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.”
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.
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 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 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.
