Espoused Strategy vs. Strategy-in-Use: Watch How The Resources Are Allocated

I recently encountered an organization with two main business units: the large core business and a smaller adjacent unit.  The enterprise as a whole was doing quite well, though it competed in a market that was becoming increasingly challenging.  Senior executives and board members lamented that the core business, while quite healthy, lagged behind several industry-leading competitors.  They pointed to  analysis by outside parties as evidence of the core business' secondary position in the industry.  Executives and board members had bold aspirations for elevating the core business to a more prominent competitive position. They wondered why managers and employees could not improve performance.  The stated strategy was clear: make the core business a top-ranked competitor in its industry.  

A close examination of resource allocation at the enterprise revealed a quite different story.  Competitors also had a similar structure: a large core business and a smaller adjacent unit.  Yet, the top competitors in the industry invested much more heavily in their core businesses and allocated far fewer resources in their adjacent units.  In fact, this organization invested three times as much on its adjacent business as the top-ranked competitors did.  Yet, executives and board members were shocked that the enterprise's core business lagged behind these rivals.  Company leaders loved to talk a good talk about being #1 in the industry in which the core business competed, but they loved to invest in the adjacency that was a pet project of some enterprise leaders.  

The story illustrates a powerful distinction between espoused strategy and strategy-in-use.  The great scholar Chris Argyris coined the terms espoused values and values-in-use to describe the distinction between what companies say their values are and how people in those organizations actually behave.  The same distinction can apply to strategy.  Don't pay attention to what executives and board members say that their strategy is.  Instead, pay close attention to how they allocate resources.   In so doing, you will see the actual strategy-in-use.  Pay even closer attention when you see resource allocation fundamentally divorced from the stated vision and strategy.  In the end, don't focus too much on executive speeches, strategic plans, and slick promotional materials.  Focus on where the dollars flow.  That will tell you about the actual strategy.  If you discover a mismatch, ask yourself: Why is there a divide between the espoused strategy and the strategy-in-use?  Uncovering the reason for that divide will help you think about how that enterprise has undermined the competitive position of its core business, as well as how a successful transformation can be unleashed.