Strategy formulation looks at external factors, craft strategic initiatives then mobilize resources including talent. But firms still generate weak strategies and execute poorly. It is time to revise strategy and business plan development from market and product orientation to Talent as the strategy.
Think about it, do strategies create talent, or does good talent create excellent strategies? Where do strategies come from?
Steve Jobs’ recent medical leave at Apple highlights how crucial he is to the business – not its products, ecosystem nor the market Apple serves. Apple’s rise and fall will be determined by its Talent mix.
In recent years, companies struggled with defining how to make their organization’s talent agenda more strategic. Leadership pipelines, succession planning, analytics, workforce development, engagement—all these were conceived and designed to get the talent agenda to the board room. Some firms realized it was the right thing to do and simply put the talent agenda in the boardroom even if they were not sure why. They just knew intuitively that it belonged there somehow. Others called for alignment with business strategies. But this fell short of making talent truly strategic. “Alignment” simply meant attaching the talent strategy as an appendage to the business strategy. In most cases, this was because the strategy planning process followed models that looked at externalities to craft the business strategy: competition, suppliers, customers, new entrants, industry configuration and the like. After reviewing these external factors, companies craft their strategies, build new scorecards and plan for resources they require including that other resource called talent.
Companies continue to search for that ever elusive competitive advantage. That single element which will provide the firm's unique advantage in the market.
Unfortunately in today's environment, this external view of strategy will not give an organization its strongest competitive strategy. The way to go is to start with talent.
The best place to start strategy formulation is to look internally and intensely at the firm’s talent. Talent is the best source of competitive advantage. Jay Barney and Delwyn Clark in their book Resource-based Theory, refers to characteristics that are “imperfectly imitable” as a source of sustained competitive advantage. Talent is that which is imperfectly imitable.
Paul Romer, an economist, suggests that there are new factors of production—people, ideas and things. Translation: Talent, ideas, and organizations. Come to think of it, business strategies do not create talent, good talent create excellent strategies! Much in the same way as organizations don't learn, people do. Look at the great firms around you.
A talent view of strategy and the firm guarantees that the company will discover that “imperfectly imitable” dimension. The talent of which I refer to is not a set of competencies, but rather a mix of individual talent – leaders, value creators and individual performers who all contribute to realize the company’s aspirations. It is this mix of talent that provides the imperfectly imitable character of an enterprise.
Just how does one start with strategy formulation using talent as source of its competitive advantage? Every individual has his or her own unique markers in a manner of speaking. These markers are represented by the individual’s success profile – competencies, experiences, knowledge and personal attributes. These markers form the individual’s talent DNA. With detailed understanding of these success profiles, one understands the value that individuals are capable of creating. Individuals develop ideas which a firm converts to products, services or intellectual capital.
As these individual success profiles are consolidated across the firm, the organization’s DNA appears in the shape of intellectual assets, capabilities, structural assets and relational assets. Intellectual assets are knowledge developed by individuals that the firm is able to patent or claim exclusive rights over. Capabilities are organizational competencies that individual members have designed. Structural assets are processes and methodologies individuals developed, while Relational assets are customer relationships, connections and networks established by associates over time. Relational assets include corporate culture as well.
It is this unique set of assets, (assets which are the consolidation of individual success profiles) that is the best source of that unique competitive advantage.
Some of the questions discussed in a Talent-Based strategic planning process are:
Given what we know, what products should be create or design?
How do we capitalize on the capabilities we have?
How to we maximize our intellectual capital?
How do we expand the relationships we have developed with (market, customer segment, etc.)?
Where will our assets (intellectual, capabilities, structural and relational) take us (vision)?
It is best to start your strategic planning process with a talent audit. A process to appraise the talent mix (leaders, value creators and individual performers) that constitute the firm. These individuals have contributed to the firm’s accumulated wealth represented by the four assets – intellectual, capabilities, structural and relational. It is this wealth that is the source of that rare and imperfectly imitable competitive advantage.
When was the last time you took stock of your organization’s talent mix and the wealth they have accumulated? Before jumping to do an external scan, take a long look at what you have inside the firm. You will be surprised with the wealth of talent that surrounds you.
Everyone agrees that innovation will be the primary differentiator. Talent is the source of innovation. Breakthrough products, killer apps, and the like are artefacts of a creative mind. By focusing on talent as source of strategic advantage, the organization immediately sparks fresh and innovative thinking. In addition, by recognizing that talent is the source of ideas, decision making and problem resolution is automatically pushed to the rest of the organization rather than left to the heroics of leaders and managers.
With Talent as the foundation of strategy, associates will be more engaged and develop a deeper sense of ownership. People will realize that they are truly valued by the organization and not considered as dispensable resource. Over time as people get used to the idea of looking at their talent as source of value and wealth, company layoffs (or in this scenario disengagement) will not be a negative event since individuals would have learned to think and fashion value. On their own, they will be independent value creators.
Consolidating jobs into just three major roles, (i.e. Individual Performer, Value Creator, and Leadership) offers associates greater freedom to choose their careers because it will remove limitations imposed by the specialized and narrow functional roles.
1. Develop a clear understanding of success profiles. Train leadership in talent assessment.
2. Audit and Document Individual Success Profiles.
3. Consolidate and integrate individual profiles to generate enterprise assets (intellectual, capabilities, structural and relational).
4. Use Talent assessments to validate current business strategies. Use sample guide questions above (and develop additional questions) to review current strategic direction.
5. Simplify careers around three major roles: Individual performer, value creator and leadership.Identify where value is created in the organization. Include value contributions like cost containment.
Development Dimensions International for Success Profile
Paul Romer: Endogenous Technological Change
Josehp T. Mahoney: Economic Foundations of Strategy
Richard M. Cyert & James March: A Behavroral Theory of the Firm
Jay B. Barney & Delwyn N. Clark: Resource-Based Theory
Hal Rosenbluth & Diane Mcferrin Peters: The Customer Comes Second
David Novak, CEO of Yum Brands (formerly Tricon): People Capability First
Vineet Nayar: Employees First