Strategy is Dead. Long Live Strategy.
10 considerations to optimise strategy in the turmoil of today’s business world.
Business has had to live with VUCA for some time. And it is here to stay.
Volatility, uncertainty, complexity and ambiguity are by-products of our fast-paced and globally-connected world. One increasingly common reaction is to question the importance of strategy. If circumstances fundamental to a business model can flip 180 degrees overnight, shouldn’t leaders be concentrating on operations, on continuous improvement, on developing employees’ skills and enabling their adaptability? Isn’t strategy, to all intents and purposes, dead?
The question gains relevance if we remember that, although we like to think in chunks of time – months, interim reporting periods, financial years – there is no end-marker to the operations of a business. Impliedly, what really matters is the process of conducting the organisation. Former head of strategy at Microsoft, Charlie Songhurst, gives this metaphor:
“If you survive long enough, maybe greatness eventually becomes you. [So] what’s underestimated, is if you want to live forever, don’t start thinking about studying centenarians, instead, work out how to not die due to drunk driving or smoking twenty cigarettes a day.”
A great strategy, then, might be simply this: Do good work. Repeat. Keep repeating.
Strategy by doing
This debate around strategy is not new. In the 1970s, with the publication of his book The Nature of Managerial Work, Canadian academic Henry Mintzberg shook up notions about what managers should be doing, including whether, why and how they strategise. Mintzberg coined the term emergent strategy to differentiate a strategy that develops over time, as new circumstances arise, from a business’s intended strategy. Effectively, he was questioning the need for an intricate, upfront strategy.
Decades later, the argument against a mandatory and detailed strategy is supported by, for example, the LEGO turnaround in the mid-2000s. The iconic company had posted a $200m loss in 2003, sales were down 26%, and it was $800m in debt. New CEO, Jørgen Knudstorp, stripped away the frills of the previous decade’s strategy, which had been oriented around constant innovation. He returned the business to its core: concentrating on operations, focusing on tactile foundation products as a basis for retaining loyal customers and recruiting new ones, and implementing tactics aimed at returning to profitability as soon as possible.
By 2005 sales were up 12% and the company was back in the black. Since then its turnover and profits have consistently trended upwards, spectacularly so in many financial years. What worked for LEGO was Knudstorp’s strategy through action. As a principle of strategy, or a derivative option, it is summarised by the guru of 20th-century shareholder capitalism, Jack Welch, who believed that
“in real life, strategy is actually very straightforward. You pick a general direction and implement like hell.”
What about ideation and innovation?
Perhaps you are an action-oriented manager or leader in this mould? Pause to consider that this may not always be effective – nor even efficient. “There is nothing so useless as doing efficiently that which should not be done at all,” said Peter Drucker, one of the world’s leading management thinkers and a contemporary of Welch.
Myriad case studies, too, emphasise that sophisticated strategy is critical, making a case in opposition to LEGO (and Welch). Airbnb is one of many interesting illustrations. From its 2008 launch the strategy has been to keep hitting the sweet spot at the locus point between holiday cost criteria, global connectedness, the sharing economy, and technology enablers. Along the way, however, new issues have needed emergent strategy adjustment: regulatory considerations (which differ by country); the trust equation in the marketplace; the increased bargaining power of buyers with the entry of new competitors and as people have become more tech savvy in seeking bargains; the collapse of travel during the recent pandemic.
So, Airbnb has gone through many iterations of its strategy, and as a digitally-based company its strategists know that the next radical competitive or industry force may arise at any time – just like they did.
Are strategies like Airbnb’s best described as disruptive? Are they born from deep analyses and out-of-the-box solutions? Or do they spin off – partly with a momentum of their own – from a super-smart idea? They are a composite of all of these. The lesson from Airbnb’s success is that innovative thinking and breakthrough strategies are now vital to running a future-focused business.
Thinking through the spectrum of ideas about strategy philosophies, it’s evident that it is illogical to hold the view that strategy is obsolete while insisting it’s all about execution. To execute implies that the business knows what it should be doing. This knowing, even in its basic, broad articulation, is a form of strategy.
This can be framed around the understandable focus and dedication, for many organisations, on financial results. If achieving results is the ultimate goal of a leadership team, that goal needs to be identified upfront. If strategy is waived away as inconsequential, someone – a whispered but courageous voice at the back of the room, perhaps – may say something like, “Phew. That’s ambitious. How do you see us getting there?”
The reality for the vast majority of organisations is that discovering aspects of strategy that best suit their business means thinking through the spectrum of options illustrated by the opposites of LEGO – consolidated strategy, pared to its core – or Airbnb, embracing intricate webs of societal, technology and consumer trends.
‘Is Strategy Dead?’ is clearly the wrong question. Like this article’s headline, the premise grabs attention. But it misdirects. Strategy itself is not moribund – it’s the traditional ways of thinking about strategy that are outmoded and will no longer serve your organisation well.
To understand the disillusionment with strategy it’s helpful to identify 5 common reasons why they fall short.
- They’re unfocused. “You can’t be world-class in 97 different things,” said Alan Mulally, former CEO of Ford Motor Company. Strategies, by implication, require making difficult choices.
- Turf wars. Strategy is often likened to chess, but strategy is bedevilled when there is a game happening in the corridors. Senior strategists may be defensive about past positions, even if there is evidence that they didn’t work well. Newer colleagues may want to prove themselves. The development of good strategy is not about finding middle grounds – but it requires open minds and hearts.
- Hands-on, me? In large organisations too many inputting parties and strategy sessions can result in multiple compromises; in smaller companies responsibilities may be duplicated or blurred, increasing the likelihood of biases or blind spots. And regardless the size of the business, if, as a strategist, you see execution as something for others to be concerned about while you busy yourself with something more important, then you are probably not a good strategist, believes Dutch implementation consultant Jeroen de Flander. For everyone involved in creating and executing the strategy, accountability is key.
- Inflexibility. Uncertainty is the only certainty. Yet wishful thinking often threads through a strategy. Specifically, the idea that during the year ahead circumstances will be largely unchanged, or that bases are covered by one or two straightforward subsequent adjustments.
- Reality bites. Linked to the above, even a good, flexible strategy may run into practical problems. As much as strategies should be ambitious, they need to be grounded in the basics – market understanding, resources, budgets, forces of change. And adequate time for fulfilment.
To ensure your company’s strategy is appropriately designed and has the best chance of success, apply these 5 considerations:
- Interrogate the goals. “A goal without a plan is just a wish,” said the writer and pioneer aviator Antoine de Saint-Exupéry. But the plan will benefit from a concerted assessment of the objectives, formalised clearly and crisply. (Rolling over or refreshing these from last year is lazy thinking!) These will help identify the strategic path.
- Know the difference between a strategy and a plan. De Saint-Exupéry’s quote makes intuitive sense, but it implies interchangeability between ‘strategy’ and ‘plan’. Further, as a leading academic on strategy, the University of Toronto’s Roger Martin, points out, putting the two words together – ‘strategic planning’ – is unhelpful. Strategy is “an integrative set of choices that positions you on a playing field of your choice in a way that you win,” he specifies. It comprises the theory of why one domain in chosen over others, and how you will be better than competitors in that area. Strategy needs to be coherent and customer-focused. Plans, on the other hand, are internal, resource-focused, usually listed as diffuse, unconnected activities, like ‘We will staff up in IT’, and ‘We will build a new plant’. (Martin says the unconnected nature of many of these activities means plans are often incoherent. Which is not necessarily a problem for the plan – but it would be for the strategy.) Most importantly, plans are controllable, but strategies take a punt on the shape of the future, so their outcomes can at best only be influenced, not controlled.
- Re-think how strategy is developed. Collectivised, collaborative inputs can unlock powerful insights. They can come from data analysts or risk specialists, or junior salespeople. Strategies formulated by senior leadership who return triumphantly with a supposed blueprint after a three-day session in comfortable isolation, miss the gains from a diversified and inclusive approach. Get creative about involving a wider net of employees, but keeping the process efficient. Socialising the strategy may well be the lever that unlocks its optimal execution, too (see below, Culture closes execution gaps).
- Beware of biases. Any assessment of the blue ocean of opportunities and the potential pitfalls and threats to the business is subject to personal views and judgements. VUCA makes it difficult to envision economic, market and consumer landscapes of even the near future. Nevertheless, it is possible to filter out a high proportion of biases which compromise decision-making. For instance, pay attention to analytics using fresh data rather than defaulting to ‘gut feel’ based on what may have worked in the past. Equally, be wary of falling into the recency bias trap by over-valuing new crests of information peaking along a slower but more powerful longer-term wave.
- Embrace the unknown. Work around the reality that any strategy must be projected into VUCA’s significantly unknowable future. Taking the above advisory points into consideration improves the odds – but will not change this. Instead of an exhaustive process and voluminous outputs, look to build in flexibility (different theories appropriate to different future scenarios) and agility (executional changes needed for these scenarios).
Culture closes execution gaps
Accepting that a strategy is only as good as its execution, it’s important to emphasise a few points about getting things done.
Closing the gap between a strategy and its execution involves attention to what employees feel and think. If they associate strategy with how the organisation fulfils its purpose, one they buy into, there is a basis for embracing the strategy. Further, if they understand that it can, and should, stay evergreen, people will be more likely to relate to new strategies, even those which call for quick adaptations or significant change to their daily work.
Most powerfully, if employees feel that their angles on the business are considered and that they have a voice which can find its way into strategy development, they will be far more likely to engage with the strategy. They will also feel encouraged to nurture their sense of constant curiosity.
This comes down to the company’s ethos, its ways of working. “Culture eats strategy for breakfast,” said Drucker. It’s an old quip, but it sums up perfectly the relationship between the design of a strategy and its execution.
Perseverant, pervasive strategy
Strategy is probably the most talked about, written about and dissected part of business management. Like many aspects of life, if there is an objective, human nature is to ponder how to achieve that goal.
Clearly, therefore, strategic thinking is still hugely valuable. It is not even remotely dispensable, let alone dead. However, leaders and managers are right to question its construct. The way a strategy is compiled, how it is communicated so that life is breathed into it, and the culture that links a strategy to its roll-out: these are now far more important than they once were.
So, if your company is battling with strategy, think about its derivation – the process, practicalities and people that go into it and then have to make it work.
Ready to rethink your organisation’s strategy for the short and longer term? At Digital Campus we offer various online short courses designed to improve strategic capabilities, including Strategic Thinking Skills Using Behavioural Science and Neurostrategy.
At DigitalCampus we understand the need for bench strength and how to help your company go about building it. Contact us for further information, or visit our website to find out about our range of courses to build bench capability.
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Managing Executive for DigitalCampus • SRE
In partnership with Dave Gorin