If large, centrally managed corporations are a thing of the past in many industries, so too are large, centrally managed strategy departments. Or are they? We decided to find out.

Decentralization sometimes means the creation of separate business units within a corporation. In other cases, it assumes more fundamental forms, as suggested by the rising number of carve-outs, spin-offs, and letter stocks.¹ Often, too, decentralization involves efforts to enable each individual unit of the decentralized company to make its own strategic decisions, instead of confining them to the senior executive level of the corporate center (Exhibit 1). The idea is to help these units focus on value creation opportunities much more narrow than those that would interest typical centralized strategy departments.

The objective is an admirable one, for a strong broad-based strategic-thinking capability can help these units make dynamic decisions about where and how they should direct their attention in a fast-moving marketplace. Yet replicating this powerful weapon broadly across a company presents quite a challenge. For one thing, such efforts demand a good deal of time from a company’s most talented people, who will have to make a long-term commitment, since quick results are not likely. And...