Understanding the “Role of a Chief Strategy Officer (CSO)”| BCG

In our work with Chief Strategy Officers (CSOs)FOUR Questions invariably arise – 

  1. What are the typical CSO responsibilities ?
  2. Why are some CSOs more effective than others ?
  3. How should CSOs work with line executives ?
  4. what role should the strategy department play in developing future leaders within the business ? 

We’ve observed that roles and responsibilities vary among companies and industries, but to better quantify the differences—and to definitively answer these questions—we embarked on a series of in-depth interviews with 48 CSOs of companies from around the world, in a wide range of industries : consumer products, industrial goods, financial services, energy, technology, media, and telecommunications. Just over half of the CSOs we interviewed report to the CEO, although this is less likely to be the case at larger companies and in the financial sector.

Our interviews explored CSO responsibilities, team composition and size, how CSOs work with other parts of the business, and other key success factors

What Are the Typical CSO Responsibilities ?

Our findings revealed that the CSO has the least-defined role among C-suite-level executives. The role is characterized by a high level of ambiguity, constantly evolving relationships with key stakeholders, and regular changes to the scope of work. As one executive we interviewed noted, “The strategy department is in charge of every new project that falls outside the boxes of the traditional organization.

Broadly speaking, CSO responsibilities fall into THREE Categories —”Strategy Development”, “Resource Allocation”, and “Strategy Execution”—but activities within these three categories vary widely. (See Exhibit 1.)

Most CSOs are responsible for identification of growth opportunities (84 percent of the executives we interviewed), strategic planning (82 percent), and M&A and divestments (82 percent). Other common responsibilities include monitoring long-term trends and outlook, gathering competitive intelligence, driving cross-business-unit initiatives, and sustaining business model innovation. Far fewer CSOs are involved with identifying cost improvement opportunities and managing post-merger integration (23 and 20 percent, respectively).

CSO responsibilities vary by industry. For instance, consumer goods companies’ CSOs focus primarily on strategic planning and cross-business-unit strategy, whereas CSOs at industrial goods companies focus more on increasing shareholder value through portfolio management, M&A, and identification of growth opportunities. CSOs in the energy and financial services industries tend to have more-diverse responsibilities.

The size of the CSO’s centralized strategy team varies depending primarily on the size of the company itself, but the centralized team tends to be smaller than strategy teams in the business units.

Why Are Some CSOs More Effective Than Others ?

From our experience and observation, three factors determine the success of a CSO: having a clearly defined role; getting the basics right on planning, growth, and innovation; and building credibility and trust—particularly in the first 100 days. Let’s look at each of these more closely.

Having a Clearly Defined Role – The most effective CSOs have a clear role and well-defined objectives. This clarity allows them to stay focused on what matters and to build a supporting team that has the right people and skills. As noted earlier, CSO roles and responsibilities vary greatly. Our analysis of the range of responsibilities revealed four distinct roles: portfolio managers, strategy orchestrators, internal consultants, and CEO delegates.

Getting the Basics Right on Planning, Growth, and Innovation – Strategic planning, growth, and business model innovation are the fundamental responsibilities of almost every CSO. Through the planning process, effective CSOs provide top-down guidance to the business units and align the units’ plans with those of the corporate center, a task that all our respondents said they find challenging. Driving growth is also a key aspect of CSO performance. Deciding which markets to target and how to win is especially difficult when it involves going beyond traditional, core businesses. The CSOs we spoke to said that their greatest challenge is executing growth ideas, not generating them. The ability to drive business model innovation—that is, to rethink the value proposition and operating model to capture new opportunities—is also a highly valued aspect of the CSO role.

Even though growth and business model innovation are among the top priorities of the CSOs we spoke with, few CSOs have formal processes for executing on those priorities. As a result, CSOs often find themselves responding reactively rather than proactively to opportunities. This can be frustrating for CSOs as well as for their C-suite colleagues.

Building Credibility and Trust – CSO success hinges on the ability to build relationships with the business units and deliver value, rather than being seen simply as “overhead.” Good listening skills are critical. Each business unit is different, and each will have substantive issues. As one CSO noted, “One of the hardest things to relearn is that I don’t have to speak. I have to listen to senior executives so that they open up.” Without strong relationships with the business units, strategic planning can become a bureaucratic, template-driven exercise. Another trap that new CSOs typically fall into is playing the CEO card too early. The CSO’s relationship with the CEO can be an important lever, but it must be used sparingly.

The CSOs we spoke to all agreed that the first 100 days on the job are critical when it comes to building relationships and gaining credibility. Said one, “I have seen that the CEO forms his impressions in the first 100 days and rarely changes them later on.” Most reported that, in hindsight, they should have focused their first months more on building relationships with the business leaders and CEOs.

To stay connected to the strategy resources in the business units, CSOs use a range of levers. These include adding non-bureaucratic team members with strong communication skills ; developing a community of business unit strategists through regular meetings, monthly calls, or newsletters; and staying closely involved with daily performance management at the business unit level.

How Should CSOs Work with Line Executives ? 

Operating within a clearly defined role that is well understood by the broader management team is critical to a CSO’s success. Although there is no single “right” model, the CSO’s role should be shaped by how diversified the business units are, the CEO’s leadership style, and the company’s organization model. Our analysis revealed four CSO archetypes, each requiring different capabilities.

  • Portfolio Manager (26 Percent of Respondents) 
  • Strategy Orchestrator (42 Percent of Respondents) 
  • Internal Consultant (16 Percent of Respondents) 
  • CEO Delegate (16 Percent of Respondents) 

What Role Should the Strategy Department Play in Developing Future Leaders within the Business ?

In many organizations, the strategy department is seen as both the entry point for external talent and an environment for broadening the horizons and accelerating the careers of the most talented young managers. For example, nearly 60 percent of CSOs are external hires, with many coming from a management consulting company or investment bank. Traditional wisdom says that the skills required to succeed in a strategy role form an important part of the skill base of a successful senior executive.

This seems to be a plausible theory, but does it work in practice? The answer is yes, mostly, but with a few significant caveats. Our interviews highlighted the important role that strategy departments play in attracting talented people from outside the organization. Most of the CSOs we spoke to recruit from a combination of investment banks, top-tier consultancies, and business schools. In general, this model works well, providing both a strong strategy team and an effective platform to bring those people into the organization. Strategy teams tend to have quite high turnover, but in general this is evidence that the model is working.

Where CSOs report a more mixed experience is in developing and accelerating the careers of talented managers who are already within the organization. Companies that do this well are rigorous about selecting managers to “cycle through” the strategy team and then providing targeted training and professional development to the chosen few. Over time, this creates a track record of accelerating the careers of talented people—and attracting the next wave of talent into the department. Unfortunately, however, the reverse is also true. Without a clear mandate to bring in the best people, a structured development program, and a process for cycling them into line roles, the strategy department can rapidly become a dead end for less-talented managers. This negative cycle can be hard to break once it sets in.

It is no surprise that CEOs and CSOs alike commonly ask us what CSOs typically do next. Although only 41 percent of CSOs sit on the executive committee or management board, they do tend to rise in the executive ranks, with 67 percent either becoming the head of a business unit or taking on another role on the executive committee.

Despite being the least-defined C-suite role, and notwithstanding some of the common frustrations surrounding the corporate-planning process, the overwhelming majority of CSOs add a great deal of value, usually by focusing on a small number of critically important functions.

” From the CEO’s perspective, an effective CSO provides tremendous Leverage and Insight “… and from the CSO’s perspective, the role typically provides a solid foundation for an executive-level line-management position.

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One thought on “Understanding the “Role of a Chief Strategy Officer (CSO)”| BCG

  1. Pingback: Small Business Owner Weekly Review (Week of December 30, 2013) | Soltis Consulting, Inc.

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