![]() These losses were clearly due to the company not keeping pace with the technologies offered by competitors. In the years since that event, each of the company’s competitors grew faster, and the share losses were greatest in Royalfield’s core business. I don’t want them distracted from the SSCs.” “I don’t want to hear negative things about the team. When, over drinks before dinner, I raised some of these issues with the CEO, he held out his hand, palm forward, asking me to stop. The company’s engineering group was competent but slow to act, responding to its own internal sensibilities rather than to competitive issues. The technology it had invented and successfully deployed in the past had been equaled-and, in places, surpassed-by a competitor’s inventions. The company was still organized by regions, while the industry had become global. Some of Royalfield’s strategic challenges seemed fairly evident. ![]() With strategy seemingly addressed by the strategy commitment, the company’s strategy retreat centered on what executives saw as the real work-the setting of financial-performance targets. A vague strategic commitment replaced having a real strategy. Thus, the world he inhabited had been engineered to make the SSCs his personal problem.Īnother way of understanding Royalfield is that the company leadership had accepted the pop-culture notion that strategy is a broad statement about purpose and values. His personal incentive package was framed against accounting results and stock-market returns. Why had these well-trained, highly paid executives chosen this approach? One way to understand Royalfield is to recognize that the CEO’s almost daily experience was explaining the company’s financial results to investors, Wall Street analysts, pension and hedge funds, Royalfield’s board, and the Securities and Exchange Commission. ![]() There was no serious consideration of how the contradictory demands for increased sales and reduced costs would be reconciled. The CEO’s system of defining the SSCs in largely financial-performance terms shaped the options they considered and shifted strategic thinking away from technology, product, customer, and competition and toward tactics for achieving targeted accounting results. Their strategies, therefore, boiled down to promising to find new customers, somehow cutting costs, and keeping investment in check to boost return on equity. There were references to key customers and certain product improvements, but the basic language had been preset by the CEO: the language of financial performance. Each offered targets for sales growth, profit rate, return on investment, and market share, along with strategies for achieving these targets. Each participant received a handsome marble desk weight commemorating the strategy retreat.Īfter lunch, the four business unit managers each presented their individual SSCs. But then every day, you can work toward them, and anything is possible.” 1ĭuring a break, uplifting music played. The CEO ended with a quote from 19-year-old Katie Ledecky, who had won five Olympic gold medals in swimming: “Set goals that, when you set them, you think they’re impossible. These targets were somewhat higher than the company’s recent financial record. The SSC for the whole of Royalfield was specified as a 15 percent annual growth in earnings and a 15 percent return on equity. It comprised a description of the market being served and the admonition that the company’s products would “provide its customers with the most effective solutions to their needs.” It would also aim to “provide a high level of service” for its products. He reminded the group that the strategic commitment grew out of a key acquisition made three years earlier and defined the newly expanded scope of the business. The chief executive officer spoke next, armed with PowerPoint slides presenting what he called the Strategic Commitment and the Success Score Card (SSC). A key point was that the company’s debt burden was becoming a constraint, so investments had to be carefully controlled if return on equity was to be preserved. The chief financial officer spoke first and showed clips from Marvel’s Thor movie to dramatize the financial report.
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