At a recent ‘thought shop’, I talked about pleiotropic effects. In biology, this means a gene that produces two unrelated effects but, when applied to business models, it means an organisational practices meant to create one outcome that also have some unintended consequence.

Asked to provide an example, I gave my personal favourite: strategy review processes that take strong strategies and dumb them down to whatever is agreeable to everyone. These and similar examples always resonate but I’d like to find some new ones. And then, the very next day, I did. And it’s one that’s so harmful to business effectiveness that I thought I’d share it with you.

I was on a review panel, watching six pitches by young executives aiming to win the authority to spend significant sums on a new business idea. I was excited to watch them since I love guiding people the same age as my adult children. And the pitches were very entertaining. They were all incredibly creative and presented with huge, very genuine enthusiasm. These bright young things had obviously put many hours into preparing their pitches. I was struck in particular by how slick their slide decks were, with fantastic images, charts and graphics that looked like they had taken weeks to prepare. Every presentation was as pretty as a picture. And yet I was very worried by what I saw.

You see, I’d helped prepare the brief for the pitches, so every team knew exactly what boxes to tick to win the funding. Our expectations included a compelling and hard-to-imitate value proposition aimed at a market segment that was genuinely homogenous and distinct. We also wanted to see what distinctive capabilities the proposed business model would need to succeed and how the business unit would create these capabilities, either in house or via alliances. To help us judge well and to guide the presenters, I’d encouraged the firm to be extremely clear about the success factors that needed to be backed up with evidence. I can’t claim too much credit for my input though. The criteria were all strategy fundamentals that could be found in any textbook.

And the presenters had obviously read the brief. Like many young people today, they had come through education systems that ‘taught to pass the test’ and had structured their pitches to reflect the guidance criteria. So what worried me so much? Well, despite the very clear guidance, none of the teams addressed the strategy fundamentals well.  The value propositions were superficially differentiated and easy to imitate. The target markets were heterogeneous customer categories, not homogenous and distinct market segments. There was much too little recognition that distinctive capabilities underpin any sustainable competitive advantage and almost no thought about how these capabilities could be built from competitive networks. I was deeply disappointed my guidance hadn’t worked. But I was at odds with the rest of the panel, who loved all the pitches. In our discussion, I proposed the wider implications of this disagreement for the firm.

When different people see the same thing differently, it’s often because they’re looking at different sides of the same object.

In this case, I was looking at lamentably weak strategy fundamentals while the others were looking at the unarguably polished presentations. This explained
our differing perceptions but it also explained why the pitches were so weak.
On many past occasions, this firm’s leaders had praised good-looking presentations and neglected strategy fundamentals. In doing so, they had created an environmental selection pressure that favoured slick spin and disfavoured the substance that was really needed. This had clearly led to not just that day’s situation but to a more generalised habit of style over substance. My Texan friends call this ‘big hats, no cattle’, when senior management get a lot of what they like to see but little of what they need to have.

This firm isn’t unique in having created this problem for itself. The same thing is seen in many firms. In the consulting industry, where quick wins often matter more than sustained client value, the predominance of big hats over cattle is almost universal. This needn’t be so. Senior managers create the environment and could, with a little more effort, create selection pressures in favour of strong strategy fundamentals. Creating the appropriate environment is, after all, one of the most important roles of leadership.