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October 30, 2003

Destination Known: An Interview with Robert A. Burgelman

Strengthened by BI and performance management, businesses are focused on improving their strategy development. In an interview, Stanford University Graduate School of Business Professor Robert A. Burgelman discusses how strategy is made and analyzes the impact of technology

by David Stodder

Continued from Page 2

So, the truth is that Intel's new business development track record during Andy's tenure as CEO was fairly weak. The fact that Andy knew some chaos was important and yet could not deal with it very well underscores the difficulty of the second discipline, as well as the difficulty of pursuing core business and new business opportunities simultaneously.

IE: When it comes to strategy, many companies face a tension between senior corporate strategists and their line-of-business managers. The former have had success with data warehousing and BI systems, which have given them increasingly improved analysis of recent business performance. Line-of-business managers hope to be the recipients of IT advances in delivering real-time operational intelligence that will help them make tactical decisions about what to promote in their stores, what inventory they need to meet current demand, and so on. What approach should a company take to avoid a disconnect between higher-level strategic analysis and more tactical decision-making — especially if the two camps are looking at different sorts of information (that is, analytical and operational)?

Burgelman: Two points. First, as Jack Welch did during his tenure as head of General Electric, I also strongly believe that the role of a corporate strategic-planning staff is to help the line managers develop better strategies — rather than to control or evaluate their strategies. Line managers must ultimately be responsible to top management for the success of business strategies and, therefore, need to be deeply involved in developing them.

A key ingredient of developing better strategies for the future — even just the immediate future — is to be clear on what really happened in the past, preferably the most recent past. [Being clear on the past] may require broader information gathering than what business leaders typically can do themselves. It may require, among other things, an understanding of cross-business strategic effects. The corporate staff can be helpful with this. So, fundamentally I see complement rather than competition between corporate and business levels. It is extremely important for the CEO to make this clear to the corporate staff.

Second, top management should be concerned with developing an overall architecture for strategic and operational intelligence that is integrated rather than fragmented and piecemeal. Designing and redesigning this architecture should involve both corporate- and business-level executives. Such collaborative efforts become a joint learning process that goes a long way toward achieving a strategy for the future.

Whenever there are binding trade-offs to be made in the allocation of IT resources, I think the presumption should be that operational needs come first. Operations are responsible for results. And in the end, results are what matter most. However, business-level executives who have prevailed in the resource allocation process should be required to show how the incremental investment in their IT tools contributed to their performance. If they can't do so, they shouldn't prevail in the next round of resource allocation.

IE: To close our interview, what impressions have you drawn from writing the book and from teaching about how organizations are driving employees to achieve strategic objectives? We're seeing that workforce performance management — especially through the use of metrics — will be an emerging area as companies try to understand, optimize, and align all of their resources to achieve strategic objectives. What do you see as the impact of such software applications on making strategy the organization's destiny?

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Burgelman: A whole new field of economics applied to human resources management is indeed emerging. These new human resource management approaches have the potential to be highly useful for improving the management of productivity and incentives. Improved metrics will play a crucial role. My advice is to use metrics intelligently. Metrics always have the potential to create games. And if people perceive them as games, they will try to beat them. Organizations should use metrics in such a way that people find them useful for improving and monitoring their own performance rather than as a way of tightening control.

Similarly, in the field of strategy, improved business intelligence software applications, featuring more sophisticated metrics and interactive tools for "what-if" analysis, are likely to help executives get a clearer idea of the competitive reality sooner. This should help them with developing better strategies and, therefore, with shaping their company's destiny.