Analysis: Strategy Myopia

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[<p><div align="justify"><span class='dropthecap'>A</span> rising tide lifts all boats. the fundamental problem at SysTech is typical of a company that has grown thanks to market momentum rather than due to any strategy. If anything, the "strategy" appears to have been to stick to the comfort zones namely, operating in known geographies (the US and the UK) and sectors (application maintenance primarily in legacy systems). An ethical company focused on diligently executing a customer's requirements is what SysTech appears to be. In not-so-charitable terms, SysTech seems to be an "order-taker", reacting only to the customer's needs rather than defining them.<br /><br />Not surprisingly, companies such as SysTech grew to a billion dollars thanks to market demands and customer requirements that did not see the need to invest in sales, demand creation,  and market and service line expansion activities. They believed that the good times would continue to roll, which is dangerous in any industry, especially in a fast changing one like IT.<br /><br />The broad issues at SysTech can be listed as:<br /><strong>Leadership: </strong>The long-serving CEO appears to be facing a real crisis for the first time. The company that was coasting along under his stewardship for over 18 years is now having to deal with the effects of a passive and myopic leadership. The CEO clearly carries the can for allowing the company to reach the current state. The rest of the management team rode the waves of market demand as well, and seems to have become wise only after the fact. <br /><br /><strong>Strategy:</strong> This is a function of the quality of the leadership team. At the end of the day, it is the leadership team that develops the strategic objectives, the operating plan and gets the team motivated enough to successfully execute it. SysTech does not appear to have had a strategy that factored in changing market conditions and customer requirements and rolled them back into organisational preparedness.<br /><br /><strong>Structure of the company:</strong> That the structure of a company — financial and people — should follow its strategy is an old adage. In SysTech's case, the lack of the strategy shows in the structural issues. For example, the lack of sales and marketing people and the fractured decision-making process. The non-alignment of the structure with the strategy of the company also manifests itself in people playing the blame game. <br /><br /><strong>Culture of the company:</strong> Culture again flows from the top leadership. With the company tacitly and passively following a path forced upon it by customers and the market, it is not used to being proactive and setting the agenda. Senior leadership too seems incapable of doing this. How does the company change from passive-reacting to aggressive action?<br /><br />That SysTech is hopelessly out of touch with the market and customer needs is clear. That it is in a tough position with shrinking market demand, loss of contracts from long-time customers and a harried leadership team is an understatement.<br /><br />There are no short and or easy solutions ahead of the company. <br /><br />Can the CEO take the appropriate decisions for getting the company back on track? Given the circumstances, it appears not. After all the company's current situation came about under his stewardship over 18 years. Winston Churchill is supposed to have remarked, "I've yet to see a bottle where the bottleneck is not at the top". here too the core issue is that of a bottleneck at the top, namely the CEO. The current CEO needs to change its mindset or be replaced. The possibility of sudden and dramatic change occurring in the current CEO leading to the creation of a changed company looks remote. The management team too seems to have suddenly realised that their passive and tacit attitude has not helped and are frustrated and angry at the turn of events.<br /> <br />The problems at SysTech would have surfaced sooner or later. The current market situation only precipitated it. But the problems are symptoms of a deeper malaise — that of strategy myopia, leading to a narrow view of the business the company was in. This in turn led to the creation of a set of competencies and capabilities within SysTech that did not and could not address the changed nature of business. The strongly held beliefs of the management team of the nature of their business blinded them to the changing external conditions. <br /><br />A look at the collapse of companies in sector after sector over the decades only showcases the dangers of not staying engaged with the environment and not having the leadership ability to address the situation. In the Indian IT industry alone, leading companies of the 1980s such as DCM Data Products, ORG Systems, PCL, Siva and IDM are no longer heard of. Globally, Netscape (the first browser company), database companies such as Ingres and Informix, networking software companies such as Novell, systems companies such as Compaq, Digital and Tandem did not adapt to what the market, technology and customers were saying.<br /><br /><em>Sanjay Anandaram has over 20 years' experience as an executive, entrepreneur, advisor, visiting faculty and investor</em></div> <script type="text/javascript"> var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } </script> (This story was published in Businessworld Issue Dated 31-08-2009)