Strategy as Pasta Puttanesca Prepared by the CFO

Henrik Tham, Head of Strategy & Transformation, Large Corporate & Institutions, Swedbank

Henrik Tham, Head of Strategy & Transformation, Large Corporate & Institutions, Swedbank

I live in cold Sweden, but for one year I lived in Italy and at least to me the climate, culture and food was just fantastic. I always wondered how Italian food could be so good (even in gas-stations!), but it is very simple – Italians have fantastic ingredients, and they use proven no-nonsense basic recipes.

These two principles can be applied to many things including strategy development. I have been part of developing and reviewing multiple strategies and seen far too many strategies of poor quality and consuming too much time and resources. This is a waste of resources, very demotivating, risks leading your company on the wrong track. With some basic steps and the CFO-organisation´s know-how, it is possible to develop excellent strategies without lengthy processes and expensive consultants. The basic ingredient is good enough profitability reporting explaining where value gets created and destroyed. Here is a basic recipe with only five ingredients.

• Really think before you move– one page only and work with three columns, concise bullets and formulate (i) ten sharp observations about the internal and external state of your business, (ii) a few conclusions linked to your observations and (iii) finally define up to five must-win battles connected to the conclusions. Read some external reports and select a handful of really knowledgeable people to give input and challenge old truths. The CFO role is to enforce the P&L perspective and further management should provide some basic play-rules including financial ambition, restrictions or other boundaries set by culture or mission. The exercise can take a few weeks including anchoring with top-management but will save lots of time during the rest of the process as you get the correct focus and buy-in from start.

• Elegance in simplicity – please use no-nonsense language and write for people who do not know your business. If you can´t explain yourself in simple words, it is probably not good enough. This will be used for broader communication and what is simple is effective. Find one good writer to manage the document from start and no one else should touch it.

• Strategy, not broad ambitions - strategy is about defining key leavers that create value and being profitable or reducing cost is not strategy, but financial goals. Entering new markets, automating your administration, or tripling the number of sales meetings are measurable Must Win Battles. Test the impact with a basic financial model, set clear targets to measure success and describe the few connected critical activities required to reach goals, but do not start activity-planning.

• Bring out the critical facts - this requires some quantitative skills and can-do-attitude including strong support from the CFO-organisation. Quality of facts is always better than quantity (as for pasta) and rather one good proof, than five mediocre ones. Based on findings you will adjust and fine-tune your initial hypothesis, but typically you are 70 percent-80 percent correct from start. Facts will bring credibility to the strategy and help you trust the end-product. You will not analyse everything with this approach, but seldom real insight comes from producing hundreds of PowerPoints and looking at them in end-less workshops (that is slow death…).

"With some basic steps and the CFO-organisation´s know-how, it is possible to develop excellent strategies without lengthy processes and expensive consultants"

• A final check and prioritisation- You are now ready to write the strategy document (keep it short), but first do a CFO feasibility assessment. Can we do this and are assumptions reasonable. Do additional prioritisation and outline a high-level plan. Strategy is a lot about selecting what not to do, but with clear pre-requisites in place from start you should not have to re-do everything. Writing the actual strategy is now easy basically putting together the story with observations, analysis, must win battles and plan and add some basic context about financials, market-shares.

There are plenty of advanced recipes for strategy development, but in my experience very few are prepared to embrace complex methodology. Do not overcook the strategy but serve it“al dente” and do not involve to many chefs - people will thank you that they can focus on their real job. In essence it should be a top-down exercise with some experts involved. It is however a messy process so expect iterations but outlining the initial hypothesis and anchoring saves enormous amounts of time and improve the end-result. Finally, below I share my wife’s pasta-recipe which I think is great.

A good Puttanesca for four people

Fry neatly chopped garlic (do not brown it) in lots of olive oil and some salt together with 5-10chopped Anchovies (Italian brand) and some fresh chilli (or some tabasco actually adds more taste) and capers. Add chopped tomatoes (nice fresh, but half a can of chopped tomatoes of highest quality works great). Some sugar and lemon zest is optional, but adds additional flavour. Let the sauce boil together and stir together with good (expensive) pasta that is boiled al dente. Serve with high quality olives, leaf parsley and possibly parmesan (but that will outrage any Italian reader).