heart Organizations possess the capacity to where to concentrate our scarce learn- strategically
and complexity theory. None on its In many companies, there is wide-
of successful overcome these learning disabilities. ing resources to achieve successful that is the source
own has worked. spread frustration over the fact that
It is our power to harness learning adaptation. Arguably this is the most
adaptation. their strategic plans are not doing of successful
that increases our chances of survival, The Learning Organization critical choice of all. As the Institute
their main jobcreating competitive
and the quality of that learning deter- The recognition that learning is central for the Futures Paul Saffo has pointed adaptaion.
breakthroughs. People groan when
mines our odds of success. Therefore, to successful adaptation has given rise out, Our predicament is the growing
they hear that the strategic planning
in the world of organizations, effective to a body of thinking on what has gap between the volume of informa-
season is at hand. Frankly, they have
learning is at the heart of successful come to be called the learning organi- tion and our ability to make sense of
good reason. Strategic planning in
adaptation. zation, i.e., an organization with an it. If we try to learn everything, we
most cases is 10 percent strategy
enhanced ability to generate and will learn nothing.
What is the track record for organiza- and 90 percent planningnumber
apply learning. Learning theorists have
tions in responding to this challenge? Thus, we need to build on de Geuss crunching, forecasting, and budget-
provided valuable insights into how
The evidence is not encouraging. insight by adding the dimension of ing. All this does is generate thick
individuals and groups learn and how
Longevity in corporations is the strategic focus. Learning gives us half binders full of data that end up
to convert this knowledge into organi-
exception, not the rule. Only one of the adaptation equation. To com- collecting dust on the shelf. The sad
zational learninga key ingredient of
third of the Fortune 500 firms of 1970 plete the equation, we must explicitly truth is that strategy all too often
an adaptive enterprise.
still survive today. And the casualty link a firms learning to the creation fails to engender the kind of ongoing
rate appears to be getting worse. Some years back, Arie de Geus, for- and implementation of winning renewal that is the hallmark of an
According to Dun and Bradstreet, merly of Shell Oil and author of The strategies. adaptive organization.
of the 9 million companies currently Living Company (Harvard Business
Strategic Planning Why is this so?
registered in the U.S., only 7 percent School Press, 1997), made an observa-
As a focus of business leadership,
are over fifty years old. tion which has since been repeated Remember that successful strategy
strategic planning is enjoying some-
many times in the business literature: is essentially a response to the
If organizations want to improve their thing of a resurgence. During the
In the future, an organizations ability Darwinian logic we explored earlier.
ability to adapt and survive, they will 1990s, when downsizing, consolida-
to learn faster than its competitors Survival, in the final analysis,
have to change their ways. tion, and cost-cutting failed to pro-

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depends on our best use of limited But by far the most serious indict- major role to play in the creation of W H AT I S T H E R I G H T A N S W E R ?
resources. No matter what business ment of conventional strategy is that adaptive organizations.
we manageIBM or the local pizze- it is static. Focused on creating one- This brings us back to the issue
However, some complexity theorists
riawe all have finite resources; if time, A-to-B change, it provides raised at the beginning: How can
have taken the argument too far.
we squander them, we are out of the no means for generating ongoing business leaders create and lead
Winning once Human organizations are not flocks The key chal-
game. Thus, the main job of strategy adaptation. adaptive enterprises? This challenge
is not enough. of birds, schools of fish, or swarms lenge is to both
is to make the most intelligent choices contains two separate questions
Complexity Theory of bees. People have free will. They
To survive in about how to use our limited resources. the what and the how: create strategic
The failure of traditional strategy can and do make choices that are
And as the environment becomes
the long term, has sparked a growing interest in often at odds with the goals of the 1. What are those few things organi- focus and con-
more discontinuous, intelligent
we have to so-called complexity theory as a new organization. They can resist change, zations must be able to do tinuously adapt
choice-making depends increasingly
way to think about adaptation and sabotage strategy, and even go on outstandingly well to generate
go on winning. on an organizations ability to make to the changing
renewal. Borrowing concepts from strike. In other words, they dont ongoing renewal?
sense of the changing landscape
biology and other natural sciences, always fly south in an orderly man- 2. How can organizations accomplish environment.
through learning and discovery,
the complexity theorists argue that ner, as some complexity theorists these things in practice?
to translate superior insights into
in a nonlinear world, you cannot like to think.
strategic action and to do so Lets deal with the what question
accurately predict the future, nor can
continuously. The reality is that we need the right first. After all, we must know what
companies plan ahead. Therefore,
combination of chaos and order for to do before we can tackle the how
As Henry Mintzberg, author of The conditions should be created that
creativity to flourish. It is a fallacy to issue of implementation. What are
Rise and Fall of Strategic Planning will allow strategy to emerge natu-
believe that winning strategies can we going to focus our scarce resources
(Free Press, 1994), has pointed out, rally and permit organizations to
simply emerge without a deliberate on? The biggest decisions we make
strategy is one thing, planning self-organize in response to signals
process for generating insight, mak- in business involve deciding whats
another. Strategy should come first, from the external environment, as
ing choices and creating focus. The important. The detailed answers will
planning afterward. However, for flocks of birds, for example, migrate
need for leadership hasnt gone vary from company to company and
many companies, strategy is a successfully together, instinctively
away. But our concept of leadership from industry to industry, but there
numbers game rather than an ideas responding to environmental cues.
must change from the pursuit of are certain commonalities that all
gamea planning ritual rather than
There are a number of valuable static goals to the challenge of con- businesses share. Here are the five
a process of discovery. Companies
insights in complexity theory: the tinuously modifying a firms strategic killer competencies that I believe
may have been able to get away
need to understand organizations focus in response to changes in the every organization must master to
with planning alone in the slower-
holistically, the importance of allow- environment. Survival in a rapidly become an adaptive enterprise:
moving environments of yesterday.
ing enough freedom for creativity to changing world is hard because it
Such an approach could prove fatal The Five Killer Competencies
flourish, and the crucial role of orga- takes a jugglers skill to balance the
today. 1. Insight: The ability to make sense
nizational learning. All these have a demands for focus and change.
of the changing environment

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2. Focus: The ability to create an Strategic Learning is presented here W H AT I S S T R AT E G I C L E A R N I N G ? two steps form the basis of a firms
intense focus on the right things as a practical leadership process strategy creation. The third and fourth
3. Alignment: The ability to align and for mobilizing the five competencies Strategic Learning is a learning-based steps are the foundations of strategy
mobilize the entire organization to create an adaptive enterprise. process for creating and executing implementation. Thus, strategy creation
behind this strategic focus I developed it initially through trial breakthrough strategies. Unlike and implementation are integrated in
Organizations
4. Execution: The ability to imple- and error as a practitioner; it has traditional strategy, which aims at a mutually reinforcing process.
that can master ment fast since been refined with input and producing one-time change, Strategic
The key is to think cyclenot
the five killer 5. Renewal: The ability to do these encouragement from my colleagues Learning drives continuous adaptation.
straight line. Simply following the
things over and over without at Columbia Business School. The
competencies As shown in Figure 1, the process has Strategic Learning process once is
stopping methodology is now widely used in
better than their four linked action steps-learn, focus, not enough. The leadership chal-
executive education programs at the
Note that the fifth competency is align, and executewhich build on lenge is to repeat it over and over,
competitors will School. The principles of Strategic
different from the first four. The first one another and are repeated (as so that an organization continuously
Learning have been taught and
greatly improve four competencies are aimed at pro- the fifth step) in a continuous cycle. learns from its own actions and from
applied in such leading companies
their odds ducing specific outputs. The fifth is Together they embody the five compe- scanning the environment, and then
as Aviva, Bausch & Lomb, Boeing,
the ultimate competencythe ability tencies mentioned earlier. The first modifies its strategies accordingly.
of long-term Chubb Corp., Deloitte, Ericsson,
to go on repeating the first four. This Figure 1
ExxonMobil, Henry Schein, Inc.,
survival. ability creates a cycle of renewal that
Process Energy, SAP and Sony. And The Strategic Learning Cycle
separates truly dynamic organizations
the Girl Scouts Organization is using
from those that are doomed to become
this process for its strategy creation.
tomorrows dinosaurs. Learn
Strategic Learning is not a magic Generate insight into changing environment &
learn from own actions.
ACHIEVING ADAPTIVENESS bullet. There is no such thing. But
T H R O U G H S T R AT E G I C L E A R N I N G the method has been battle-tested Strategy Creation
and has made a measurable differ-
Having decided on the competencies ence in a number of organizations. Execute Focus
crucial to an organizations long-term In working with executive teams, Implement the strategy & Make strategic choices.
experiment with new ideas.
survival, the big challenge is to I have found that those who follow
move beyond the rhetoric and the principles of Strategic Learning
Strategy Implementation
actually implement themthe how with passion and determination have
question. An idea, no matter how achieved a real difference both for Align
profound, has absolutely no value their organizations and personally. Align organization behind strategic focus.

until it is put into practice.

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The more often an organization in organizations, it needs to be an The process involves a particular The firms own realities
repeats this cycle, the better integral part of the way the business sequence of activities, each designed Industry dynamics
it will become at doing it, thus is run, not a sideline or staff-driven to produce specific outputs that feed The broader environment
enhancing its adaptive capacity. activity. Strategic innovation is too into the next stage of the cycle. But
The aim is to scan and interpret the
The result is a process of ongoing important to be left to random actions note: Although these activities are
firms external environment and its A wise mans
renewal that characterizes the truly and ad hoc initiatives. Just as compa- portrayed as sequential, life is messy.
internal realities in a combination of questions
adaptive organization. nies employ systematic research and Thus, it is often necessary to repeat
analysis and creative brainstorming.
development to spur technical inno- a stage or loop back in an iterative contain half
The emphasis is on challenging
I M P L E M E N T I N G S T R AT E G I C vation, so too we need to harness a process. That is part of the learning,
existing assumptions and producing the answer.
LEARNING: A PRACTICAL GUIDE deliberate, systematic process to and it is all to the good, as long as
out-of-the-box thinking. It is impor- Gabirol (ca. 1070)
drive strategic innovation. Figure 2 the whole cycle is completed. Heres
tant to probe and explore, always
When you want to achieve an impor- illustrates how the four-step cycle is how it works.
searching for trends, root causes,
tant result, the key to success is to converted into a practical leadership
and ultimate consequencesnot just
create a process that will take you process for creating and implementing S T E P O N E : T H E S I T U AT I O N
stacks of data.
there. For Strategic Learning to work breakthrough strategies. A N A LY S I S ( L E A R N )
Figure 2 Note that the process does not begin
The essential starting point in the with articulating a vision, as many
Strategic Learning: The Leadership Process Strategic Learning process is the strategy experts recommend. Trying to
Situation Analysisa systematic invent a vision in a vacuum is like
Conduct
Situation Analysis exercise in diagnostic learning. shooting in the dark. Doing the Situation
Learning Loop Issues & Alternatives The Situation Analysis is the engine Analysis first ensures that the vision
room of strategy creation. Its aim is is based not on whim but on insight.
Learn very specific: to develop superior Where a clear and compelling vision
insights as the basis for the firms already exists, a thorough Situation
Implement &
Experiment Execute Focus Define Vision & strategic choices. All breakthrough Analysis will validate and reinforce it.
Strategic Choices strategies are based on a unique
The key to conducting a good
Align
insight.
Situation Analysis is to ask and
The task of the Situation Analysis is answer the right questionspenetrat-
Action Plan Gaps to generate superior insights into the ing questions that will provoke
Measures & Rewards following key areas: insights. Each company must find
Culture Structure the right questions for its particular
& Process Customers
People circumstances. The following list of
Competitors
sample questions is offered as a guide:

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Customers The Firms Own Realities The Broader Environment When executive teams conduct a
What are the underlying trends in What are the five-year trends on What is happening around us that Situation Analysis, they should
our customers expectations? How our critical performance measures, will impact our business in regard to pretend theyre journalists in search
is today different from yesterday, and what conclusions can we the following factors? of a scoop. They should continue
and how will tomorrow be differ- draw from them? to delve and not stop until they
Economic trends Increasingly,
ent from today? Where are we making money and feel they have developed superior
Social habits and attitudes the battle for
What is the hierarchy of customer where not? (This question requires insightstruths that they have
Technology
needs? These should include disaggregation of profit and cash understood better or earlier than the best insights
Demographics
customers hidden needsthose flow by customer, product group, the competition. Seeing it first and
Government regulation is becoming the
things we must understand before and geography.) Are we address- understanding it better is the name
they do. ing our losing propositions? For maximum benefit, the Situation of the gameits where the competi- most decisive
How well do we currently serve What are our key strengths that Analysis should engage the intellectual tion begins. battle in the
those needs? (S=Strong, M=Moderate, we can leverage for competitive and creative resources of the entire
When the key insights have been competitive
P=Poor) advantage? What are our weak- firm, not only those at the top. Inputs
defined, a firm can begin to consider wars.
nesses that represent barriers to should be sought from those who are
Competitors the issues and alternatives that have
better performance? closest to the customer. Therefore,
In what distinctive ways are our emerged, and to explore the pros
extensive use should be made of cross-
traditional competitors serving the Industry Dynamics and cons of various alternatives. This
functional teams in a combination of
market? How does their effective- Which trends in our industry and is the analytical precursor to making
market research, analysis, critical
ness compare with ours in the the new economy are the most the final strategic choices. For exam-
thinking, and creative brainstorming.
eyes of the customer? important in shaping our destiny? ple, a key insight may be that a
Who are our nontraditional com- How will they change the rules of The key deliverable from the sizable share of your business will
petitors and what unique benefits success? Situation Analysis is a set of insights, migrate to the Internet over time. If
are they offering? Who is the most What are we currently doing to not a survey of data. These insights so, one issue to explore is the alter-
dangerous, and why? exploit these developments so that should be crystallized into concise native ways of converting your existing
What will be the next big break- they produce greater value for our diagnostic statements that can be model to a dual-channel (on-line and
through in serving customer needs? customers? readily understood by all. Simplicity off-line) approach without destroying
Who is most likely to launch it What barriers must we overcome and clarity are essential virtues. your current profit stream.
us or a competitor, and why? to take the lead in profitably
exploiting these trends? What are
the top priorities?

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Figure 3

STEP TWO: VISION AND A good vision is simple, motivating,


The Strategic Choices
S T R AT E G I C C H O I C E S ( F O C U S ) and realistic. Martin Luther King Jr.s
I have a dream speech is a great Customer Focus
The Vision and Strategic Choices example of a powerful vision state- Which customers will we serve?
What is their hierarchy of needs?
are the key deliverables of strategy ment that inspired a movement and, What will we offer them?
The first task One litmus
creation. They are based on the ultimately, a nation. Here are some
of the leader insights generated in the Situation other examples: test of a good
is to be the Analysis and represent the strategic Greater strategy is
President John F. Kennedy Superior The Winning Proposition
focus of the firm. What will we do differently or Customer
trumpet that To put a man on the moon and return Profits that the firm
better than our competitors? Value
sounds the The Vision him safely to earth in ten years has decided
The sightless author and educator
clear sound. Ogilvy & Mather not only what
Helen Keller was once asked
To be the agency most valued by Five Key Priorities
Peter Drucker whether she could think of a fate What are those few things that it will do, but
those who most value brands will make the biggest difference?
worse than being blind. Yes, she also what it
said, being able to see, but having Walt Disney
no vision. We use our imagination to bring will not do.
happiness to millions achieved without an intense focus second is the Winning Proposition.
There is no doubt that a compelling
on the right things. But making This answers the question, What
vision has an energizing effect on an Marriott Hotels
choices takes courage. The worst will we do differently or better than
organization. However, it is equally Every guest leaves satisfied
decision is to duck the issue, trying our competitors to achieve greater
true that there is no bigger waste of
A vision should involve stretch. The to be all things to all people. value for our customers and superior
time than the creation of bland, one-
desired response should be Yes, The Strategic Learning process is profits for our firm?
size-fits-all vision statements such as
thats where we want to gobut we designed to ensure that your choices
We shall strive for excellence in all The third element is the Five Key
cant get there by doing what were are based on insight rather than
that we do. Priorities, a list of the top priorities
doing today. Great visions motivate guesswork and that you make the
the firm will pursue to realize its
A vision is a concise word picture of transformational behavior, not incre- most intelligent choices possible.
winning proposition. Avoid a laundry
what an organization aspires to be mentalism. They inspire people
The Strategic Choices contain three list. If there are more than five prior-
in the future that provides a clear to invent their way to the desired
elements (Figure 3). The first, ities, focus becomes blurred. The
sense of direction that everyone can future.
Customer Focus, defines which process of prioritizing should then
understand. Coherence is key; the
The Strategic Choices customers the firm will serve (and cascade throughout the organization,
vision should be an extension of the
Strategy is about making choices. which it will not), and what products so that each division, department,
firms strategic choices, not a thing
No lasting success has ever been or services it will offer them. The and individual develops an aligned
apart.

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set of strategic priorities, never more GEARING UP FOR goals, companies should strive for than a matter of good, hard-nosed
than five in number. I M P L E M E N TAT I O N worldwide best practices, not simply project management. It also requires
to be the best in their local market. that all the key supporting elements of
The Strategic Choices should be
Before moving to the alignment step Today the competition for the best the business system be aligned behind
described in utterly simple, concise
in the process, the strategic priorities ideas is global. If there is a better the chosen strategy. The existing align-
I am sorry statements. This takes time. Simplicity The big
need to be translated into operational idea anywhere else in the world, ment has been put in place over time
to write you is not a shortcutit is hard work. But question is,
goals that clearly spell out what must sooner or later it will come into your to support yesterdays strategy. It is
the time spent is a sound investment.
this long letter, be done for the firms strategy to be market and compete against you. essential to realign the business How do we
People simply do not respond to
effectively implemented. First, look You can run, but you cant hide! system behind tomorrows strategy.
but I didnt long, complex statements. get our organi-
at each of the strategic priorities and Otherwise, that strategy will fail.
have time to A good example is Southwest ask what gaps must be closed for STEP THREE: ALIGN THE zation to do
There is a trap that many organiza-
write you a Airlines. Their customer focus is them to be achieved. O R G A N I Z AT I O N ( A L I G N ) what we want
tions fall into when they move into
single-minded: to serve budget-
short one. The resulting gap statements define this implementation phase: Manage- it to do?
conscious travelers. Their winning Now that the Strategic Choices
Blaise Pascal
the appraisable difference between ment of Things in Isolation (MTI).
proposition is to operate at the and the gaps to be bridged have
the current reality and the desired Companies fall into the MTI trap
lowest industry costs and provide been clearly defined, a firm is
future state for each priority. They when they simply change one ele-
fun-filled air travel that competes ready to tackle the issue of strategy
should be articulated in concrete, ment of the business system and
with the cost of car travel. Their key implementation. In large, complex
measurable terms. For example: hope for success. The kinds of isolat-
priorities are equally unambiguous: organizations, this can be a daunting
ed initiatives many companies launch
To improve customer satisfaction task. For many executives, this is the
Have fun. include Six Sigma, management by
rates from 70 to 90 percent hardest part of all.
Focus on the needs of the objectives, reengineering, and espe-
To raise sales from products intro-
customer. Fortunately, there are clear principles cially changing the organizational
duced in the past three years from
Ensure that everybody helps out. for success. If applied effectively, structure. Company after company
20 to 40 percent of the total
Maintain superior operational they can substantially improve a sets out to reorganize its way to suc-
To reduce R&D time to market
efficiency. companys results. But if they are cess. When this doesnt work, they
from seven years to four
Apply tight cost controls. ignored, then failure is inevitable. simply do it again. Before long they
To increase the percentage of on-
become serial reorganizers! They
Everyone at Southwest knows exactly line sales from 2 to 30 percent The first essential is effective project
then become frustrated, finding that
what the strategy is, what the firm will management. The right disciplines,
Each gap should contain clear mile- nothing happens except confusion.
and will not do, and where each measurements, and accountabilities
stones, and for each gap a specific
employee fits in. It is no accident that must be applied to closing the gaps, Such selective interventions hardly
champion should be selected and
Southwest has the best growth and and follow-through must be relentless. ever work. For implementation of
charged with leading teams to
profit record in the airline industry. But successful implementation is more any strategy to be successful, all
achieve those targets. In setting their

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the key elements of the business son: Measures and Rewards, Structure leaves of the acacia tree. They Measurements and Rewards
system must reinforce each other in and Process, People, and Culture. browse on them all day long. But a A good place to start is with
support of the strategy. No single giraffe will never feed from the same Measurements and Rewards. It is
Think of an organization as an
element on its own can do the job. acacia for very long. After a brief amazing how often a firm will try
ecosystem, like a rain forest or an
period of eating, it will amble off to introduce a new set of practices
The key is to The task is to understand the key oasis in the desert. An ecosystem What gets
and start feeding from a similar tree while continuing to measure and
see the organi- supporting elements of a firms busi- functions successfully only when its measured gets
nearby. It looks as if the giraffe is reward the old ones. When this
ness system that must be aligned. interdependent elements support one
zation as an acting on a whim. But this is not so. happens, the new initiative is dead done. What
Various frameworks for doing this another. When any single element
The tree is actually giving the giraffe in the water.
ecosystem of have been suggested by, among oth- does not play its supporting role or gets rewarded
its marching orders. After a certain
interdependent ers, Galbraith, Nadler, and Tushman. when the elements work against each Every measurement conveys a hid- gets done
number of its leaves have been
The model proposed here (Figure 4) other, the system fails. den message. Whenever a company
elements. eaten, the tree rapidly injects a bitter repeatedly.
comprises the following supporting measures something, it is doing two
Consider the story of the giraffe and sap into its leaves, thus repelling
Think of the elements, which must work in uni- things: It is gauging performance,
the acacia tree. Giraffes love the the giraffe and forcing it to feed
giraffe and the and it is making a strong statement:
Figure 4 elsewhere. This protects the tree
This is important. Failure to meas-
acacia tree. from extinction, while preserving the
Aligning the Organization ure something sends the opposite
giraffes food supply.
message, i.e., This is not important.
The key elements of the business Thus, it is crucial that the measure-
Measures & Rewards system are similarly interdependent. ment and reward system act in unison
Measurement &
Reward Systems Success comes not from isolated with the other elements in the business
actions, but from orchestrating the system.
right interactions. For example,
Structure and Process
Southwest Airlines strategy is sup-
A new strategy often requires impor-
Culture Structure & Process ported by all the key elements of its
tant changes in the way a firm is
Widely Shared Beliefs
and Behaviors
Strategy Organization Design,
Decision Processes,
business system working together.
organized and how its decisions get
& Information Systems This is why their competitors find it
made. Therefore, it is necessary to
so hard to copy them.
ask such questions as:
It is necessary to examine each
To best support the new strategy,
People element in turn and make the
Competencies &
should the firm be organized by
changes necessary to ensure that
Motivation product line, customer grouping,
they are acting in concert to
function, geography, or some
support the strategy.
other principle?

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Should we introduce some form of commitment organizations out- The last rule, Set a shining exam- from the rest of the business, like
matrix system to ensure that the perform those where employees ple, lies at the heart of effective the separation of church and state
proper linking mechanisms are in exhibit lower levels of motivation. leadership. A leaders words and in the American political system.
place? Yet human beings by nature resist deeds must be completely integrated. This notion, too, is flawed. Business
What should be the level of cen- change. People do not easily leave This is what we mean when we say performance and culture are inextri-
Be the change When culture
tralization or decentralization for their comfort zones to embrace the that leadership is about integrity. cably linked together.
you want each activity in the value chain? uncertainties brought by change. The first lesson officers learn at resists strategy,
Think of culture as a means to an
to create. military school is that your troops culture wins.
As your strategy changes, its likely We need to address this psychology end. In a particular society, culture
will always follow your example.
Mohandas K. Gandhi that your answers to these questions of resistance with specific actions is a set of beliefs and behaviors that
The moment a leaders words and
need to change too. designed to overcome the resistance persist over time because they help
deeds come apart, the leadership
and convert it into active support that society solve its problems
People effort will die.
for the new strategy. Simple exhor- (whether social, economic, or politi-
An organization is not a machine.
tation will not be enough. We have Culture cal). Every society has an elaborate
Success will be achieved only if
to address the underlying causes Culture is probably the most misun- system of rewards and penalties
its people are focused, skilled, and
of resistance. This is, perhaps, the derstood and mismanaged part of designed to ensure that supportive
motivated.
most difficult of all leadership chal- the business systemand arguably behaviors continue and that destruc-
A firm that defines and communi- lenges. the most important success factor of tive behaviors are extinguished.
cates its strategic choices with clarity all. As Lou Gerstner, CEO of IBM,
The leadership of change is a vast The same is true in any business.
and simplicity will create the neces- has said about his turnaround strate-
subject of its own. However, the A companys values and behaviors
sary focus. It then needs to build gy for the once-troubled computer
keys to success can be summarized must directly support its strategy
the competencies required to sup- company, Fixing the culture is the
through six simple rules: and work in combination with all the
port the new strategy. This often most criticaland most difficult
other key elements in the business
involves recruitment, training, and Principles of Change Leadership part of a corporate transformation.
systemin order for that strategy
job rotation. Sometimes, hard deci- 1. Create a simple, compelling state-
The poor management of culture to succeed. Especially important
sions must be made about the need ment of the case for change.
usually stems from two misconcep- are the necessary measurements
for severances. And if the compe- 2. Communicate constantly and hon-
tions. The first is that culture is and rewards, without which those
tency overhaul is radical, a firm estly throughout the process.
vague and mysterious. This is a supporting behaviors will simply
may need to acquire or partner 3. Maximize participation.
fallacy. Culture expresses itself not happen.
with an organization that has the 4. If all else fails, remove those who
through specific values and
required skills. resist.
observable behaviors. The second
5. Generate short-term wins.
Motivation is a pivotal factor. The misconception is that culture is
6. Set a shining example.
evidence shows clearly that high- somehow separate and distinct

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STEP FOUR: IMPLEMENT AND D O C U M E N T I N G T H E S T R AT E G Y S T R AT E G I C L E A R N I N G A S A knowledge, creativity and insight.


EXPERIMENT (EXECUTE) PAT H T O P E R S O N A L R E N E WA L The familiar saying, Our people
A strategy based on Strategic Learning are our greatest assets, has now
Effective alignment, as described in should be captured in a concise Just as companies need a process for become an unforgiving reality.
Step Three, ensures that the firms document consisting of six sections: generating ongoing renewal, so do Tomorrows losers will be the com-
key organizational resources and individuals. Strategic Learning can be panies that fail to fully realize the
The Strategic Learning Document
the energies of its people are con- used not only as an organizational potential of their employees. The
1. A summary of the key insights
centrated as a powerful driving force tool to help create breakthrough winners will be those that maximize
generated by the Situation
behind the new strategy. The firm business strategies but also as a not only their ROA (return on assets)
Analysis
is now in a position to execute the personal tool for the development but also their ROP (return on people).
2. The Vision Statement
strategy successfully and rapidly. of effective leadership skills.
3. The Strategic Choices and a list of Leadership and Emotional Intelligence
Step Four is the actual implementa- the Key Priorities Strategy and leadership are often What then is leadership? How does it
tion phase of Strategic Learning. 4. The gaps that must be closed in approached as two separate subjects. differ from the intelligence and tech-
It should include a deliberate set of order to achieve the priorities But the truth is that they are two nical skill needed by any competent
experiments to fuel organizational 5. The plan for aligning the organiza- sides of the same coin, each indis- executive?
learning. We can never know for tion behind the strategy pensable and both intimately linked.
In the business context, intelligence
sure what is going to work. Like 6. A list of experiments to stimulate Without strategy, there is no clear
and technical skills are threshold
nature, we must maximize our further learning direction, which makes effective
capabilitiesthe basic requirements
chances of finding favorable varia- leadership impossible; yet even the
The emphasis should be on brevity for entry into the executive suite.
tions through continuous experimen- most far-sighted strategy is doomed
and clarity. Ten pages is the limit. True leadership involves an addition-
tation. to failure unless its implementation
Long, rambling documents simply al set of qualities, including self-
is guided through effective leader-
Step Four then feeds back into the cloud the issues and often go awareness, empathy, motivation,
ship. Thus, any lasting success is the
Situation Analysis. The firm updates unread. The operating plan is a sociability, and political adroitness.
product of great strategy and great
its insights, learning by examining its separate document that will contain In combination, these qualities are
leadership working hand in hand.
own actions and by rescanning the the financial projections, capital sometimes referred to as emotional
environment, and then modifies its budgets, and other important details. Furthermore, in todays new econo- intelligence, or EQ. Research increas-
strategies accordingly. The process my, effective leadership is more ingly suggests that the most effective
never stops. crucial than ever. Success in the leaders are those with a high degree
old world was based mainly on the of EQ.
leveraging of physical assets. In the
In his book Working with Emotional
new world, it is based mainly on the
Intelligence (Bantam, 1998), Daniel
leveraging of such human assets as

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Figure 5

Goleman lists five key elements of THE LEADERSHIP


The Leadership Development Cycle
EQ, grouped under two broad head- D E V E L O P M E N T C YC L E
ings:
Learn
The good news is that the leadership Generate insights about yourself
Personal Competence (How We and the leadership challenges
skills comprised in EQ can be
Manage Ourselves) of your environment.
enhanced through learning, provided
Self-awarenessKnowing ones
one is willing to work at the task
internal states, preferences,
with systematic rigor. The Strategic Execute Focus
resources, and intuitions Implement action plans and Translate insights into
Learning process can offer a power-
Self-regulationManaging ones apply Credo. Obtain feedback. priorities and action plans for
ful framework for such personal self- leadership development.
internal states, impulses, and
development.
resources
MotivationEmotional tendencies Learning, in fact, is at the heart of
that guide or facilitate reaching both strategy creation and leadership Align
Align inner self with
goals development. In the case of strategy leadership philosophy by creating
creation, learning is an outside-in your Leadership Credo.
Social Competence (How We Handle
process (starting with a study of
Relationships)
customers and competition), while in
EmpathyAwareness of others
the case of leadership development, 1. LearnGenerate insights about lifeachievements, setbacks, mile-
feelings, needs, and concerns
it is an inside-out process (starting yourself and the leadership chal- stones, instances of self-discovery.
Social skillsAdeptness at induc-
with an understanding of self). Yet lenges you face. Relating the importance of these
ing desirable responses in others
the steps in both processes can be The essential first step is to conduct defining moments to a trusted col-
It is easy to think of effective leaders the same. Mike Fenlon, my colleague a Personal Situation Analysis, with league can be a powerful tool for
from the worlds of business and pol- at Columbia Business School, and the aim of generating the key uncovering some of the unrecog-
itics who have a high degree of EQ, I have developed a Leadership insights needed to guide your self- nized lessons of your life.
as well as others who lack this spe- Development Cycle whose four development program. One good
Another powerful learning experi-
cial set of sensitivities and therefore stepslearn, focus, align, and exe- starting point is the Lifeline Exercise,
ence is the use of a well-constructed
are vulnerable to professional derail- cuteclosely mirror those of the which is often used in executive
360-degree feedback instrument,
mentoften despite high IQs and Strategic Learning Cycle (Figure 5). education programs at Columbia
which gathers feedback on your per-
brilliant technical skills. To a large Business School. This involves draw-
sonal and business skills from peers,
extent, the qualities that make up EQ ing a line across a sheet of paper,
subordinates, and superiors on an
are what we have in mind when we representing the timeline of your life
anonymous basis. This is a sensitive
describe someone as a real leader. up to the present. You then mark on
exercise, one that demands maturity,
this line key turning points in your

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honesty, and openness on all sides. actions and a method for assessing 4. ExecuteImplement action plans define not only the what but also
Expert advice and coaching can help your progress. and obtain feedback. provide the how. Hence, the four-
you gain the greatest benefits from In the fourth step of the Cycle, you step cycle of Strategic Learning:
3. AlignAlign your inner self with
this process. In fact, a growing num- implement your personal improve- learn, focus, align, and execute.
your leadership philosophy.
ber of businesspeople are employing ment plan. Seek opportunities
The task here is to align your sense But Strategic Learning is about
executive coaches on a continuing to articulate and act upon your
of self and core beliefs with how leadership, not mechanical rituals.
basis to help them learn and grow as Leadership Credo, continually
you intend to lead your organization. Strategic breakthroughs have been
leaders. If you and your organization appraise your own performance,
The integrity of this alignment gives achieved by companies when they
are able to devote the necessary time and seek feedback from others
the leader authenticity and moral apply the process with imagination,
and resources, this is an option your colleagues, your coach, and
authority. in a discovery-driven, dynamic
worth considering. others whose opinions and observa-
way. It involves a constant drive
One powerful tool in this process is tions you trust. Use the results as
2. FocusTranslate insights into for insights, followed by the rapid
the personal Leadership Credo, a the basis for further learning and
priorities and action plans. translation of insights into action.
succinct statement of the beliefs improvement.
The second step is to develop your
and principles that will drive your Finally, I would like to bring the
own priorities for personal growth. The key is to repeat the cycle again
success as a leader. It should provide human aspect of all this to center
What are those few things that you and again, never ceasing to strive
compelling responses to the follow- stage. It is often stressed that people
will concentrate on, day in and day for self-improvement. If you remain
ing questions: are the most important asset in
out, in order to become a better leader? open to new ideas and self-examina-
any business. There used to be an
What do I stand for as a leader? tion, you can continuously enhance
Begin by summarizing the key implicit understanding between
What is our organizations vision? your EQ and improve your leader-
insights about yourself and your employer and employee that loyalty
How will we win? ship effectiveness.
leadership challenges as generated and hard work would earn security
What do we stand for as an organ-
in your personal Situation Analysis. of employment. The era of downsiz-
ization? SOME FINAL THOUGHTS
Discuss these with your coach or ing and outsourcing has shattered
trusted colleague. What strengths can The Leadership Credo can be the that social contract. By mobilizing
Strategic Learning rests on the
you build on? What gaps need to be crucial point at which strategy and Strategic Learning for both organiza-
proposition that the ability to learn
filled? Which leadership qualities are leadership intersect. If the Credo is tional and personal renewal, a firm
and adapt is the only sustainable
likely to be most severely tested in clear and simple, and if you harness can develop the intellectual capital
competitive advantage in todays
the coming months? the power of images and stories to of its people, thus helping to
turbulent world. This is equally true
communicate its message to those provide them with the vital tools
On the basis of your answers to for organizations and individuals.
with whom you work, it can play an for success in todays competitive
these questions, establish a list of no But merely saying this is not enough.
important role in keeping you and environment.
more than five personal development Executives need practical methods
your organization on track.
priorities together with specific for turning ideas into action, which

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Acknowledgments
Strategic Learning has evolved from the two great learning laboratories
that have shaped my ideas. The first was my twenty years as a practicing
CEO in various countries and industry settings. The second has been the
last five years at Columbia Business School as a teacher, consultant, and
researcher, where Ive received wonderful input and encouragement
from my colleagues.

I would particularly like to thank Bill Klepper and Mike Fenlon for their
many and generous contributions to my thinking, Victoria Marsick for
her guidance on learning theory, and Jeffrey Kuhn for his energetic sup-
port on numerous aspects of this project.

You can learn more about the benefits of Strategic Learning in Willie Pietersens
book, Reinventing Strategy (John Wiley & Sons, 2002).

All inquiries about Strategic Learning should be directed to Willie Pietersen by


e-mail at williampietersen@aol.com.

Copyright 2004 by William G. Pietersen

All rights reserved. No part of this document may be reproduced or transmitted in


any form or by any means, electronic or mechanical, including photocopying,
recording, or by any information storage and retrieval system, without permission
in writing from the author.