Always-On Strategy: A Guide to Agile Strategizing For Disruptive Times (1/4)

Introduction

Let’s face it, the way most organizations do strategy is broken.

Large, medium, and small business leaders complain that their strategy doesn’t help them do their job well. Here are some common complaints:

1. Lack of clarity: Many leaders struggle to develop a clear and concise strategy that is easy to communicate to employees and stakeholders.
2. Difficulty prioritizing: With limited resources, they often struggle to prioritize which strategic initiatives to pursue.
3. Execution challenges: Even when a strategy is well-defined, many leaders struggle with executing it effectively due to limited resources, lack of expertise, or other internal constraints.
4. Adapting to change: The business environment constantly changes, and adjusting the strategy quickly enough to remain competitive is challenging.
5. Difficulty measuring success: Leaders struggle to measure the success of their strategic initiatives, which can make it difficult to determine whether they are on track to achieve their goals.
6. Balancing short-term and long-term goals: Many find it challenging to balance achieving short-term objectives with investing in long-term growth.
7. Lack of buy-in: Getting buy-in from employees and stakeholders can be challenging, particularly if they do not understand the strategy's rationale or feel they have a stake in its success.

As a result, many leaders don’t think engaging in a strategy exercise is worth the effort anymore: it takes too long to do, is too expensive, and the yearly strategy offsites rarely profoundly impact the business anyhow.

Yet, strategy, done well, can help solve all the challenges listed above and help to improve your performance, make a more significant impact, and build a better business.

In this free guide, I outline an alternative approach to strategy, a different way to think about your strategy to make it better.

Part I: Old School Strategy is Dead

Criticism

“There’s no good just being better, … you got to be different!” – Charles Handy

Traditional strategy has gotten much bad rap in recent years. Many leaders and experts question whether it is keeping up with the times.

To be fair, the criticism is not entirely new. As a student, I did a literature review over two decades ago, summarizing the many problems with strategy as practiced at the time.

That criticism revolved around the content, the process, and the tools of strategy. The main arguments were:

• Content: Focus on best practices and operational effectiveness, too much imitation of competitors’ moves, and trying to hold on to one strategic position. In other words, innovation is missing.
• Process: Strategic planning is usually nothing more than an incremental adaptation of last year’s plan, and the planning process is far too formal and analytical.
• Tools: Like the process, the tools are too analytical, often too complicated, take too long, are oriented towards planning, and are too inflexible.

Not much has changed since, or has it?

More recently, Richard Rumelt and Roger Martin, two of the leading thinkers on strategy, have added that what most companies call “strategy” is not really “strategy” anyhow. It might have the word, but it is not, as Martin says. Or it is what Rumelt calls Bad Strategy:

• Fluff, buzz words, esoteric concepts, giving the illusion of high-level thinking
• Fails to face the challenge
• Mistakes goals for strategy
• Bad strategic objectives: a long list of things to do, blue-sky, completely unrealistic 
• Incoherent list of actions/initiatives
• Not actionable

Hence, it is no wonder that many leaders complain about strategy.

According to a survey by strategy&, 50% of senior executives don’t think they have a winning strategy. In addition, four out of five executives admit that their strategy is poorly understood within the organization. As a result, 30% of executives don’t think they have the capabilities needed to create value, and a whopping 90% say they are missing critical opportunities in the market.

A study published by Harvard Business Review found that, on average, only 23% of people within your organization are aligned with your strategy and can tell you what the strategy actually is.

Obviously, this creates many challenges: if there’s a significant gap in alignment, employees are more skeptical about the effectiveness of your strategy, and overall implementation is slower and of lower quality.

Call to Action: How does your strategy practice compare to these points?

Assumptions

So, why is there so much bad strategy? Why this criticism? To understand what’s going wrong, you must understand the historical context of strategy as a business discipline and the assumptions that strategic planning is built on.

A historical look at the evolution of strategy shows that at the beginning, strategy was associated with the problems faced by managers in the 1950s and 1960s. As their companies grew larger and became more complex, they needed tools, techniques, and systems for maintaining control. Annual budgets were among the first tools developed, followed by long-term (usually five-year) plans for coordinating capital investment decisions and taking advantage of economies of scale based mainly on economic and market forecasts.

Strategic planning basically looked like this: How much will the market grow? What’s our projected market share? How much capacity will we need to satisfy that demand? What will it cost? That’s our strategic plan. And somehow, people started associating “strategy” with this task of planning the next 3-5 years.

The desire to grow and changes in the marketplace (e.g., the oil shocks of 1974 and 1979) led to new techniques like, for example, Ansoff’s SWOT analysis, or Porter’s Five Forces, which are mainly analytical in nature and focused on mastering and understanding the environment.

The tools might have become more sophisticated, but strategy remains primarily grounded in the analysis and planning philosophy in the mind of most leaders.

Therein lie some of the most significant assumptions of traditional strategic planning: 

• The environment can be analyzed and understood (by a few people at the top of the corporate center, nonetheless).
• The future (trends, customer behavior, demand, supply by competition,...) can be forecasted and even controlled, i.e., there isn’t any volatility.
• Strategy can be logically deduced from this analysis (I still see many SWOTs combining the SWs with the OTs to form strategies).
• Plans can be easily cascaded, like the budgets that are being assigned.
• And because of all of these assumptions, it’s enough to do “strategic planning” only once a year and maybe, update the forecast every now and then.

Of course, the reality for most organizations and leaders looks much different:

• The environment is increasingly complex and challenging to understand (e.g., global supply chain issues caused by COVID).
• The future is impossible, or at least very difficult, to predict…and even if someone does an excellent job of predicting significant events (e.g., the dotcom bubble, financial crisis of 2008, COVID, Ukraine,...), or that a new entrant (Amazon, Uber, Netflix,...) or a new technology (Internet, digital photography, AI,...) will become the next big thing, nobody believes them!
• Your future can’t be found in past data – Imagination is as crucial as analysis. (Could Nokia or Blackberry ever have found through analysis that Apple would become their main competitor and put them out of business?)
• Because of today's organizations' size and global footprint, cascading is increasingly complex and takes longer than expected. As a result, it's probably already outdated by the time the plan reaches every part of the organization.
• Strategic challenges and opportunities just don’t happen on a schedule once a year when you’re preparing for your annual strategy offsite. The idea that you set your strategy once and then check back in 2-3 years to see how you’re doing is definitely obsolete.

Why does this matter?

I understand the desire to meet the growing uncertainty, confusion, and overwhelm with more data, analysis, and planning. I can understand the longing for stability and control.

Yet, you must understand that what you’re trying to achieve can’t be done using your current approaches and tools.

If your future is uncertain and constantly evolving, what good is it to try to create milestones, fixed objectives, and deliverables?

If all of this is too theoretical for some, consider the following.

What does life for many leaders of companies, large, medium, and small, look like?

• They drown in data, internal and external reports with analyses about just everything
• Despite all the analyses, the strategy is not working
• Despite all the data, they can’t make any decisions
• Because of the long lists of priorities from all over the organization, they don’t know what to focus on and can’t distinguish between the critical and the trivial
• Often they can’t even align on what the most critical challenges are (besides maybe that something needs to be done about revenues and shrinking margins)
• They run from fighting one fire to the next
• Strategy is often done during the yearly offsite. These events take an enormous amount of time to prepare and are very costly, but often have no real impact on the business.
• After the offsite, everybody returns to business as usual, drowning in all the operational stuff, priorities, etc., and no longer thinking about the strategy.

Strategy should help solve all of this. Not reinforce the problems you’re facing.

I observe two main gaps here:

First, there is a large gap between what leaders want to achieve – growth, competitive advantage, differentiation, innovation, adaptability – and what the traditional tools were developed for – analysis, planning, and control.

Second, not only is the purpose of strategic management no longer the one that the traditional approaches and tools were developed for, but the circumstances under which they were created are now different. Many have argued that the way organizations do strategy is disconnected from the dynamics of the real world and not suited to understanding its complexities. As a leader, you might feel the same. The question is how to meet the increasing uncertainty and complexity.

To avoid misunderstanding, I believe that traditional, long-term “strategic planning” still has its merits. If you’re acting on well-known terrains, such as building a new plant, investing in new equipment, building up capabilities for the future, etc., and the assumptions mentioned above still hold, of course, you need longer-term planning. Some of these plans don’t qualify as “strategic,” though.

Some might argue that disruption and VUCA are nothing new. We‘ve always had it. Our parents and grandparents have. What is different, though, others argue, is that disruption is more continuous nowadays. Meaning by the time you respond to one disruption, another one hits, and then another, and so on. In that sense, the world has become more volatile and fast-moving.

In the past couple of years, we’ve experienced Covid-19, the war in Ukraine, inflation, rising interest rates, a looming recession, which has led to massive layoffs in the tech sector, and most recently, yet again, instability in the banking sector.

Your world may not have changed. And that‘s ok too. In that case, you can stick to the more traditional strategy and planning methods.

Conclusion

Call to Action: So, as a leader, you have to ask yourself two questions:

First, is whatever you call “strategy” in your organization really “strategy?”

Second, does your approach towards making and executing strategy – your mindset, processes, and tools – still fit your current realities and environment? Do the assumptions described above still hold up?

If not, it’s time to rethink your approach to strategy.

Enter “Agile Strategizing.”

This is the first article in a series on "Agile Strategizing." Part II will go online next Saturday. Subscribe to the newsletter here on LinkedIn or follow me so you don't miss the next one.