Corporate strategy

Date: October 28, 2014

Name: Directors Source – 20 questions directors should ask about strategy

Presenter: Ken Smith

Company’s success comes from strategies and implementation. Directors need to ensure the proper delegation of roles of strategy. Understanding the role behind the strategy will reduce the risk of business going to the wrong direction. Dr. Ken Smith, the Associate Dean, Executive Programs and Associate Professor of College of Management and Economic, will share his view of questions directors need to ask to focus the right strategic choices for the business. He is also the chair of SECOR consulting and the author of “20 Questions Directors Should Ask about Strategy”. In this webinar from Directors Source, he will condense his research and present his experience to help board directors to ask the right questions. All directors in any industry will be benefit from this webinar.

Smith believes all directors should ask the main 20 questions to assess the corporate strategy. The first 6 questions relate to the process of strategy development. The next 11 questions relate to the content of the strategy, and the last 3 questions relate to the oversight of the strategy. The purpose of the questions is to take directors deeper into strategy while remaining in directors’ roles.

Question 1: What is the board’s role in strategy versus management’s role?

It is important to distinguish the roles between board and management. The board is responsible for company’s direction and the management responsible for analysis and planning. The important element is to ensure the board actively collaborates in the strategic thinking.

Question 2: What is the process for developing the strategic plan?

Smith thinks the process should incorporate future planning, internal and external considerations, different levels of analysis, the usage of external resources, the action plan with appropriate financial models, associate risk analysis, and the appropriate level of involvement.

Question 3: What is the education so directors understand company and context?

It is important to understand that not all directors have the right industry knowledge. Therefore, board should incorporate independent competitor briefings and discussions to maintain the necessary knowledge for the strategic decision making.

Question 4: How will management and board be engaged in strategy development?

Smith indicates the engagement between management and the board is critical. Board needs to raise expectation and concerns early before the implementation of the strategy. Directors need to engage scenario analysis to assess any possible risks.

Question 5: What is this board ‘s risk appetite with respect to strategy?

Directors need to discuss about the uncertainties and other possible risks circumstances. Smith believes board’s role is not to minimize risk; instead, the board should take on the right amount of significant risks to move to the right strategic direction.

Question 6: Each decision: what is the strategic context; does decision alter strategy?

In the business world, all strategies are ongoing process. If decision is right but not align with the strategy could mean any of these 3 possibilities: the strategy is right but the decision is wrong, the decision is eliminating one of corporate alternatives, or the decision forces to change to new strategy.

Smith emphasizes the content of the strategy consists 4 levels of concern to the board.

• Strategic vision and goals
• Corporate strategy
• Competitive strategy
• Functional strategy

During the first level of concern, there are 3 questions directors should ask.

Question 7: What is the future context for the industry and the company?

Directors need to know the plan to address the strategic choices for future context, seldom the current context.

Question 8: Where will the company compete and why?

Directors need to identify the market, the stage in value chain and the position in the economic trend.

Question 9: Given the future context and the choices above, what are the overall strategy goals?

Directors need to know the outcome they want to target.

As for the second level of concern, directors need to ask the next 4 questions.

Question 10: Are any of the industries in which the company operates likely to restructure?

Directors need to know if restructure is necessary to compete with other competitors in the same market.

Question 11: What role should the company play in industry restructuring?

Directors need to know where company is positioning themselves in the market during the restructuring, such as if company acts like a buyer or a seller position.

The next 2 questions only consider for corporation with subsidiary companies.

Question 12: Considering a portfolio of businesses held, how is the parent company add value?

Directors want to know how company can add value to the subsidiary companies in the future.

Question 13: Is the proposed corporate strategy consistent with the role and capabilities of the parent?

Directors want to know if the company is ready to face the new market.

In the stage of third level of concern, directors will ask 2 questions.

Question 14: How does the proposed strategy advance the company toward its goals?

Smith believes it is important to link the strategy back to vision. Therefore, this question will analyze the basic.

Question 15: How does the new strategy affect the skill and resource requirement?

If company is changing strategy, there will be new direction. Directors want to know if the direction requires new capabilities or resource. In addition, directors will need to assess if there is any risks to avoid or reduce.

The last level of concern will require directors to ask the next 2 questions.

Question 16: What are the functional strategies that are instrumental to success and associated risks?

Based on risks analysis, directors need to leverage the right amount of depth in the management.

Question 17: How has the strategy incorporated corporate social responsibilities?

Many companies are incorporated their strategies with Corporate Social Responsibilities (CSR). Directors need to ensure all solutions are related to CSR model.

The last stage of strategy development is the oversight phase. The last 3 questions focus on the implantation part of the strategy.

Question 18: What are the key steps, risks and expected returns of implementation?

Companies need to create their action plan based on the strategy. The action plan includes financial projection, monitoring process and the clarity with the organization.

Question 19: What options does the strategy keep open or eliminate?

Companies need to ensure there is flexibility on the implementation to ensure other options available in the future. This will allow companies to seek new opportunities to enhance the current direction.

Question 20: Is board prepared for events that could put directors on the front line?

Companies need to prepare for the worst. This includes possibility of losing CEO or other unsolicited takeover. As long as the board is prepared for any unexpected or unplanned events, companies will be in healthy position.

“If directors have been sufficiently engaged, they will serve the company well when the stakes are highest”