This is “A Framework for Board Strategy Engagement”, section 7.2 from the book Governing Corporations (v. 1.0).
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7.2 A Framework for Board Strategy Engagement
To create a workable framework for board engagement, Nadler (2004) distinguishes between four, roughly sequential, types of strategic activity:
Strategic thinking. The collection, analysis, and discussion of information about the environment of the firm, the nature of competition, and business models.
Strategic decision making. Making a set of core directional decisions that define fundamental choices concerning the business portfolio and the dominant business model, which serve as the platform for the future allocation of limited resources and capabilities.
Strategic planning. Identifying priorities, setting objectives, and securing and allocating resources to execute the chosen directional decisions.
Strategy execution. Implementing and monitoring results and appropriate corrective action. This phase of strategy development can involve the allocation of funds, acquisitions, and divestitures.
It will be apparent that the board’s role can and should differ dramatically in these four development phases. Early in the process, the board’s focus should be on providing advice and counsel about issues, such as the process followed, perspectives taken, the inside–outside balance of environmental and competitive analyses, and presentation formats. Later, when key directional choices must be made, the board’s role becomes more evaluative and decision focused. Once directional decisions have been taken, reviewing and monitoring progress should become the board’s primary focus.
Nadler organizes the various discussions and decisions the board needs to undertake into a multistep “strategic choice process”:
Agreeing on the company vision. This step entails restating or confirming the company vision—a description of its aspirations in relation to multiple stakeholders, including investors, customers, suppliers, employees, legislative and regulatory institutions, and communities. Such a vision statement should be aspirational and paint a picture of what the company hopes to accomplish in tangible and measurable terms. Good vision statements talk about measures of growth, relative positions in markets or industries, or returns to shareholders. They provide a benchmark against which to assess strategic alternatives.
Viewing the opportunity space. This second step focuses on an analysis of the full array of strategic options the company should consider from different perspectives. For example, the analysis might look at different emerging markets, the range of available technologies to meet a customer need, the potential set of customers, or the constellation of competitors. Each of these presents a different set of “lenses” through which to look at the environment.
Assessing the company’s business design and internal capabilities. This third step looks inward, focusing on an assessment of the company itself, including its current business design and organization. The objective is to analyze the relative strengths and weaknesses of the firm, including its human capital, technologies, financial situation, and work processes, among others.
Determining the company’s future strategic intent. In this fourth step, the vision, the view of the opportunity space, and the assessment of the current business or organization are brought together to identify a future strategic intent. The purpose is to identify the most attractive opportunities for their vision and their capabilities.
Developing a set of business design prototypes. Having identified a strategic intent, the next step is to develop prototypes for each business design. It is useful to consider a number of distinct, viable options to provide the opportunity for real comparison, contrasting approaches, and true choice. The final decision should be made against a set of criteria developed in the strategic intent stage. The leading choices should also be tested against current organizational capabilities to understand the nature of the challenges inherent in executing each strategy. When this choice is made, initial planning of execution is complete.
This process unfolds over a period of months, with numerous meetings, work sessions, and rounds of data collection and feedback, and provides a way of building board engagement. Perhaps more importantly, management will benefit from the board’s informed point of view.