7 deadly strategy sins

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					Executive Summary
January 19, 2005
SDG eBriefing


       The Seven Deadly Sins of Strategy
              Featuring: Carl Spetzler, Jim Lang, Greg Bean, and David Wolter

Following is a summary of the Executive eBriefing covering:

o The most common and deadly sins of strategy.

o Why people and organizations commit these sins.

o What steps can be taken to sin less frequently and become ‘‘more virtuous.’’

        To view the complete eBriefing or to request a copy of the presentation,
                                                                                                                          The Seven Deadly Sins of Strategy
                                                                                                                                          January 19, 2005

                                                   ©2005 Strategic Decisions Group. All rights reserved.
                                                Created for SDG ( by BullsEye Resources, Inc.

                                      The Seven Deadly Sins of Strategy
              SDG Speakers: Carl Spetzler, Chairman; Jim Lang, President and COO; Greg Bean, Managing Director, Oil & Gas;
                            David Wolter, Senior Engagement Manager

                                                                                      2. Pride: Organizations that have experienced breakthrough
Overview                                                                                 success can suffer from pride when they attribute their success
                                                                                         to superior management skills, pursue hyper-growth with
Too often when organizations fail to develop and implement                               limited controls, and lack respect for competition. Those with
strategy that maximizes value, one sees the same behaviors or                            pride may pursue diversification strategies based on a self-
“sins” occur over and over. These sins include delusion and pride,                       perception of invincibility. Examples of companies committing
incognizance and indolence, wimpiness and groupthink. Their                              the sin of pride include Xerox and Enron. The opposing virtue
results include failing to have adequate awareness and perspective,                      is a culture of humility, especially among an organization’s
failing to grasp reality, risk aversion, lack of healthy dissent, and                    leaders, and a healthy respect for competitors.
overemphasis on thinking about opportunities without adequate
emphasis on execution.                                                                3. Indolence: This sin involves an overemphasis on thinking
                                                                                         about opportunities and a lack of emphasis on activity,
However, behaviors which at one moment are sins might be lauded                          execution, and follow-through. This can take place in
at another time or situation as virtues. Therefore, the key is to know                   organizations with long and cumbersome planning cycles and
when to employ certain behaviors. This knowledge and perspective                         where those responsible for implementing strategy are
starts with tackling the sin of incognizance, which entails lacking                      dissociated from those who develop it. The results of indolence
knowledge or awareness. By having adequate awareness,                                    are no and slow execution, and missed opportunities. The
perspective, and purpose, and through proper characterization of                         opposing virtue needed is a bias for action and an execution
the problems, the proper behaviors can be employed by the right                          perspective linked to effective strategy.
people at the right time, changing potential strategy sins into
strategy virtues.                                                                     4. Incognizance: This is not being cognizant—lacking knowledge
                                                                                         or awareness. Where present, lack of awareness is the first sin
                                                                                         that must be addressed (see Key Learning 3 on p.2). This can
Context                                                                                  take place in companies that have experienced success, but
                                                                                         fail to realize that rapid external changes are taking place,
Key members of SDG’s management team described nine common                               requiring strategic shifts. Too often, organizations
“sins” and sinful behaviors that companies often experience in                           experiencing incognizance are unwilling or unable to
dealing with strategy. For each sin, a set of behaviors (termed “the                     internalize critical external threats, because they are focused
opposing virtue”) was identified to turn that sin into a virtue.                         on satisfying the narrow needs of current customers. Examples
eBriefing participants rated the degree of deadliness of each of the                     include Digital and Polaroid. The opposing virtue is a culture
sins, resulting in a ranked list of the seven most deadly sins of                        and processes that refresh the organization’s strategic
strategy. SDG’s team then discussed why we sin, and offered a                            perspective, along with big-picture thinkers.
prescription for becoming more virtuous and avoiding these
common sins.                                                                                “Incognizance often happens when companies don’t
                                                                                            have a big enough frame.”
                                                                                                       - Jim Lang
Key Learnings
                                                                                      5. Wimpiness: This entails bland alternatives and overly risk-
• Listed below are common “deadly sins of strategy” that
                                                                                         averse behaviors, which can occur in companies with a strong
  result in the destruction of value.
                                                                                         operational culture where there are big penalties for bad
  These deadly sins of strategy were developed by SDG after
                                                                                         outcomes and low incentives for taking risks. Behaviors within
  considering dozens of candidates. The sins are listed according to
                                                                                         wimpy companies include an unwillingness to take risks or
  how participants rated the sins on a scale of most to least deadly.
                                                                                         challenge sacred cows, an avoidance of seemingly risky
   1. Delusion: This involves crafting a strategy without a grounding                    alternatives, and a resistance to abandon a current strategy in
      in reality, or “inside-out thinking.” The sinful behavior                          the face of change. Companies often develop a wimpy culture
      demonstrated is wishful, but not realistic, thinking;                              based on overlearning from past failures. The opposing virtue
      unreasonable goals with no means or capabilities to achieve                        is to create incentives and a culture that reward goring the
      them; and unrealistic assumptions. The results of delusion                         sacred cows and taking risks.
      include implementation surprises and failed strategies. The
                                                                                      6. Groupthink: This involves making decisions with an uncritical
      opposing virtue is a grounding in external, validated data.
                                                                                         acceptance of prevailing points of view. Groupthink happens
                                                                                         when people of similar backgrounds and experiences develop
         “Some delusion is actually useful for motivation. A
                                                                                         strategy together; they tend to quickly agree, downplay dissent,
         bold goal, even if on the bounds of unachievable, can
                                                                                         and avoid conflict. The mob behavior that follows, as has been
         be a strong motivator. The sin is basing decisions on
                                                                                         seen repeatedly through the behavior of the large international
         unreasonable goals.”
                                                                                         oil companies which all react to the same events with the same
                     - David Wolter

© 2005 Strategic Decisions Group                   To view this eBriefing or request a copy of the presentation                            Created for SDG by:                                                 visit
                                                                                                                             The Seven Deadly Sins of Strategy
                                                                                                                                             January 19, 2005

      strategies, requires the opposing virtue of creating a culture                   simplism; pride is the opposite of wimpiness; and indolence is
      and processes that encourage dissent.                                            the opposite of operationalism.)
                                                                                       In reaction to a negative behavior or experience, or based on the
   7. Simplism: This is an oversimplification of problems, or the                      fear of committing one sin, a person or company, doing what is
      tendency to concentrate on a single aspect of a problem to the                   believed to be the right and virtuous thing, simply goes too far in
      exclusion of all other factors. This can take place when an                      the opposite direction.
      organization is in a hurry to develop its strategy and move to
      execution. By overly simplifying the situation and the strategy,                 For example, an organization which has previously committed
      teams may fail to adequately take into account in the strategy                   the sin of groupthink, where everyone thinks the same, may
      development process important uncertainties, such as                             encourage active dissent and in the process can go too far,
      competitive reaction, potentially leading to premature                           resulting in the sin of dissociation where none of the team is on
      execution and worthless strategies. While simplicity and clarity                 the same page. Or, a company that had taken too much risk and
      are important in communicating the strategy, having the                          exhibited too much pride could overlearn this lesson and develop
      courage to wrestle with complexity in the strategy development                   a culture of wimpiness. So too could an organization which feared
      process is often a necessary virtue to develop appropriate                       premature action, or operationalism, swing to the other extreme
      strategies.                                                                      by committing the sin of indolence where inaction dominated, or
                                                                                       an organization fearing delusion and complexity could resort to
         “Companies need simplicity in messaging and                                   simplism instead.
         direction after breaking through the complexity of
         the puzzle presented.”                                                        The key learnings in analyzing these common strategy sins is that
                     - Jim Lang                                                        what may be virtuous behavior at one moment can go too far, or
                                                                                       may not be appropriate in another situation, resulting in
   8. Dissociation: This is a state of separation or disunion. It occurs               commission of an important sin of strategy. Thus, whether a
      when a company has strong functional “silos” and insufficient                    behavior is virtuous or sinful is based on the extent, the situation,
      involvement of key parties in the strategy development and                       and the right timing.
      decision-making processes. Results include lack of buy-in,
      particularly by those charged with implementing a strategy,                            “The biggest sin is if you keep repeating the same
      and significant resistance, which can kill strategies. The                             sins.”
      opposing virtue is fostering a culture of inclusion and a                                         - Carl Spetzler
      strategy process that involves the right people in the right ways
      at the right time.                                                           • Avoiding these sins and becoming more virtuous begins at
   9. Operationalism: This is strategic blindness due to being                       the “front end” of strategy development with the need to
      captive to an operational perspective. This sin involves lack of               tackle incognizance.
      big-picture, strategic thinking. The sin of operationalism is                  Incognizance deals with a lack of awareness. Lack of awareness
      based on a bias for action and results in execution taking place               and perspective causes an organization to pursue the wrong goals
      prematurely before the strategy has been completed. The                        and to characterize problems incorrectly. To avoid repeatedly
      strategies that are developed by those with this perspective                   committing the aforementioned sins, an organization must
      tend to be incremental and can result in missed opportunities.                 overcome incognizance to create cognizance—awareness and
      The opposing virtue is to take good aim before firing. eBriefing               perspective. Addressing incognizance requires developing the
      participants view this sin as the least damaging and the easiest               right purpose and perspective, defining the right goals, and
      from which to recover.                                                         characterizing the problem correctly. This starts at the beginning
                                                                                     of the strategy development process (the “front end”) by getting
• The reasons why people and organizations repeatedly                                the right people involved, having the right kinds of conversations,
  commit these sins include human nature, overlearning, and                          and exhibiting the right behaviors―it is a process of discovery,
  attempting to demonstrate a virtue at the wrong time.                              stretching thinking, and testing beliefs. A suggestion involves
  Some of the sins regarding how people behave and make                              taking the time up front in the initiation of the strategy
  decisions are a result of human nature and are embedded in who                     development process to openly confront and discuss
  we are as human beings. Human nature causes each person to                         incognizance and to identify any other potential deadly sins
  have biases including a comfort zone bias of doing what is                         which could hamper strategy development and execution. Only
  comfortable instead of what needs to be done; biases in                            through discussing and addressing these sins can they be
  perceptions which cause each person to see the same facts                          avoided.
  differently when viewed through the lenses of his or her own
  attitudes and life experience; and motivational biases based on                            “Discuss how to avoid and address incognizance
  rewards and incentives. We all suffer from some fallacies in our                           head on.”
  reasoning, and we all want to be included in a group, so we shy                                       - Carl Spetzler
  away from putting forth views that will be alienating.
                                                                                       While addressing incognizance requires creating perspective, the
   A reason that many sins occur is that they are justified as virtues                 other sins can be addressed with good processes, involvement,
   and are the result of overlearning or overreacting. Several of the                  and roles. In addition, becoming more virtuous involves tailoring
   sins discussed are actually opposites of each other (dissociation is                the approach used, as well as the people, processes, and tools, to
   the opposition of groupthink; delusion is the opposite of                           fit the specific problem being solved.

© 2005 Strategic Decisions Group                    To view this eBriefing or request a copy of the presentation                              Created for SDG by:                                                  visit
                                                                                                                              The Seven Deadly Sins of Strategy
                                                                                                                                              January 19, 2005


         Carl Spetzler

         Specializing in strategy development, business innovation, and strategic change management, Dr. Spetzler has developed creative business
         strategies for major financial institutions, capital-intensive companies, high-technology manufacturers, and systems businesses. Over the
         past 15 years, he has been a leader in designing an innovative strategy development process that helps corporate leaders cope with the
         lack of explicit strategic alternatives, deal with the complexities of uncertainty and risk over long time horizons, and achieve lasting change.
         In addition to serving as the chairman of the board for SDG, Dr. Spetzler leads strategy assignments to redirect and restructure major US
         corporations and to create revolutionary new products and strategic alliances. Before founding SDG, he was the director of the Financial
         Industries and Strategic Methodologies Center at SRI International. He received an MBA and a PhD in economics and business
         administration and a BS in chemical engineering from the Illinois Institute of Technology.

         Jim Lang
         President and COO

         Mr. Lang, a founder of SDG's Boston and Houston offices, specializes in strategy development, capital investment decision-making, and
         organizational capability development. He has worked in a variety of industries worldwide, including energy, telecommunications, high
         technology, defense, finance, and automotive. His value-creating work over the past few years has led to new investments by his clients in
         excess of US $20 billion. Mr. Lang has also conducted hundreds of seminars in strategy development, decision quality, and R&D in Europe,
         Asia, and North America. Before joining SDG, Mr. Lang held planning and engineering positions at Analog Devices, Data General
         Corporation, and AT&T. He received an MBA from the Amos Tuck School of Business Administration at Dartmouth College and a BS in
         electrical and computer engineering at the University of New Hampshire.

         Greg Bean
         Managing Director, Oil & Gas

         Mr. Bean is managing director of the Oil and Gas sector of SDG’s Energy and Chemicals practice. He has more than 20 years of international
         oil industry experience, focusing on strategy development and implementation, organization restructuring, and performance operations
         improvement. He has worked extensively with both international major oil companies and state-owned companies around the world, large
         independents, and national oil companies in North and South America, Europe, the Middle East, Asia, and Africa. Before joining SDG, Mr.
         Bean was vice president in the Global Energy Practice at Arthur D. Little, Inc. He was the practice leader of the North American and Latin
         American Energy Practice and spent two years in Jeddah as resident advisor to the government-owned refining and marketing company
         SAMAREC (now part of Saudi Aramco). Mr. Bean was also at Exxon for five years, working in refining operations and crude and product
         supply and trading in the Aruba refinery and Asia Pacific regional business. Mr. Bean holds an honors BS degree in chemical engineering
         from Texas A&M University.

         David Wolter
         Senior Engagement Manager

         Mr. Wolter has expertise in strategy development, decision analysis, and client capability development in the application of the SDG
         methodology, particularly through strategy projects in the pharmaceutical, biotechnology, agricultural biotechnology, chemicals, and oil and
         gas exploration industry. He has led strategy development sessions, commercial and technical assessments, and deterministic and
         probabilistic analyses of alternative strategies, while training clients to build analytical models to support business decisions. Mr. Wolter
         earned an MBA from the Stanford University Graduate School of Business, an MS in accounting from DePaul University, and a BA in
         economics from Amherst College. He is a Certified Public Accountant.

© 2005 Strategic Decisions Group                               Created for SDG by BullsEye Resources, Inc.                                      Created for SDG by:                                                
                                                                                                            The Seven Deadly Sins of Strategy
                                                                                                                            January 19, 2005


© 2005 Strategic Decisions Group                     Created for SDG by BullsEye Resources, Inc.                             Created for SDG by:                                      

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