Should you rely on internal or external strategy experts? Part 1: The important role of in-house strategy experts

Pros and cons of internal and external strategy experts

Strategic planning and the related tasks can be challenging activities for any organization – small or large. Some are large enough to have a team of internal strategy experts. Others rely on external consultants. Other options are to delegate strategy-related tasks to a member of the management team or to skip it at all (which clearly isn’t a good solution).

Obviously, there is no one right solution. In this article series, I discuss the overall question whether to rely on internal or external strategy experts. I will list the pros and cons of both. In addition, I will give some advice on how to manage the undeniable downsides of both options. I will finish the article with some guidance on how to combine the benefits of both – internal and external specialists for strategic planning.

Part 1: The important Role of in-house strategy experts

Part 2: The pros and cons of external strategy consultants

Part 3: How to make the best choice between internal and external strategy experts

Part 1 The important role of in-house strategy experts

Organizations that take strategic planning seriously normally have a person or a small team of experts dedicated to this task. Sometimes it is only one manager or specialist who takes on this responsibility besides other tasks.

The extent to which the business employs specialists dedicated to strategic issues depends on

  • the size of the business and the resources it can dedicate to strategy making
  • the frequency and complexity of its strategic questions

In any case, there are a number of benefits associated with in-house strategy expertise:

Advantages of internal strategy experts

Unparalleled knowledge of the organization

It is almost inevitable that internal specialists and managers know their organization in much more detail than any external consultant. Ideally, internal strategists have at least some level of knowledge about every aspect of the organization – its markets, technologies, challenges, perceived strengths and unspoken ways of doing things. They should be well networked throughout the whole business. This provides a set of advantages, compared with external consultants:

Internal strategy experts:

  • Identify connections and interrelations that externals may overlook or have a hard time finding
  • Immediately take into account internal policies, networks, alliances and ways of getting things done effectively
  • Know many details that might be relevant for the bigger picture
  • Know where to find and how to retrieve all relevant information
  • Can approach a greater variety of people for input

External consultants on the contrary may have a hard time getting together all the pieces and making sense of them. They rely on the support of their internal contacts. Although consultants normally are quick at getting a feel for their clients, they will inevitably need some time to do so. Internal strategists don’t need this learning curve.

True ownership of processes and outcomes

It is the nature of external consultants to finish a project and to leave the house once the buck is turned. As opposed to that, the internal strategy consultant stays in the organization. His responsibility for a particular strategy project may expire too. However, he will still be around when the long-term results of the project reveal. Thus, his personal reputation and credibility are much more linked with the final impact of the project for the organization.

I don’t want to play down external consultants’ commitment to a strategy project. Their reputation is linked to the final outcomes too. They always work with potential follow-up projects in mind. Nevertheless, it is their role to not become as closely attached to a client and his initiative.

By their nature, internal strategists are more focused on the long-term overall impact of a project. In addition, internals are more concerned for its interrelations and potential side-effects.

Another aspect is that some projects and processes tend to become “orphans” once the initial leader leaves. With external consultants walking away, especially unpopular projects may soon lose momentum. An internal strategist is more likely to have a close eye on the further course of the initiatives he helped to launch. In many cases, this is sufficient to keep things going.

Other advantages of internal strategy experts

Keeping the responsibility for strategy making in-house has some other benefits too. The most important ones are:

  • The organization builds internal knowledge about strategy processes.
  • This knowledge is always available. No need to negotiate project scopes and budgets before the externals start working.
    In every organization there are smaller strategic questions and evaluations that may come up at any time. It is a fast solution to hand them over to the internal strategists who will provide answers without delay.
  • Internal strategists can help the whole organization to improve its strategic thinking capabilities on an ongoing basis.
  • Internals can think and plan proactively. They can tackle minor problems and issues with a low probability of occurrence. Thus, the organization achieves a higher level of preparedness.

Potential downsides of internal strategists

Despite all benefits, it is not without downsides to rely on internal strategists. As I wrote in an earlier post about the Many faces of the strategist, they have to have many facets. In order to be successful, internal strategy experts have to have a wide set of character traits, take on various roles and handle different – often contradictory – expectations. This is not only a difficult task. It is almost impossible to fulfill all these requirements (although a well-balanced strategy team can come quite close to this).

Internal strategy experts may fall victim to human weaknesses as much as anybody else. Potential problems are:

  • They may become biased and professionally blinkered.
  • They may fall victim to the “We have always done it this way”-syndrome.
  • They may lose their ability to think outside the box by taking on internal believes and common sense.
  • They may not speak and act as freely as an external consultant due to their own relationships and networks
  • They may not be up to date with latest strategic thinking.
  • They may have difficulties to identify and adapt solutions from outside the industry (Cross-industry innovation).
  • Their expertise and their results might not be valued as highly as those from externals, since they are always there. An external project support incurs costs and thus is often perceived as more valuable. In this context, the sunk-cost-dilemma plays a role. There may be a lower psychological barrier to kill an internal project than one that is related to high consulting fees.

Recommendations to overcome the downsides of internal strategists

To my experience, diversity can help to diminish unfavorable aspects of internal strategy teams. This is not so much about gender or racial diversity here. More relevant are aspects like experience levels, period of employment within the company, level of internal and external work experience, networks and relationships within the company etc.

With a good mix of members in the strategy team, their individual strengths and weaknesses can level out potential downsides from personal biases.

A good mix of members in the strategy team can level out potential downsides from personal biases. Click To Tweet

Another important factor is feedback and support from top-level executives. Corporate strategy is their responsibility. Hence, they can remind and encourage their internal experts to remain objective and professional. Their public backing enables the strategy team to develop a position of strength. From there, the strategists can operate independently from other internal constraints.

Our book recommendations for internal strategy experts