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In a world where business models are evolving rapidly and new competitors can emerge almost overnight, strategic thinking — especially at the top of the company — is more important than ever to a company’s survival. Unfortunately, boards of directors have no clear model to follow when it comes to developing the strategic role that is best suited to the company they oversee. At one extreme, the board does little more than rubber-stamp the CEO’s decisions, while at the other, the board constantly second-guesses the executive team. Neither extreme adds value.
As with other leadership roles, the one played by the board varies with the company’s culture and the norms and legal requirements of its home country, as well as the norms of the industry. More importantly, the board must play a role that matches the strategic needs of the company and the state of its sector. The board of a young company usually needs to wrestle with different strategic issues than the board of a long-established company, and the board of a company in a young and chaotic industry generally needs to operate differently than the board of a company in a mature industry. In this article, we will look first at how to assess the strategic value that your board currently delivers; second, at whether that value matches your company’s needs, based on the current competitive situation; and finally, if there isn’t a good fit, how to realign your board’s style so that it meets your company’s current needs. (See “About the Research.”)
Three Strategic Dimensions
Three dimensions shape the board’s contributions to strategy. These factors differ from culture to culture and from company to company, but they are always present in varying degrees:
1. A Definition of Strategy
Companies define strategy in different ways, depending on their place in their industry and the nature of their industry. Often boards go wrong simply because they have not defined the right measures of competition or the right challenges on which to focus.
2. The Role of the Board
The board’s role in strategy may range from that of advisers who supervise the strategy to full coauthors of the company’s game plan.
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1. Scholars have long debated the definition of strategy. For a range of such strategy definitions, see A.C. Hax and N.S. Majluf, “Strategy and the Strategy Formation Process,” Sloan School of Management working paper no. 1810-86, August 1986, available at http://dspace.mit.edu.
2. See H. Mintzberg, “The Rise and Fall of Strategic Planning” (New York: The Free Press, 1994).
3. D.J. Snowden and M.E. Boone elaborate on this framework. See D.J. Snowden and M.E. Boone, “A Leader’s Framework for Decision Making,” Harvard Business Review 85, no. 11 (November 2007): 68-76.
4. R. Rumelt illustrates this view. See R. Rumelt, “Good Strategy Bad Strategy: The Difference and Why It Matters” (New York: Crown Business, 2011).
i. H. Mintzberg, “Patterns in Strategy Formation,” Management Science 24, no. 9 (May 1978): 934-948.