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Session 1_Don' t Confuse Strategy with Lofty Goals

The article emphasizes the distinction between strategy and lofty goals, arguing that many companies fail to communicate clear strategic choices, leaving employees uninformed. It uses the example of DPG Media Group, which successfully navigated digital disruption by making hard decisions about its focus on professional journalism and market presence. Effective strategy communication involves articulating these choices rather than vague aspirations to enhance employee understanding and engagement.

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16 views

Session 1_Don' t Confuse Strategy with Lofty Goals

The article emphasizes the distinction between strategy and lofty goals, arguing that many companies fail to communicate clear strategic choices, leaving employees uninformed. It uses the example of DPG Media Group, which successfully navigated digital disruption by making hard decisions about its focus on professional journalism and market presence. Effective strategy communication involves articulating these choices rather than vague aspirations to enhance employee understanding and engagement.

Uploaded by

sharma.abhijeet4280
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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HBR / Digital Article / Don’t Confuse Strategy with Lofty Goals

Don’t Confuse Strategy with


Lofty Goals
by Constantinos C. Markides
Published on HBR.org / June 08, 2022 / Reprint H071O5

Natnan Srisuwan/Getty Images

Most companies communicate strategy as a set of aspirations or good


sounding platitudes. For example, a major European multinational had
this to say in its annual report: “The key elements of our strategy are
to continue our focus on delivering operational excellence, leverage the
benefits of our integrated model, reinforce our technological leadership
and make intelligent and disciplined investments.” In a similar vein, a
U.S. global operator declared that: “Our strategy is based on four pillars:
winning with our customers, leading with our culture, expanding our
network and maximizing our performance.”

Copyright © 2022 Harvard Business School Publishing. All rights reserved. 1


HBR / Digital Article / Don’t Confuse Strategy with Lofty Goals

But these grand claims provide no guidance to employees on their


company’s direction. No wonder that employees in many companies
claim to have little knowledge or understanding of their organization’s
strategy. One recent academic study reported that even in high-
performing companies with clearly articulated strategies, only 29% of
their employees knew what their company’s strategy was. Similarly, in a
survey that I undertook in five European companies in 2019, only 35% of
the employees claimed to know their company’s strategy and fewer than
20% said that they understood why they were following the strategy that
had been communicated to them.

Strategy is not aspirations, objectives or wishful thinking. It is a set


of hard-to-reverse choices and explaining what these choices are and
why they were made is what strategy communication should be. A
good example is provided by the new strategy adopted in response
to the digital disruption of the early 2000s by DPG Media Group, the
leading media company in Belgium and the Netherlands. At the time,
the market for newspapers and other traditional print and broadcast
media was being overwhelmed by digital giants such as Google and
Facebook and customers as well as advertisers were moving to digital
offerings in droves. The cover story of The Economist in August 2006,
headlined “Who killed the newspaper?,” was representative of the mood
at the time.

In that context, the then CEO and now Chairman of the Group, Christian
Van Thillo, organized an offside with his top 10 managers and editors
to develop the company’s new strategy. According to Van Thillo, the
starting point of strategy is to first decide what business the company
is or should be in, a point also made by Professor Derek Abel more
than 40 years ago. It was essential, therefore, for DPG Media to decide
whether it wanted to stay in professional journalism or exit the business
altogether.

Copyright © 2022 Harvard Business School Publishing. All rights reserved. 2


HBR / Digital Article / Don’t Confuse Strategy with Lofty Goals

According to Van Thillo, this meant answering the question: “Is there a
future for high-quality, professional journalism? Do we believe that in
the digital age, people will continue to want to be informed, entertained,
and inspired by professional media or is the market moving to citizen
journalism, blogs, and influencers?” The team answered this question
in the affirmative which immediately set DPG Media down the path
of focusing and investing its resources in professional journalism and
reinventing it for the digital age rather than exit it as many of its
competitors were doing at the time.

According to Van Thillo, this was the most important decision the
company had made in its entire history. At the time, it represented a
huge gamble. Ever since, he always uses this decision as the starting
point to explain why the company exists and why it’s taking the
strategic decisions that employees see it taking every day.

Once the decision was made to focus on professional journalism,


the question that arose was: “what do we need to do to succeed in
professional journalism in these digital times?” The answer was that size
will matter a lot. According to Van Thillo:

“We never talked about size before because we used to compete with
local competitors. Now, all of a sudden, we had to compete with
Google and Facebook. We therefore needed to be big enough so that
advertisers as well as consumers would have us at the top of their
mind, like they did with Google and Facebook. That implied that we
had to be the local multimedia undisputed leader so that people will
think of doing business with Google and Facebook and then us.”

The need for size led DPG Media to two other key choices. First, what
countries to compete in. Given its limited resources, it could not be big
in too many markets. And given its size, it had to avoid big markets
where giants like Google would operate. They therefore decided to

Copyright © 2022 Harvard Business School Publishing. All rights reserved. 3


HBR / Digital Article / Don’t Confuse Strategy with Lofty Goals

focus on just two geographic markets, Belgium and the Netherlands.


Second, they decided to engage in acquisitions to grow to critical size
quickly. This was, again, something new for the company. Traditionally
they grew organically whereas now acquisitions became a necessity for
them. But given their emphasis on quality journalism where consumers
would be expected to pay a subscription price to access this journalism,
their acquisition targets were media companies that relied more on
subscription rather than advertising for their revenues. According to
Van Thillo, “If the potential acquisition target depended on advertising
for its revenue, I would walk away.”

The need for size and the focus on subscription revenue led the
company to another choice: focus on market-leading brands (or power
brands as they call them) and disinvest in or sell laggard brands. The
brands that remained in the portfolio were reinvented for the digital
age — newspapers and magazines were transformed into news media,
television developed streaming, radio built up podcasts — and new
online services that were complementary to the media business, such
as platforms for jobs and cars, were built. Any time a decision had to
me made on whether to offer a new product or not, the choice was
made by asking whether the addition of the new product will support
the company’s new mission, which was to become the local, multimedia
champion in the countries it chose to compete.

The final choice to be made was how to do all this. The company
opted to operate with two business models. For their premium brands,
they targeted affluent customers, offering them ad-free content on a
subscription model. For their mass-market brands, they opted for a
freemium model that relied mostly on advertising revenue. In addition,
they chose to adopt a dual transformation strategy: continue to build
on their size by undertaking only acquisitions that had the potential

Copyright © 2022 Harvard Business School Publishing. All rights reserved. 4


HBR / Digital Article / Don’t Confuse Strategy with Lofty Goals

to impact their market power in the local market while reinventing the
core for the digital age and developing new digital services.

The hard-to-reverse choices that DPG Media had to make revolved


around three issues: why do we exist, what do we do, and how do we
do it? These may not be an exhaustive list of choices that need to be
made but making these three will go a long way towards defining the
organization’s strategy. The real problem that most organizations face
is not whether they need to make three or four or five choices but how
to get their senior managers to make any choices at all! The biggest
strategic mistake that organizations make is not that they miss one or
two choices in their decision-making; it is that they do not make choices
at all, something that Michael Porter alluded to long time ago.

For any organization to succeed, it must first make the difficult


choices that strategy requires and then communicate these choices
to employees in an effective way. Unfortunately, if we go by what
companies communicate in their annual reports or by what CEOs say
at company conferences, the bulk of the communication is focused on
the organization’s goals and aspirations rather than its choices. This
mode of communication leaves employees in the dark and limits their
emotional connection to their organization. A little bit more effort in
improving our communication of strategy can lead to major benefits in
how employees execute our strategy.

Constantinos C. Markides is a professor of strategic and


CM international management at London Business School.

Copyright © 2022 Harvard Business School Publishing. All rights reserved. 5


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