A post summarising recent thinking on the (often over-used) notion of ‘Strategy’ – how it is evolving from “planning for deterministic organisations” to “dealing with the uncertainty of complex systems”. In the project world, change is well advanced with the diffusion of the ‘Agile methodology‘. The realm of “strategy” is also changing. Here is an update…
A NEW NORMAL
“Strategy is stuck. For too long the business world has been obsessed with the notion of building a sustainable competitive advantage. That idea is at the core of most strategy textbooks; it forms the basis of Warren Buffett’s investment strategy; it’s central to the success of companies on the “most admired” lists. I’m not arguing that it’s a bad idea—obviously, it’s marvelous to compete in a way that others can’t imitate. And even today there are companies that create a strong position and defend it for extended periods of time—firms such as GE, IKEA, Unilever, Tsingtao Brewery, and Swiss Re. But it’s now rare for a company to maintain a truly lasting advantage. Competitors and customers have become too unpredictable, and industries too amorphous. The forces at work here are familiar: the digital revolution, a “flat” world, fewer barriers to entry, globalization.” McGrath (2013) p.64
As the opening quote here highlights for us, we are faced with a new and increasingly complex global and local business environment with disruptive technological and social forces at work. This is systemic change not just another cycle. There is a new norm that has been brought about by multi-dimensional changes such as globalisation, the digital economy, international funds flow, major social change, risk contagion and increased private/public sector policy interaction. Add to this the increased need for specialisation and the value of existing business models are seriously challenged – necessitating far greater collaboration, integration and responsiveness throughout the value chain.
As the U.K. based Sunningdale Institute suggests: “The world is in the throes of an ever more reaching global restructuring of the ecological, political, economic, technological and social context which requires a Copernican revolution in how we respond to it”.
We are now in a period that David Snowden (Cynefin Model) describes as the “complex space”. In this space existing processes, techniques and supporting technologies built on assumptions of linear order and predictability increasingly fail us. This is a major reason why more than 85 % of Strategic plans fail, with a similar failure rate with large-scale change projects and capital programs.
A NEW MINDSET
As Albert Einstein famously said, “problems are seldom solved with the same mindsets that created them”. The issue in a complex world is not just a better strategy, trying harder or focusing on building better skill sets. What is needed are different mind sets to make sense of the new order, determine good enough adaptable strategic directions, align our teams and mobilise our resources.
Based on extensive research INSEAD Professor Yves Dov identified that these change dimensions render traditional mindsets and business models obsolete. In his ground-breaking work he explores a different way of thinking and leading for success in the new and turbulent normal.
WHAT IS STRATEGIC AGILITY?
“Strategic Agility is about the capability to think and act differently” ~ Professor Yves Dov Insead Business School (link to http://www.insead.edu/facultyresearch/ )
Strategic Agility is not simply about seeing the world at a single point in time. It proceeds from the ability of leaders and organisations to continuously sense, optimise and respond to a changing landscape.
This requires leaders who can build a culture based on mindsets, skillsets and behaviours that focus on all three aspects simultaneously to deliver outcomes. It is no good having a great strategy if the key stakeholders aren’t engaged. A team that is unfocused, or focused in the wrong direction, waste energy and won’t get you where you need to go.
And a strategy sensitized to the environment with a united team won’t deliver the outcomes if critical resources (hard and soft) are trapped in fixed and inflexible structures, slow moving decision and approval systems, antiquated relationships of processes and practices based on yesterday’s ideas and paradigms.
The leadership challenge of today is to develop all three strategic dimensions simultaneously to deliver the necessary outcomes.
Doz comments “strategic insight results from an intense interchange with the outside world as well as deep reflection.” So it is more than just applying strategic frameworks like PESTLE, 5 forces or Boston Box or undertaking long distance scenario planning. It is about ensuring you have the right connections and then the mindset to process the myriads of stimuli that you are receiving from your environment on a continuous basis. With the volatility we are now experiencing there is less applicability for fixed 3 and 5 year strategies. What we need is strategic direction and ability to rapidly adapt to changing markets.
A key failure point of strategy is lack of true engagement in its formulation and therefore commitment to achieving the desired outcomes. This is a result of the strategic planning process which is often done as an annual internal ritual (often to satisfy the Board) or imposed on the business through an external management consultant. The alternate is to co-create your strategic direction through engagement with key stakeholders. You may choose a variety of different participants to ensure there are multiple perspectives.
Doug Ready in his HBR Article The power of Collective Ambition commented on the difference in companies that have thrived: “These companies don’t fall into the trap of pursuing a single ambition, such as profits; instead, their employees collaborate to shape a collective ambition that supersedes individual goals and takes into account the key elements required to achieve and sustain excellence.”
He goes on to identify that they “focus on two priorities – what we call the glue (collaborative engagement) and the grease (disciplined execution) – to achieve their collective ambition.”
This broad based engagement allows the organisation to continuously align itself to the changing market with little need for senior management intervention or process compliance. This in line from what we have learned from the complexity sciences in terms of successful adaptation.
Snowden and Dov have both advocated a portfolio of experiments as the appropriate strategic response to a complex world. This acknowledges that we truly don’t know and cannot forecast linear outcomes and we can learn about real outcomes through a series of experiments, scenarios and simulations (war gaming).
As Amy Edmondson from Harvard Business School comments “many companies still rely on the command-and-control approaches that fueled growth and profitability in the industrial era. Some of the most basic tenants of this management style – ensuring control, eliminating variance, and rewarding conformance – inhibit collaboration and organisational learning. The result is that great companies can fail when they confront overly complex or dynamic contexts.”
So we need to create a safe space and mindset that allows a diversity of different perspectives to engage, debate, align and create a sense of shared purpose. This engagement is essential to the downstream ability to self-manage and hold the team and individuals accountable in achieving their committed outcomes. The challenge for Leaders is to build this environment and then enact it. It requires a different mindset where both cognitive (thinking) and affective (emotional, social and political intelligence) are integrated in a creative problem solving process.
As noted innovation and design thinking expert Professor Roger Martin of the Rotman School of Management at the University of Toronto suggests: “Drawing a line between strategy and execution almost guarantees failure.”
The third ‘leg’ of the strategic agility tripod involves the capability to speedily and efficiently marshal and commit the right resources when, where and in the quantity they are needed.
Strategic resources like capital, knowledge, creativity, relationships and skills are valuable and scarce, and strategic opportunities are often fleeting. Hence strategically agile organisations must not only be sensing the strategic opportunities and risks, assessing, evaluating and focusing on those which match organisational capability and risk appetite to the most attractive opportunities, and then committing the right resources, at the right time and in the right quantum.
The structures, systems, management roles, accountabilities and relationships that give expression to the strategy and business model in strategically agile organisations must facilitate the rapid ‘flow’ of resources to those places in the organisation and the value chain that will deliver the best strategic return on investment.
Traditional business models have often lead to organisations with structures, management decision-making and governance practices, internal and external relationships that are often risk-averse, slow moving, bureaucratic and fixed, taking far too long to respond to opportunity or risk. In traditional strategic approaches and business models management status and success are often based on the quantum of resources (hard and soft) that fall within the individual’s span of control. Structures and success KPI’s often generate ‘hoarding’ behaviour and competitive mindsets – leading to ‘empire building’, narrowly defined territorial management practices and hierarchies that discourage creativity, experimentation, calculated risk taking and strategic agility.
The pursuit of optimal productivity and focusing on efficiency often leads to systems, structures and management behaviours that limit strategic agility by locking up and over-stretching strategic resources and stifling initiative, entrepreneurialism and innovation.
But among the clearest insights of noted management authors Jim Collins & Jerry Porras is the finding that truly strategically agile and enduring organisations need to focus on “Not the tyranny of the OR, embrace the genius of the AND!” This insight was one of the powerful discoveries in their ground breaking analysis of the behaviours of a sample of visionary organisations who are ‘built to last’, succeeding and out-performing over many decades – companies like Disney, IBM, GE and 3M.
What this means is that these organisations craft structures, deploy capital, build and sustain relationships (internally and externally), and manage resources like knowledge, capital, partnerships and assets efficiently and productively and inspire and capture creativity and innovation, finding new and better returns on the scarce resources by constantly and restlessly reinventing how they deploy their scarce strategic resources to maximise returns. They place both long and short term ‘bets’ on the future by building, marshalling and managing strategic resources in ways and at speeds that other ‘ordinary’ organisations struggle to match.
This necessitates a management mindset and organisational culture of collaboration and abundance, wedded to structures, systems and behaviours that balance the needs for efficiency, speed of action, creativity and reinvention – based on some simple guiding principles and backed by resource (including capital, people and partnership) management that ensures rapid and fluid strategic responses.
The challenges we face in the complex world of today have become a new norm. Our traditional linear responses don’t work in this volatile environment. We need a different mindset to both contemplate this world and response in a holistic adaptive manner. This is the mindset of strategic agility. We need to simultaneously develop and execute the capability to sense our environment, engage our leaders, collaborate across organisations, and rapidly align our resources to point of greatest need.
Collins J & Porras J, 2004, Built to Last: Success Habits of Visionary Companies, Harper Collins, New York
Dov Y & Kosonen M, 2008, Fast Strategy, Wharton School Publishing, Harlow UK.
McGrath RG, 2013, ‘Transient Advantage’, Harvard Business Review, June, pp. 62-70
Martin R, 2010, ‘The Execution Trap’, Harvard Business Review, July-August, 64-71
Ready D, Truelove E, 2011 ‘The power of collective ambition’ Harvard Business Review December
Edmondson A, 2012 ‘teaming ‘ Harvard Business School