How Emerson and it’s CEO, David Farr, are responding to COVID-19
There’s a piece from the Wall Street Journal about how Emerson, a conglomerate, and its CEO, David Farr, has been responding to COVID-19.
We often think of strategy as a document we put together. We often think of decision making as the process of putting together a proposal, presenting it to executives, and then letting people make decisions over an eight-week period. But the reality is that as soon as your strategy meets reality, reality always wins.
For many critical decisions, you don’t have the luxury of time to appoint a team or hire a consulting firm to give you a recommendation after eight weeks. When you think about strategy, you have a document or you have a plan. As you start rolling out that plan, numerous issues crop up. You have to be an executive who can make decisions on the fly, using instinct and experience. You will rarely have enough of the right data, enough time to analyze that data, and enough time to think about the analyses. Most often, you will have to make a lot of the back-of-the-envelope calculations.
In the Corporate Strategy and Transformation program, we emphasize that a lot of the thinking for an entire strategy—which the team goes out and tests over about an eight-week period—was developed by a partner in two days. We often get caught up in thinking that every strategy decision must be made in a way we expect a strategy consulting firm would make it. Think of strategy like food. You can get food in many ways. You can get tacos from a vendor on the main streets of Los Angeles, or you can go to a nice Michelin starred restaurant and order a meal. Strategy is similar. Different strategies exist for different reasons and different purposes.
If you’re only learning how to do strategy like a consulting firm, you’re going to have problems when you’re a senior leader in an industry. When you have to make a critical decision, you won’t have eight weeks to call McKinsey.
I worked with a CEO who was one of the first female CEOs in a male-dominated sector. In our sessions, we made big decisions in two to three hours about how she was going to fund her business, develop the resource assets and take it forward. Obviously, I didn’t have eight weeks to ask an engagement manager and business analyst to run an analysis for me. I can’t do that in two hours. You have to learn to make a strategy decision without using the standard process.
The WSJ article shows how David Farr has made a lot of rapid, life-changing decisions to navigate Emerson through this challenging time. One way to do strategy is on PowerPoint over an eight-week period. The other way is to make decisions rapidly. If you look at our Corporate Strategy and Transformation Study, which is available to FC Insiders, you can see how we make big decisions rapidly—like whether or not a company should build power stations—without a lot of data.
One of the most difficult decisions a CEO has to make is deciding what business to be in. We have a program that is coming out for FIRMSconsulting Insiders who have access to our Advanced Knowledge Management System (aka SLIDES) about a national post office making difficult decisions about what businesses they should retain—knowing that they’re going to be failing businesses that will need massive bailouts that the government doesn’t want to give them. But at the same time, they must make the decision to free some high-growth, high-margin businesses because those businesses cannot exist within the culture of the post office. By freeing them up, they can compete against competitors that are encroaching on European turf. It’s not a question of which business is most attractive and which is growing the fastest. It’s the opposite. Which business is not growing the fastest? Which is not the most attractive? We are going to keep that.
Too often when we think about strategy, it’s always about what’s best, fastest and most profitable. But strategy is about making a decision that’s in the best interests of your shareholders. Sometimes, making money is not always in their best interests. If you only think in terms of total shareholder return or shareholder value, you may go down the wrong path. When you read this article about how David Farr is thinking through those decisions for Emerson, first think about how to make strategy decisions quickly, and we have a program for that. Second, think about how to make a strategy decision when the goal isn’t to be the most profitable.
This is an excerpt from Monday Morning 8 a.m. newsletter, issue #8.