More than a communications partner

Corporate Strategy Study Conducted May 2009

2

Objectives

This study examined the intersection of leadership, strategy and communications in successfully creating and implementing corporate strategies. Our key objectives:

– Gain additional insight into corporate strategy, its development and execution, and the impacts to its success or failure

– Understand the similarities and differences in behaviors and attitudes toward corporate strategy of CEOs, strategists, and communicators

– Identify areas where these three groups can work together to maximize their collaboration

3

Methodology

Of the 230 completed interviews, 90 were CEOs, 47 were senior strategy officers, and 26 were senior communications officers

Online survey fielded by FD January 28-March 3, 2009 with 230 completed interviews

The analysis that follows is based on the sub-total of 163 completed interviews comprised of CEOs, senior strategy officers and senior communications officers

4

Key findings

5

Definition of strategy

CEOs, strategists, and communicators do not share a common definition of what strategy is at the conceptual level, but most agree that it has:

The ability to change a market, competitive position or business model

6

What makes an initiative strategic

Which criteria must be met for an initiative to be considered strategic within your organization? Please select as many as three. (N=163)

Respondents do not have a clear definition of what strategy is at the conceptual level, but two-thirds agree that it “changes a market, competitive position or business model.”

73%

46%38%

30%23% 23%

45%

21%32% 36%

23%27% 31%

19%

58%

27%

64% 65%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Changes market,competitiveposition or

business model

Cuts acrossfunctional andorganizational

boundaries

Involves multi-yearcommitments of

resources tomarkets and new

ventures

Exceeds $threshold in impact

and investment

C-LevelSponsorship

Is visible to theBoard of Directors

CEO

Senior Strategy Officer

Senior Communications Officer

7

Identifying strategic initiatives

CEOs, strategists, and communicators agree that externally focused initiatives are more strategic than

those that are not. Among the most strategic:

New market entry Acquisitions Business model transformation

8

Most strategic initiatives vs. least strategic initiatives

CEO

1. New market entry 69%

2. Acquisitions or divestures 64%

3. Business model transformation, e.g., pricing 64%

4. Repositioning or rebranding 52%

5. New product launch 51%

6. Reorganization 51%

7. Sourcing/outsourcing 34%

8. Channel entry/exit/consolidation 27%

9. Recapitalizations 23%

10. Downsizing/reengineering 20%

11. C-Level leadership training 20%

12. Front office/back office technology platform replacement 19%

Overall

1. New market entry 71%

2. Acquisitions or divestures 63%

3. Business model transformation, e.g., pricing 58%

4. Repositioning or rebranding 57%

5. New product launch 48%

6. Reorganization 47%

7. Sourcing/outsourcing 30%

8. Channel entry/exit/consolidation 29%

9. Recapitalizations 24%

10. Front office/back office technology platform replacement 23%

11. Downsizing/reengineering 23%

12. New measurement and compensation models 23%

Most Strategic

Least Strategic

Senior management has a clear definition of what strategy is not. External initiatives are considered most strategic.

Which initiatives would usually be considered strategic within your organization? Please check all that apply. (N=163)

9

Strategy success and failure

Respondents are generally very optimistic about the success of strategies, but acknowledge that about one-third of initiatives fail

All three groups agree that strategic initiatives require a disciplined strategic planning process

They also cite stakeholder commitment and anticipation of obstacles as major success factors

CEOs, strategists and communicators say senior management is most responsible for both the success and failure of strategic initiatives

They blame failed strategies on five common reasons, and 82 percent of failures are preventable

10

Disciplined strategic planning

CEOs, strategists, and communicators all agree that strategic initiatives require a disciplined

strategic planning process

11

Importance of a disciplined strategic planning process to the success of strategic initiatives

More than 80% say disciplined strategic planning is at the very least critical to success.(80% = combined 4 and 5 responses across all groups)

How critical is following a disciplined strategic planning process to the overall success of your strategic initiatives? (N=163)

12

Success factors

They also cite stakeholder commitment and anticipation of obstacles as major success factors

13

Why strategic initiatives met or exceeded expectations in terms of effort required and delivery of expected benefits

  CEOSenior

StrategyOfficer

SeniorCommunications

Officer

Correct strategy 33% 39% 33%

Understanding and commitment of stakeholders 30% 25% 31%

Anticipation of obstacles 21% 9% 11%

Upfront planning 13% 20% 19%

Other 2% 6% 5%

Stakeholder commitment and anticipation of obstacles are major success factors. In fact, 21% of CEOs say the latter is the key to success.

What was the primary reason why the strategic initiatives met or exceeded expectations in terms of effort required and delivery of expected benefits? Please check all that apply. (N=163)

14

Responsibility for outcomes of strategic initiatives

CEOs, strategists, and communicators say senior management is most responsible for both the

success and failure of strategic initiatives

15

Parties most responsible for failed strategic initiatives

3 out of 4 respondents (76%) said senior management should be held most accountable for failed strategic initiatives.

Who within the organization should be held most accountable for the failure of key strategic initiatives? (N=135)

16

Reasons for failure

CEOs, strategists, and communicators blame failed strategies on five common reasons, and

82 percent of failures are preventable

17

Why strategic initiatives fail

Strategic initiatives fail for five common reasons. But CEOs, strategists and communicators are not completely aligned on why initiatives fail.

What was the primary reason why strategic initiatives did not meet expectations in terms of effort required and delivery of expected benefits? (N=135)

18

Major differences

CEOs Strategists Communicators

Most likely to indicate that failure is a result of “unforeseeable external circumstances”

Most often blame “incorrect strategy”

Split the blame evenly among “unforeseeable external circumstances,” “lack of understanding,” and “other”

Why Strategies FailCEOs, strategists, and communicators do not agree on why strategic initiatives fail.

19

Cause for concluding strategy was incorrect

The greatest problem is an overestimation of market potential (58%), but incorrect economic modeling (38%) and unanticipated competitive responses (21%) are also factors.

What caused you to conclude the strategy was incorrect? Please check all that apply. (This question was only asked to those who blamed failed strategic initiatives on “incorrect strategy” (N=24))

67%

33%

22% 22%

11%18% 18%

46%

9%0% 0%

50%

25%

46%

75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Market potentialoverestimated

Competitive responsedifferent in magnitude

or direction

Objectives andsuccess criteria not

well understood

Incorrect assessmentof economics

Unforeseen barriers touptake/switching

CEO

Senior Strategy Officer

Senior Communications Officer

20

Why lack of understanding occurred

CEOs and strategists say the problem is communications-related, while communicators suggest their earlier involvement in the process would have helped.

Why do you believe the lack of understanding occurred? Please check all that apply. (This question was only asked to those who blamed failed strategic initiatives on “lack of understanding” (N=25))

64%

55%

27%

18% 18%

44%

22%

11%

33%

20%

40% 40%

0%

56%

0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Poor communications among stakeholders Misunderstandings about deadlines Poor understanding of costs

CEO

Senior Strategy Officer

Senior Communications Officer

21

Importance of communications

All three groups agree that communications is critical to the overall success of strategic

initiatives, with 1 out of 2 respondents indicating that communications is “extremely critical”

22

Importance of communications to the success of strategic initiativesCEOs (90%), strategists (86%) and communicators (96%) say communications is at the very least

critical to success.

How critical is communications to the overall success of your strategic initiatives? (N=163)

23

Major differences

Role of CommunicationsCEOs, strategists, and communicators disagree on the role of communications in strategic planning.

CEOs Strategists Communicators

Is an integral component of the strategic planning process

Is an integral component of the strategic planning process

Acts as a resource once implementation begins

Acts as a resource once implementation begins

Acts as a sounding board prior to rollouts

24

0%

10%

20%

30%

40%

50%

60%

70%

CEO 49% 42% 34% 51% 47% 9%

Senior Strategy Office 55% 49% 55% 47% 51% 9%

Senior Communications Office 50% 62% 58% 39% 62% 8%

Provides input up front

Sounding board as

soon as strategies are

developed

Resource for strategists

to use once

implemented

Integral and active

component of the

strategies

Means of

team/employee

feedback

Communications is not

involved in strategy

Role of communications in the development and execution of strategic initiatives

CEOs (51%) and strategists (47%)

said communicators should play an

active role vs. only 39% of

communicators. And strategists

(55%) and communicators

(58%) said communications is a resource vs. only

34% of CEOs.

How does the communications function contribute to the development and execution of strategic initiatives within your company? Please check all that apply. (N=163)

25

CEOs Strategists Communicators

Projects that most frequently met expectations

Business model transformation

Repositioning or rebranding

New market entry

C-level leadership training

Reorganization Compensation

Acquisitions or divestures

Reorganization Repositioning or

rebranding

Projects that least frequently met expectations

Acquisitions or divestures

Sourcing/outsourcing Compensation

Sourcing/outsourcing Front office/back office

technology platform replacement

Channel entry/ exit/consolidation

C-level leadership training

Front office/back office technology platform replacement

Sourcing/outsourcing

Major differences continued…

Optimism GapAn optimism gap exists among the groups regarding the success of strategies. While CEOs and strategists put most of their initiatives at a 50% to 89% success rate, communicators rank multiple initiatives as low as 20%.

26

Success rate of strategic initiatives completed within the past five years

Percent that met or exceeded expectations

CEOSenior Strategy

Officer

Senior Communications

Officer

Business model transformation, e.g., pricing 83% 74% 78%

Repositioning or rebranding 78% 67% 81%

New market entry 78% 82% 71%

New product launch 76% 79% 72%

Front office/back office technology platform replacement 76% 53% 22%

Recapitalizations 75% 78% 67%

C-Level leadership training 73% 89% 20%

Downsizing/reengineering 69% 78% 64%

Reorganization 67% 89% 79%

Channel entry/exit/consolidation 64% 60% 67%

Sourcing/outsourcing 63% 50% 40%

Acquisitions or divestures 60% 71% 83%

New measurement and compensation models 59% 93% 56%

While respondents generally believe initiatives completed within the past five years were successful, an optimism gap exists among the three groups.

How have the results of strategic initiatives you’ve completed within the past five years met your expectations both in terms of effort required and delivery of expected benefits? (N=163)

27

Use of communications

When asked how they will use communications as it relates to their current strategic initiatives in this economy, most respondents said they will utilize both “workforce communications” and “customer

marketing communications”

28

How communications will be used in relation to strategic initiatives in this economy

Communications will maintain focus on two key audiences: employees (68%) and customers (70%).

How do you plan to use communications as it relates to your current strategic initiatives in this particular economic downturn? (N=163)

73%67%

44%

19%14% 12%

70%

30%26%

21% 19%

69%

38%35%

27%

35%

64%69%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Customer marketing communications Board communications Government/ Legislative outreach

CEO

Senior Strategy Officer

Senior Communications Officer

29

Continuation of strategic agendas

A solid one-third of respondents will execute their current strategic agendas despite the

economic downturn

30

Effects of the economic downturn on strategic initiatives

A solid one-third of respondents will execute their existing plans despite the economic downturn.

Has the economic downturn caused you to change your current strategic initiatives in any way? (N=163)