Collaborative Strategy: A Q & A With Nilofer Merchant

If nothing else, Nilofer Merchant’s The New How: Building Business Solutions Through Collaborative Strategy is ambitious. While many management gurus go on about the value of employee empowerment, Merchant spends an entire book showing not only how strategy with input from all employees is better than strategy from a few people at the top, but also how to make it happen.

Merchant takes for granted that every company is full of people with good ideas. What makes her book so intriguing is that she offers a way for companies to eliminate as many good ideas as possible so they can concentrate on the great ones.

Merchant is founder, chief strategist, and CEO of the Rubicon consultancy, and she is both strategic and practical. She identifies one of the major problems companies face — how to conceive of and execute better strategies — and creates a framework for solving that problem.

In direct, provocative language (sample section title: “Blaming People Only Works for So Long”), she lays out a new way to make every employee a strategist. MIT Sloan Management Review Executive Editor Jimmy Guterman talked to Merchant about her theory, how to put it into practice, and what an “air sandwich” is. (If you want more, read an excerpt from The New How.)

One of your basic arguments is that companies need to include employees at all levels in their strategy. That’s conventional wisdom, but few companies do that well. Why do companies who try to do that fail — and how can they succeed?

Companies fail to include employees for three reasons. First, companies often confuse collaboration with a “kumbaya” kind of approach as if how we feel about each other is the point. It’s not. It’s about co-laboring towards a goal. The only real reason we want to include employees at all levels is to let us create better solutions, better outcomes. To avoid this, we need to move beyond “inclusion” to a full engagement where you get ideas and demand that people engage the process of figuring out what should “we” do to win.

The second reason companies fail is that they include employees without engaging them in making decisions. The bottom line is we don’t have the time in this economy to have a smallish group of people setting strategy or innovating or leading. Instead, that old approach means we’ve created a bottleneck in a business where a few people are responsible for making decisions. That’s not flexible, complete, or nimble enough. So we’ve got to figure out how to have as much distributed decision-making as possible with many employees sharing that responsibility.

The third reason companies fail in this is they lack a way to make tough qualitative decisions. Sometimes that means we don’t ask questions that will only make the process of picking more complicated.

How does “co-creation” work?

For this new era of creative work, we will need to have a new set of management tools. In a creative era, we need to co-create, not just coordinate work. But most of our management tools and rewards are set up to manage within discrete boxes — essentially asking the question: Did Joe do what he was supposed to do?

But those boxes — they don’t help us achieve success. They help us define what each person does. But as soon as we are thinking of boxes, what we also get is the space between the boxes. Those gaps — those spaces in between the boxes — they are where organizations fail. It’s whether engineering makes what customers need or whether sales and marketing are aligned.

It’s the lack of connection across a company or a silo-ed approach to going in a new direction that quite often causes failure. Roles matter, but what matters more going forward is how those roles interact to “mind the gap” for the business.

Co-creation acknowledges that most value created today is not done in discrete pieces that any one person owns. We need to find a way to co-own that big picture of where to go so that any specific new piece of information or market response doesn’t throw us – our highly educated, creative workforce can figure out the right answers. Information flows freely today, and we need not focus on to tell people what to do but rather helping all of us to get a place where we co-create the strategy, co-own the outcome and co-create a new marketplace reality.

How does corporate culture change in an era of collaborative strategy?

Collaborative strategy gets us to stop moving from companies where a few people tell other people what to do to a place a bunch of us create value. We go from “I think, you do” to “we think, we win.” This cultural change will, of course, require a change in how leaders perceive their own value. Most leaders are still taking a stand of “chief of answers” where their value is to know most — if not all — the answers.

But whenever a leaders is the chief of answers, it makes everyone else the tribe of doing things. When we have a collaborative culture, we have a culture able to create momentum, on how to create action. It acts more like a living, breathing organism that can take in information from the market, knows what questions to ask and answer, can envision many options to success, can decide amongst all those option quickly and can take the vision into reality. Momentum then keeps up with or sets the pace for the competition.

How can companies get from whiteboarding to MurderBoarding?

We’re all good at whiteboarding or brainstorming. We all thrive on coming up with brilliant new ideas. But no company I know of — from start-up to a big global titan — is failing because of a lack of ideas. What companies are struggling with is knowing which of these many things we could do, what should we do? That’s where MurderBoarding comes in. We need a set way of picking from many options to “the one” that makes most sense; we need to go from whiteboarding or generating options to picking the right option for us — at this time, in this market.

I created MurderBoarding when I helped a CEO and his team define direction as they went for a new round of capital. The CEO kept going to the whiteboard adding more and more options for what this $100M company could do. And the group kept giving me that look, like — make him stop. I came up with the term MurderBoarding to captivate his attention. The methodology is really an integration of best practices for making tough qualitative decisions.

MurderBoarding is a common framework for a group to make tough choices and walk away being able to tell anyone, which idea matters most to us and why. This allows companies to create alignment and velocity because they are no longer mired in confusion or diluting resources or a political quagmire. When a group can have a shared approach to making a tough set of calls, they can actually make forward motion on making those big ideas real.

Finally, what is an “Air Sandwich”?

I’ve come to characterize traditional strategy creation as one that guarantees an “Air Sandwich.” This is where the company’s new direction is delivered from an 80,000-foot perspective to the folks holding a 20,000-foot view, who in turn then try to coordinate the people working on the ground—producing a big “Air Sandwich” of strategy. It would be like having a peanut butter and jelly sandwich with no peanut butter or jelly — the good stuff that is incredibly necessary is missing.

An Air Sandwich is a strategy that has clear vision and future direction on the top layer, day-to-day action on the bottom, and virtually nothing in the middle—no meaty key decisions that connect the two layers, no rich chewy filling to align the new direction with new actions within the company. By doing strategy the old way, we’re missing the substance of the business—the debate of options, the understanding of capabilities, the sharing of the underlying assumptions, the identification of risks, issues that need to be tracked, and all of the rest of the things that need to be managed. The middle is missing a set of shared understandings that would connect the vision to the direction to the reality.

When a company has an Air Sandwich, the most valuable details and decisions that enable a strategy to succeed are left out of the strategy.