Strategy starts at the top

Summary : Strategy starts at the top and then should be layered with tactics down through your organization

My understanding of this was clarified with two conversations: one with Jerry Hutcheson, the other with Bob Graham.  Early in my career, I thought that strategy was something strategic planners did in ivory corporate towers and that the key output was a long treatise that could be used as a master corporate plan.  It was not long before Jerry corrected me, saying that “all good corporate strategy starts with the CEO; it can easily be carried in their head; it is almost always less than a sentence long, while rarely longer than two sentences; and the CEO will use it, as well as communicate it, throughout the course of everyday in almost every decision.  If he doesn’t, the company will drift and soon be in trouble.”  As I worked with and watched companies over the years I found this to be dead on.  And for those long treatises, they mostly wound up forgotten, as they were almost always marked confidential and hidden in desk drawers.  Strategy has no value if you do not communicate it to everyone in the organization.

Years later, I was at one of those off-site corporate strategy meetings.  Bob Graham had long since left Novellus and we were both invited in to help this company set a new direction.  At lunch, the conversation drifted off into the meaning of strategy versus tactics in business.  I was stunned at the obvious, but overlooked the concept of Bob’s that “strategy and tactics should be layered down through an organization.  The CEO sets an overall corporate strategy and from this emerge tactics.  These tactics create strategies for the president, who then define their own tactics to accomplish their strategic objective.  These tactics then fold down to strategies for Vice Presidents and so on and so forth.”  Strategies should rarely change, but tactics must always change to meet changing business conditions.  New tactics should always be evaluated to see if they obsolete a strategy.  This is how you know when strategy should change. 

In the early-mid-eighties I spent a lot of time working on new strategies for the CVD market.  At the time, LPCVD furnaces dominated the market.  Strategies were tool oriented and tactics centered on pricing.  But the industry was moving to multi-layer-metallization.  To understand what needed to be done with the tools, you had to understand what chipmakers needed to do with the films they were putting down.  The tactics were quickly defined in understanding the films, which meant that a tool-oriented strategy would not work.  The strategy had to be film oriented. Novellus and Applied Materials won big time by recognizing this change, while all the furnace makers missed it.  You can see the same effect in the late nineties with copper.  Novellus was the first to see that copper would take a multi-vendor/multi-tool/integrated process strategy because of the process complexity.  They actually entered the market much later than other companies.  However, their focus on the integrated process led them to abandon MOCVD early and shift tactics to electroplating.  Because they had a broader approach, they quickly captured mind share, which then led to market share, by pursuing this new strategy. 

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