How can you choose between top-down and bottom-up strategy formulation?

Top-down strategy is where direction and strategy are defined by its top-level management or leadership and then disseminated throughout the organisation for implementation. Implementation of parts of the strategy are devolved to lower layers and therefore subject to interpretation, whilst the overall strategy may, for reasons not known by senior management, not work. However it provides a clear and unambiguous company-wide direction if kept to top level visionary status.

In my experience, the primary role of corporate strategy is to define the target portfolio and provide guidance to each business on their respective role. For example, categorized each business as growth, maintain, or harvest/exit. These top down decisions then enable the business to develop the specific tactics around their strategy — which markets to play in, why/how the company will win, and the enabling initiatives.

It really depends on how the management wants to engage with their employees in this spectrum. In summary: - Top-down approach traditionally involves executives dictating the vision and features, leaving little room for input from lower-level teams; however, it offers a sense of control and direction, empowering teams. - By contrast, bottom-up encourages ideas and feedback from diverse teams across the organization. Through bottom-up initiatives, an organization can unlock greater creativity, adaptability, and ultimately, a more successful development journey.

Top-down strategy still requires a good understanding of the internal and external environment. Senior leaders shouldn't just sit in a room and define a new strategy in a vacuum, they still need to ensure that a thorough data and insights analysis has been carried out and that stakeholder input has been considered. Any good strategy requires a clear understanding of: - the skills & capabilities that exist in the organisation as well as any gaps that need to be filled - the key challenges the organisation is facing - customer pains & gains to be solved - the external threats & opportunities For top-down strategy to work, leaders have to do a thorough job of cascading the strategy - this means communicating objectives down the organisation.

To my mind, strategy must always be Top-down, because it needs a complete view of the business, as well as the external environment, which lower levels of the organisation are unlikely to have. Of course, the bottom-up inputs for strategy development and their buy-in and alignment with the strategy are crucial for success - however responsibility for formulation of the strategy rests with the leadership.

This approach is a great way to generate buy-in and a sense of ownership in the strategy process across the organisation. What's critical though is that leaders still play the role of taking the input, ideas and insights and then formulating the strategy. This is about: - Making choices - every business has limited resources and not every idea can be considered - Setting priorities and sequencing activities in a logical order - Linking it back to the bigger picture - this requires goals to be clearly defined, so each activity or idea can be evaluated in its ability to move the organisation towards that bigger goal. For a bottom-up strategy to work, leaders need to help employees understand the big picture, evaluate ideas & make choices.

Bottom up stratgegies are formulated by the grassroots of the company and must be amalgamated and tweaked as aggregated throughout the company to an overview vision.

Bottom-up strategy formulation represents a dynamic approach where frontline employees actively contribute ideas, suggestions, and feedback to shape the organizational strategy. In this process, innovation and empowerment take center stage as the lower levels of the organization become integral contributors. Unlike top-down approaches, bottom-up strategy formulation thrives in environments marked by high uncertainty, fostering adaptability and resilience. The key strength lies in engaging employees directly, leveraging their insights to create strategies that are not only innovative but also reflective of the diverse perspectives within the organization.

Rather than looking at these two approaches as an either or scenario, I think it is important for leaders to consider leveraging elements of both. By involving employees in the strategy creation process from the start, it's easier to gain traction and buy-in and it can accelerate strategy execution as there is less need to sell. However, creating a strategy with a very large group of people is never advisable. Leadership teams need to step up and lead. This means taking on board the knowledge, expertise and ideas from their teams, providing an opportunity for employees to contribute but at the same time owning the decision-making and holding people to account.

Top down strategies are likely not to work in maturer companies. In a startup they may, as employees have signed up to the entrepreneurial method. Bottom up strategies contrast as get employee buyin and therefore traction, however may not be a coherent strategy. The difference between the approaches in a consultative company is defined by company size / degrees of separation. There is no one right answer as to what works.

Richard Rumelt said: "Good Strategy is about addressing the biggest challenge the organisation faces.” So when you are considering what approach to take in the development of your strategy, whether it's top-down or bottom-up, think about who or where you might find the best and most relevant insights about how to identify what the problem is and who or where you might find ideas about how to address it. This will help you decide which approach you might want to lead with - my suggestion is that it should always be a mix of both.

I would always advocate for a mixed approach of top-down thinking and bottom-up insights. Both perspectives are hugely valuable in a strategy creation process and engagement of stakeholders at all levels of the organisation in some form or another should be built into the process. The assumption that the senior leadership team have all the answers is flawed. Strategy is a team sport in my opinion and diverse perspectives, expertise and insights are needed to create breakthrough strategies in today's challenging and fast-moving world. However, the most important part of a strategy is its execution. While a robust and well though-through process for strategy creation can create much better outputs, unless it's implemented, it's useless.

In my approach to strategy formulation, I find the power of combining both top-down and bottom-up methods invaluable. This dynamic strategy integrates the clarity and efficiency of centralized decision-making, ensuring a clear direction and optimal resource allocation. Simultaneously, it harnesses the creativity and expertise of all levels within the organization, encouraging employee involvement and adaptability to change. I believe in fostering a sense of ownership among team members, recognizing their contributions to the strategy. This hybrid strategy, acknowledging the iterative nature of the process, allows for innovation and responsiveness. In my experience, the approach & effectiveness depends solely on the organization culture.

Combining both top-down and bottom-up strategy formulation can be a strategic powerhouse, allowing organizations to harness the strengths of each approach. Employing a top-down method for defining the overarching vision, mission, and objectives establishes a clear direction. Subsequently, integrating a bottom-up approach for idea generation and feedback ensures a diversity of perspectives and promotes innovation at the grassroots level. Alternatively, initiating a bottom-up process for generating and testing various strategic options empowers frontline employees and taps into their unique insights. Once options are vetted, a top-down approach can be utilized to select and communicate the most effective strategy to the entire organization.

Unified Vision and Objectives (Top-Down): - Start with a top-down approach to establish a clear vision and high-level objectives for the organization. Collaborative SWOT Analysis and Iterative Feedback (Top-Down and Bottom-Up): - Conduct a joint SWOT analysis, integrating top-down leadership insights with bottom-up perspectives. Embrace an iterative process with regular feedback loops for continuous improvement. Inclusive Stakeholder Involvement and Open Communication (Bottom-Up): - Involve employees and stakeholders in strategy formulation through surveys, workshops, and cross-functional teams. Foster a culture of open communication and transparency to enhance understanding and commitment.

Acredito que a melhor maneira de implementação seria a integração das duas abordagens sendo que seria necessário ficar atento para os seguintes pontos de atenção: Compreensão 360 graus(holística), Alinhamento Estratégico, Estabelecimento de Metas Claras, Feedback Contínuo, Incentivo à Inovação, Capacitação e Desenvolvimento, Flexibilidade e Agilidade, Avaliação de Desempenho Integrada. Ao integrar esses pontos de atenção, pode-se criar uma abordagem híbrida que capitaliza as vantagens tanto da visão estratégica de cima para baixo quanto da agilidade e insights operacionais de baixo para cima. Essa consolidação fortalece a implementação eficaz da estratégia em toda a organização.