Misunderstanding the relationship between goals and strategy is the origin of wheel-spinning frustration in many strategic retreats and planning meetings. The executives want to develop strategy, but first mistakenly try to agree on the overall goals of the company. Agreement on broad universal goals is easy but uninformative. Searching for something concrete, senior executives finally impose some arbitrary metrics, like a 15% after-tax return on capital and a 12% annual rate of growth. The group now tries to identify “strategies” for achieving these goals.
What should have been a discussion of how and where to compete devolves into an exercise in hockey-stick financial forecasting. The problem the group has experienced is that a strategy is not a plan for reaching an arbitrary goal. A strategy structures the situation, providing guidance as to how to best use the resources and insights available. Useful strategic objectives are not simply the echo of ambition; they reflect an understanding of the forces at work and seek a balance between what is desired and what is possible.
My doctoral research was on diversification and the ensuing book, Strategy, Structure, and Economic Performance, was, for a brief moment, a Fortune Book Club selection. This opened a number of doors into senior management groups of diversified companies. Thus, in 1975, while on the faculty of Harvard Business School, I was asked to work with a small top management team at Curtiss-Wright. The CEO, Ted Berner, had guided the company since 1960 and he wanted an outsider with expertise in diversification to help shape the corporate strategy.
Headquartered in Woodridge, NJ, Curtiss-Wright was the legacy of aviation pioneers Glenn H. Curtiss and the Wright brothers. Glenn Curtis was a motor designer, motorcycle racer, and test pilot. Curtiss rose to national fame in 1907 when his V-8 powered motorcycle achieved a speed of 136 mph. He was the first man to fly an airplane on a take off from a naval ship (1910). During World War I, Curtiss supplied thousands of easy-to-fly “Jennys” and N-9 seaplanes to the military. Wright Aeronautical was an engine manufacturer. On its non-stop flight from New York to Paris, Lindbergh’s Spirit of Saint Louis was powered by a Wright Whirlwind engine. Two years later, in 1929, Curtiss-Wright was formed as a merger of the Wright and Curtiss interests.
Curtiss-Wright became a major manufacturer of aircraft engines and propellers during World War II and in the 1950s. The rise of jet engines in the 1960s almost eliminated that business and Curtiss-Wright diversified into other aircraft components, nuclear control equipment, and components for the automobile and construction equipment industries.
Ted Berner began the strategy meetings by asking the group to clarify the company’s goals. I recall his injunction that “We should first agree on what we are trying to accomplish. Once that is clear, we can dig into how to get there.”
The morning’s two-hour discussion of goals was painful. No one could argue with a broad goal like “grow,” or “diversify,” but this kind of aspiration had no bite—you couldn’t deduce much from it. Economists will tell you that the goal of the corporation is to maximize profit, or value, but this statement is equally empty of actionable implications. Yet, if someone was more specific, arguing that the company should seek to be the leader in advanced rotary engines, we quickly realized that such a “goal” was actually an extremely powerful decision about where to allocate resources.
The rest of the day was committed to a review of the company’s businesses. As we broke, Berner told me that we would revisit the topic of goals the next morning. He asked me to lead off with a quick summary of what constituted a “good strategic goal.”
I did not sleep that night. I had come prepared to discuss the pros-and-cons of various approaches to diversification, not the problem of goals. The question “what should a business strive to accomplish?” is, logically no different than the question “what should a person strive to do in life?” And, this question has bedeviled philosophers for twenty-five hundred years. Should people seek faith, honor, truth, justice, power, wealth, balance, or simply happiness? Or, are we free to define our own goals and values, as existentialists hold? And, what does any of that have to do with what one does tomorrow?
The brief presentation I developed that night has stood the test of time. More than thirty years later I continue to find it helpful in setting the stage for fruitful strategy work.
When we do strategy work it is natural to remind ourselves of our broad goals. But it is also important to remind ourselves that broad goals can never tell us what to do. For example, broad goals like liberty and security are shared by almost all Americans, but they do not tell us whether or not Social Security should be a backed by real savings or simply be a pay-as-you-go commitment. And, they do not tell us exactly how much security we are willing to give up to gain an increment of liberty, or vice versa.
Broad goals are best seen as constraints on strategy. Like laws, or like the rules of a game, they constrain our actions without specifying them. Broad goals rule out certain things, and encourage us in certain directions, but cannot tell us what to do.
Specific goals, like grow the GNP by 3 percent next year, or earn more than 15 percent on capital, may seem more “practical” in that they are concrete. But such performance goals still do not tell us what to do and they can actually damage further strategy work. Real strategy work looks beneath the surface of performance measures and attempts to discern underlying causes—the trends, opportunities, and threats that will shape performance in years to come.
After we have reminded ourselves of our broad goals and values, real strategy work begins by examining changes. Strategy may in the service of our desires, but its practical shape is always determined by our insights into how to cope with change—with our diminishing effectiveness in some activities, with the opening of new avenues of activity, and with new modes of operating and of competing.
Importantly, the skillful strategist is not bound by arbitrary goals. The strategist chooses which broad goals can be advanced and which cannot in each situation.
Once we have a firm grasp on a way forward—a strategy—it is necessary to go beyond general guidance and establish explicit targets to measure and control our forward progress. If, for example, we have a strategy of being the most reliable supplier of engine components to truck and construction equipment manufacturers, it behooves us to define “reliability” in this sphere and create systems to both improve it. Such targets are best named “objectives” rather than goals. Goals guide and constrain strategy work whereas objectives are part of its product.
A Note on Curtiss-Wright
At the time of the strategy retreat, Curtiss-Wright was deeply involved in bringing the rotary Wankel engine to market. However, the Wankel’s promise was never realized. Production costs remained high and the rapid run-up in gasoline prices sealed its fate. With this setback, CEO Ted Berner turned his attention to a series of complex take-over battles. While highly-diversified Teledyne was acquiring a major stake in Curtiss-Wright, Berner sought to gain control of Kennecott Corporation (copper). Ted Berner died in 1990.
Today, Curtiss-Wright is a medium-sized diversified provider of flow and motion control products for the aerospace, nuclear, and oil/gas industries, and of metal treatment services for aerospace, automotive, and industrial markets. Click on the logo to visit its Web site.