Cynthia A. Montgomery: An interview by Bob Morris

Posted on: December 14th, 2012 by bobmorris

Cynthia A. Montgomery is the Timken Professor of Business Administration and immediate past chair of the Strategy Unit at Harvard Business School, where she’s been on the faculty for 20 years. 
One of her recent assignments has been working with owner managers in the School’s flagship Owner/President Management program, an experience that changed her view of strategy, and the distinctive role leaders play in the process. Her latest book, The Strategist: Be the Leader Your Business Needs, grew out of that experience and was published by HarperBusiness (May, 2012).

Montgomery’s work has appeared in nearly a dozen top-tier managerial and academic outlets, including Harvard Business Review, Financial Times, American Economic Review, Rand Journal of Economics, Strategic Management Journal, and Management Science. She is the co-author of Corporate Strategy: Resources and the Scope of the Firm (with David J. Collis), the editor of Resource-Based and Evolutionary Theories of the Firm, and the co-editor of Strategy: Seeking and Securing Competitive Advantage, with Michael E. Porter.

Montgomery has served on the boards of two Fortune 500 companies, a number of mutual funds managed by BlackRock, Inc., and several non-profits.

* * *

Morris: Before discussing The Strategist, a few general questions. Years ago, was there a turning point (if not an epiphany) that set you on the career course you continue to follow? Please explain.

Montgomery: When I finished my early education, I did a big round of interviews for a wide variety of jobs ranging from marketing tires to writing communications pieces for a liquid metal fast breeder reactor business. They all had their merits but when all the hoopla was over, I asked myself: Do I want to spend the majority of my waking hours doing this, even for a few years? Ultimately, I decided “no” and went with my gut. I went to graduate school, got a PhD, and became a researcher and educator. It has suited me well. I’m glad I had the courage to walk away from attractive jobs that “weren’t me.”

Morris: To what extent has your formal education been invaluable to what you have accomplished in life thus far?

Montgomery: I did my graduate work at Purdue University, where they had state-of-the-art courses in empirical methods that are vital to strategy research. It was a very challenging program—not a lot of fun, especially for someone who had been a philosophy major as an undergraduate—but the run room from that investment set up the rest of my career.

Morris: What do you know now about business world that you wish you knew when you went to work full-time for the first time?

Montgomery: I wish I’d known more – not about the ideas side of business — but about the human side: What’s involved in building a reputation, inspiring people, and working effectively in organizations. I learned that incrementally over many years.

Morris: From which non-business book have you learned the most valuable lessons about business? Please explain.

Montgomery: 

One of my favorite books is The Remains of the Day by Kazuo Ishiguro. It’s about a butler and the choices he makes about who he is and what matters to him. It’s also about how the goodness of the people/organizations we work for inevitably impacts the meaning of our own contributions. I read it years ago, but it still haunts me.

Morris: Tell me about the owner-manager program you’ve been teaching in.

Montgomery: 

The participants come from all over the world and from almost every industry — aerospace, refuse collection, health and beauty, financial services, education, fashion, biotech—everything. So, there’s enormous variety in the program; at the same time, what everyone has in common is that they’re leading an organization wherein they have a significant ownership stake. It gave me a great opportunity to think about the distinctive contributions leaders can make to a business –one of those, the one I’ve thought about most is the opportunity to define what a business will be and why it will matter. It’s the most fundamental question facing a business, the one from which everything else begins.

Morris: Here are several of my favorite quotations to which I ask you to respond. First, from Lao-Tzu’s Tao Te Ching:

“Learn from the people
Plan with the people
Begin with what they have
Build on what they know
Of the best leaders
When the task is accomplished
The people will remark
We have done it ourselves.”

Montgomery:

 The empowering, egalitarian tone in this passage appeals to me. Inspiring people to do great work is essential. That said, a manager’s challenge is not always solvable by a firm’s existing base of experience and talent, no matter how hard they work. There are tough times when a business needs to change in fundamental ways that require adding to its base of talent to be able to “skate to where the puck is going to be” as Wayne Gretzky said.

Morris: Next, from Voltaire: “Cherish those who seek the truth but beware of those who find it.”

Montgomery: Truth with a capital “T” has been overrated. Truth is not an absolute, a forever and ever; truth, as William James helped us understand, is something that evolves. New experiences, new data, change it. So I’d always urge people to talk about truth with some humility, some openness.

Morris: Finally, from Peter Drucker: “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”

Montgomery: 

This is one of my favorite quotations about business, and, really, about life. To me, it’s at the heart of strategy, of living deliberately as a business, of pausing to consider where you’re going before you start running, before you dedicate resources to an endeavor. The first time I heard this quotation was during a board meeting, when an exasperated director muttered it in response to a presentation that laid out all the tactics that were being undertaken without first nailing the “why.”

Morris: Now please shift your attention to The Strategist. When and why did you decide to write it?

Montgomery: 
 I had spent many years working with MBAs and managers from large organizations who have responsibility for a piece of the action. Then, somewhat unexpectedly, I was asked to teach in the School’s owner/ president course, where everyone in the room was the leader of a business, often a business they’d founded, or a business that had been in their family for decades.

I began by covering material I’d use in any core strategy course. The class sessions went well but people started coming to my office to talk about their businesses. The conversations started out predictably enough: we’d analyze the strength of their competitive positions and discuss challenges that lay ahead. But often near the end of the conversations, something else happened: People talked openly and earnestly about choices they were making; uncertainties they harbored; fears that their businesses didn’t really matter, didn’t really have a competitive advantage. Other times, they’d talk about exciting opportunities they were weighing. In those conversations I saw in a deep down sense what it really means to be the chief strategist for a business, to bear responsibility for defining what a business will be, and why and to whom it will matter.

That led me to reshape the curriculum and to add a unit where we worked on nothing but their own strategies. The goal was not just for each of them to develop a compelling plan, though that was part of it; the real goal was to help them grow into the role, to learn to be leader strategists in the full sense of the word. The book is the story of that journey, and it is written for leaders who want to step up to that challenge, that opportunity in a real way.

Morris:
Were there any head-snapping revelations while writing it? 

Please explain.

Montgomery: 
 In writing it, I learned how much strategy had become about analysis, and how little about leadership. But strategy should be at the heart of leadership, the very core of a leader’s responsibility to a business and everyone in it.

Morris: To what extent does the book differ from other books on strategy?

Montgomery: There have been literally thousands of books and articles written about strategy in the last twenty-five years, but virtually nothing has been written about being a strategist, or what it means for a leader to wholeheartedly embrace this role. That’s the book’s most important contribution.

Morris: What’s different about companies led by strategy?

Montgomery: Many companies and many managers run by the ‘seat of their pants,’ in an ad hoc manner without much consistency. Companies where strategy is alive and well have a coherence about them; what they want to accomplish is clear, and that makes it much easier to align activities throughout the firm to serve those intentions. If someone working in a company doesn’t know what the strategy is, how can they in their positions best serve those ends? The answer is, they can’t. People throughout a firm need and deserve clarity –real clarity—about what the business is trying to do. Only that will allow them to make the many choices they face every day in a way that is consistent with what others are doing, and consistent with the overall objectives of the business.

Morris: What does it mean to “live the questions that matter most?”

Montgomery: It means that, so long as a business exists, the questions at its core are never solved and settled, once and for all. It means that a leader has to always be aware of the choices that have been made, how they’re playing out, and consider the way forward with all of that in mind.

Morris: What are the most common misconceptions about what strategy is…and [begin italics] isn’t [end italics]? What in fact is true?

Montgomery: 
 Once strategy was considered the very heart of leadership, the first essential responsibility of a leader. Considered “an architect of organizational purpose,” a leader was someone who not only formulated strategy, but paved the way for and oversaw its execution. As the strategy field has grown more rigorous, and we’ve brought in a lot of insights from economics (in itself a good thing), there have been a host of unintended consequences. Something important has been lost. Strategy has become more like an analytical problem to be solved than a tool for building and nurturing a great company. Strategy can’t be just about formulation, about thinking great thoughts. It has to be about setting an agenda and putting in place an organization to see it through. Thinking and doing combined.

After all, any strategy that is put into place in any company today will eventually have to change. A good metaphor for this is an old Greek paradox called The Ship of Theseus. The Theseus was a ship that was brought into dock for repairs. Every plank was changed; and as each plank was removed and replaced with a new one, the old planks were piled on top of each other near by. In time, all those old planks were reassembled and there was another ship—what was it? Was it the Theseus? At what point did one ship stop being the Theseus and become something else? Plutarch called it the “logical question of things that grow.” It captures the way most companies grow and change, too. Exactly when a company stops being one thing and becomes something else is often difficult to pin point, as companies rarely stand still. And that’s why the job of the strategist is never completely finished as long as a company is open for business.

Morris: In your opinion, what are the most valuable lessons to be learned about strategy from Ingvar Kamprad, founder of IKEA?

Montgomery: 

Kamprad described IKEA as a concept company, a business that was driven by a core idea—what I’d call the purpose of a business. He understood through and through that excellence starts with clarity about what you want to do, and that that something has to matter to some group of customers. Kamprad said: IKEA’s concept is “to offer customers an extensive range of practical, well-designed home furnishings at low prices. By doing this….we [strive] to give people a better everyday life.” In the notoriously difficult furniture industry, IKEA has a difference that really matters. Not surprisingly, it is one of the most profitable firms in the industry. Readers should ask themselves whether their businesses really matter to their customers. It’s where greatness starts.

Morris: What are the defining characteristics of a “good purpose”?

Montgomery: 

A good purpose is not just something that makes people feel good; it has to address real market needs with real solutions. It should give the firm a distinctiveness that some group of customers really care about, and for which they are willing to pay sufficiently for you to make a decent profit.

Morris: Insofar as effective strategy is concerned, what is Domenico De Sole’s significance?

Montgomery: 
 DeSole was the CEO of Gucci Group and pulled off one of the most impressive turn-arounds in the history of the fashion industry. He did it by redefining the purpose of the company, and building a business model –what I call a system of value creation—that aligned everything the company was doing with that new purpose.

Morris: What are the greatest barriers to avoid or overcome when attempting to do what DeSole did –“turn purpose into reality”?

Montgomery: 
 The biggest challenges are avoiding purposes that are mushy, not clear, or of insufficient consequence to customers; and failing to make the tough calls that are necessary to see a good purpose through. When implementing a strategy, managers often stop half way: they make the easy changes the strategy calls for, but put off or avoid the tough ones; the ones that could really give the firm an edge. One of the things that was particularly admirable about DeSole’s time at Gucci is the courage he had to make the hard calls, to give the strategy what it really needed to succeed.

Morris: How best to determine whether or not one’s strategy establishes a “real system of value creation – a clearly defined purpose tightly backed by a set of mutually enforcing parts”?

Montgomery: 
 The test is this: Everyone throughout a company should be able to link his or her job, and the way he or she does it, back to the strategy. Strategy should be the animating force for everything that’s done in a business.

I was talking about this once with a group of executives and someone mentioned that he thought strategy was something for a few elites, and that some of it might trickle down to the rest of the people in the company. The comment was quickly countered by a manager from one of the world’s most profitable airlines. He gave impassioned testament that people throughout their firm know their strategy—they have to. If they don’t have a good understanding of what the company is trying to accomplish, “baggage handlers and gate clerks won’t have the information they need to make the trade-offs, the choices they have to make in their jobs every day.”

Morris: What is the primary insight behind a “strategy wheel?”

Montgomery: 
 The strategy wheel is a simple diagram for visualizing strategy. It requires not only that you state the company’s purpose (the center of the wheel) but that you lay out all the spokes—from marketing to HR to supply chain—and show how they support that purpose.

Morris: You identify six “Hallmarks of Great Strategies.” Which of them seems to be the most difficult to achieve and then [begin italics] sustain [end italics]? Why?

Montgomery: 
 The toughest is “add real value.” That means bringing something to the world that would not be there without you. Otherwise, your firm isn’t relevant, really, and could easily be replaced. Adding value over the life of a business is the most difficult challenge any leader faces, and the single most important responsibility of a leader.

Morris: In your opinion, did Apple ever have an “insanely great” strategy? Please explain.

Montgomery: 

 Apple had a big advantage in its early years, but I’m not sure I’d call that a strategy. After returning to the firm in the late 1990s, Jobs put in place what’s been called “the digital hub strategy” wherein he laid out why Apple would matter and what it would bring to the world: Apple would add value to a host of digital devices, and connect them through the iMac, Apple’s digital hub.

Jobs made the announcement at Macworld in 2001—and you can watch his speech on YouTube. He lays out the idea, and proceeds to bring it make it a reality over the next decade. Those who think strategies are developed retrospectively, not prospectively, should watch that video!

Morris: You assert that a strategist is, “first and foremost,” a leader. Please explain.

Montgomery:
 The leader of a company should be its chief strategist because it is the leader who ultimately is responsible for what a firm is and why (and indeed whether) it matters. Consultants, analysts, and people throughout a company can contribute, of course, and often in big ways, but the person with the ultimate decision rights, and the ultimate responsibility for the well being of the firm, is the leader.

Morris: Does an organization’s [begin italics] status quo [end italics] require the strategist you endorse in your book?

Montgomery:
 No, but the status quo is always a limited period in time. Don’t sink into it too comfortably for soon it will be gone. That’s why every business needs a leader who is a strategist, who, like the captain of a ship, is watching out for icebergs, steering, and rebuilding the vessel to keep it seaworthy.

Morris: Are the best strategies a “work in progress”?

Montgomery:
 Always!

Morris: For more than 25 years, it has been my great pleasure as well as privilege to work closely with the owner/CEOs of hundreds of small companies, those with $20-million or less in annual sales. In your opinion, of all the material you provide in the The Strategist, which do you think will be of greatest value to leaders in small companies? Why?

Montgomery: The book as a whole was inspired by my experience working with entrepreneurs and business owners; it was designed to be inspirational and practical—to encourage leaders in businesses of any size to be strategists, and to give them the tools they’ll need to do the job well. I’d challenge them all to put pen to paper or hand to keyboard and try to work their way through the exercise in Chapter 6, where they have to identify the purpose of their business, build a strategy wheel—a system of value creation—around it, and sum up the strategy in one succinct, compelling paragraph. It’s not easy to do—in fact, most managers find it very challenging—but, my hunch is they’ll find it well worth the effort!

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Cynthia cordially invites you to visit this websitewhere you can download an excerpt from her book, The Strategist: Be the Leader your Business Needs.

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