I did an excellent course on Strategy for Directors. On Monday, I shared some models we learned about and in this post I pull those together.
Whether you are in leadership or not, you can use this process and the models to help your strategic thinking. If you prefer to watch rather than read, I covered a lot of this in my talk Analysing, Deciding, Doing: How to develop and execute an effective strategy.
The course splits strategy work into three stages.
Strategy is often set by the person with the loudest voice. One of the aims of this course was to teach techniques and models to allow robust discussion, surface ideas and allow everyone to be heard.
With all the models, the value comes mainly in the discussion and the shared understanding that brings, rather than the output itself.
A running theme was, can we hear the challenge? There is a lot of noise, but can you recognise the one challenge that you need to address, and then work out what you need to do to address it?
The analogy the course instructor used was “can you hear the baby cry?” When a baby cries, it cuts through other noises, and you know you need to do something: pick it up, feed it, change it, etc. What, in the noise of your situation, external factors, challenges and opportunities, is the one key noise that you need to act on?
The purpose of the analysis is to understand where you are, what the challenges are and what the opportunities are.
Part of the analysis phase is about challenging groupthink. Sometimes knowledge or understanding can be outdated, and sometimes the board or leadership are predisposed to see what they want or expect to see. The main outcome you are looking for from the strategic analysis is a common understanding.
Many of us are familiar with a SWOT analysis: identifying the organisation’s Strengths, Weaknesses, Opportunities, and Threats. It is often a starting point for defining strategy.
One interesting thing this course recommended was doing the SWOT analysis last, after other models, because it is quite a blunt instrument; it can be quite simplistic. They recommend instead using SWOT to pull together the outputs from the other analyses.
Firstly, look at the macro-external market, i.e. the world. For this, use PESTLE. You can also do scenario testing for analysing a VUCA situation, which is imagining some changes in the external world that could affect your business, and for any that would have a large impact, plan what you could do.
Then, look at the micro-external environment: customers, competitors, suppliers etc. For this, use S-curves, market segmentation, generic strategies, and Five forces.
Then, look at the internal environment: how your organisation currently is. For this, use capabilities, core competencies, threshold/distinctive capabilities (VRIN), and value chain analysis.
Now you’ve analysed the external world and your organisation, bring it all together for an integrated picture. Firstly, you can do a portfolio analysis, and then use SWOT to bring together all the other outputs.
SWOT is a nice way to share the outputs of this work, but be aware that people you share only the SWOT with will not have all the context of the work you did to get to that, so it is not always a very effective communication tool.
The situation analysis is often relatively straightforward. What it means for your organisation is the more challenging conversation.
The prognosis is what will happen to the market if the organisation does nothing. If the prognosis suggests a discrepancy between the anticipated market conditions and the forecast for the business, there will be a strategic gap.
Articulating the main challenge can be difficult. It has to be seen as a challenge by all of your key stakeholders. One way to get into the mindset is taking a step back and first asking the question of other organisations. For example, what is the main challenge facing your national rail provider? Your country’s health service? Coca-Cola?
You now need to make the call to action so that everyone can hear it. Everyone needs to be able to hear the baby cry.
You need to provide context, because other stakeholders weren’t present during your analysis. You need to make it clear why change is vital: use story, example and metaphor; be clear. Show what value your call to action provides, and stress the consequences of doing nothing.
What are you are trying to do here is communicate a compelling call to action that ensures that all stakeholders who will be involved in implementing the strategy understand why change needs to happen. You want to get everyone keen to move to the next stage and thinking about options for the business.
You’ve now completed your analysis and you know what the central challenge is for your organisation. So what are you going to do?
Models to use to come up with options include Three horizons, Ansoff matrix and Blue Ocean approaches. It is also worth looking at the disruptive innovation model now in case disrupting your own industry is an option.
You now have your analysis and your options. So what do you do?
Whatever you choose is informed by all this work. It needs to be explicit, forward thinking, and simple. Some models to help choose are SAFe and weighting and scoring.
They also spent some time on the course talking about decision-making biases, including cognitive bias (Wikipedia has a good list), unconscious bias and group decision-making vulnerabilities including social loafing (people are prone to work less hard when in a group than when working alone), evaluation apprehension (nervousness about what others might think) and the Einstellung affect (thinking a method that has worked in the past will work again now, even if more effective methods exist).
Apart from all this, a potential obstacle to good decision-making is not being clear about what decision is to be made and who is to make it.
It is a good idea to set up or strengthen your strategic decision-making processes and put in place corrective measures to lessen the impact of some of these biases and vulnerabilities that hinder good decision-making.
Some will resist the strategy. It calls for change, so some will be disadvantaged, and some who may be advantaged cannot be certain that will be the case. So this is where strong leadership comes into play, through will, focus, communication, repeating why the status quo is no longer acceptable and reminding everyone of the vision for the future.
Ask those who say no what it would take for them to come along on the journey.
You need to win “hearts and minds”. Commitment is easier to gain when the organisation is in jeopardy. It’s much harder to secure commitment when the status quo is acceptable or even desirable. This is why leadership is required, to ensure stakeholders can hear the baby cry.
“Five frogs are sitting on a log. Four decide to jump off. How many are left?”
Many people say “one”. But the answer is “five”. There is a big gap between deciding to jump and doing it.
Often boards and leadership teams will have intentions rather than commitments. They announce they are going to jump off the log, but things get in the way of the actual leaping. Good ideas can be lost through lack of implementation.
As well as commitment, you need to ensure the organisation can execute. Neilson, Martin and Powers suggest there are four fundamental building blocks that influence effective strategy execution: decision rights, information flows, aligning motivators and structure; and furthermore found that changes to the first two are twice as effective as changes to the second two. Share context, ensure information flow in both directions, don’t undermine decisions and ensure everyone, especially people on the ground, have the data and information they need to understand the impact of their decisions.
The last model we learned about that can support your execution is the implementation web. This allows you to create a spider diagram of where you are across the 8 key areas of implementation and where you therefore need to put more focus.
There is a lot to cover in the implementation web but some of the key areas follow.
If you’ve heard me speak about strategy you will have heard me say that it’s all about communication. You can have the best strategy in the world, but if no-one knows about it, it’s worth nothing: people won’t know how to act.
It is very hard to do sufficient or varied enough communication. Some of the suggestions from the course:
Implementation requires effective alignment across the organisation. Everyone needs to understand what the strategy means for them.
Measurement can help drive strategy both by communicating intent and as a way to show progress. You can have both lagging and leading indicators. Lagging indicators are the consequences of earlier decisions, for example financial results. Leading indicators are outcomes or metrics that will show you are on the right path early enough to adjust your course.
Balanced scorecards are one way to address this, by including internal processes, customers and learning as well as financial results. Dashboards are another way to show leading indicators, real time data, and/or RAG statuses (Red, Amber, Green, also known as traffic light reporting) to indicate how projects are progressing towards their goals.
They also noted that you need to think about performance and measurement on different horizons differently, and that should impact how you allocate resources to that work.
Culture is the hardest to change: so the more closely the implementation plan fits with the prevailing culture, the more likely it is to succeed.
It’s perfectly legitimate for the implementation of a strategy to seek to change the prevailing culture, but it’s important to be aware that this will be very challenging.
It’s often easier to change direction when you’re already in motion rather than getting stuck in ‘analysis paralysis’, and as long as you incorporate review into your strategic process, you can flex. However, review is the one that leaders do least often. The board and leadership tend to be enthusiastic about driving the organisation forward, meaning often not enough attention is paid to tracking progress against the plan.
Because competent implementation includes review, it’s actually less important to have a perfect strategy than it is to have a good implementation, because a good implementation will include reviewing and adjusting the strategy. As you progress, you will gain more data, more strategic insight and a better understanding of your choices.
It’s important to move fast, so it’s better to move into implementation as soon as you have a “good enough” strategy. Implementation is about achieving goals and generating value, but it is also about learning, and the ultimate competitive advantage might be the ability to learn more quickly than your competitors.
The implementation web can be used as a tool to help you work out if you are putting the right inputs into your strategy. Ultimately, there is no “right” strategy; outcomes are impacted by many factors some of which are out of your control, so what you can do is make sure the process of strategy works in your organisation and you are giving the right inputs.
I enjoyed this course, learned a lot and would highly recommend it. However, at the end, the question I was left with was how to put all this information together to work on strategy. Answering that question is what led to me creating my talk, Analysing, Deciding, Doing: How to develop and execute an effective strategy, and these two blog posts.
You do not need to use all of the models in order, but you can. You don’t need to be in leadership to do this strategic thinking. I hope these two blog posts have given you some thoughts about what your next steps in strategy could be.
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