Creating an Adaptive Organization for the Age of Uncertainty The Solutions: Part 2: Accepting the reality of Assumptions

My favourite Strategy Management saying is “Strategy is a Set of Assumptions that must be Verified in Execution” which I actually first heard a number of years back while in conversation with Hubert Saint-Onge

I like this so much because it gets the message upfront and obvious that no matter how much time and effort we expend in developing a Strategy, and no matter how much of our personal convictions influence the Strategic Choices, at the end of the day they are just assumptions – best guesses, if you like.

But, as Strategies are rolled out, we will find that the assumptions are correct, partly correct, or wrong. In all likelihood, a mix of all three.

The Challenge of Acceptance

As clearly true as this statement is it is a challenge to translate that into practical reality, and the reasons why are largely within the paragraphs above.

Championing Choices

Firstly, given that Senior Managers might be very protective of the parts of the plan that are based on choices they championed, it can be hard to get them to accept that these are just assumptions, especially if significant resources have been allocated to implementing these choices. Saying “I got that wrong” is often not a good career choice in organizations – as sad as that is.

I would start every Strategy Formulation session (and subsequent Strategy Reviews) with a slide that simply says, “Strategy is a Set of Assumptions that must be Verified in Execution”, and be clear that some assumptions might be spot on, close or way off the mark – but that’s OK as the job of the Executive Leadership Team (ELT) is to monitor and adjust accordingly.  If Senior Managers can accept this and actually develop a no-blame ELT culture, then Strategy Management can be a much more useful, and healthier, process.

A Question of Time

Secondly, organizations typically take an inordinate amount of time to develop a Strategic Plan, Each line of the plan is debated to death and, of course, external Strategy consultants often engaged, who will typically charge by billable hours – might as well get as many as possible.

Strategic Plans tend to very detailed – and as we all know, nobody ever reads them and primarily for that reason.

I would recommend shortening the Strategic Planning phase by developing a high-level document describing why the Strategy has been chosen and what the key goals are (so a much shorter, and readable, document).

The Execution Question

That said, I always develop a Strategic Plan with the “how will we execute this” question front of mind.

o  Does the organizations have the requisite capabilities and financial resources?

o  Can it realistically carve out the time required to execute the plan – primarily through the Strategic Initiatives?

o  How big a challenge is to get buy-in from employees and other stakeholders (the activation stage)?

I would integrate the Execution Plan with the first two component (the why and the goals) and publish as the Strategic Plan.

So, the three key components of the Strategic Plan are:

1.   An explanation of why we have agreed on this Strategy and set of Strategic Choices.

2.   A description of the Key Strategic Goals

3.   Details on how the Strategy will be implemented and monitored (the Balanced Scorecard System).

And always keeping in mind that these are based on assumptions, yet to be verified.

Quarterly Strategic Reviews

With the Strategic Plan prepared (and the concept of assumptions accepted), it should then be subjected to a calendarized Strategic Review. This will typically be to a quarterly schedule (might be more frequent in very fast-moving industries), at which time performance to the Strategy can be reviewed (the testing of the assumptions) with appropriate tweaks or larger alterations made.

Jettisoning the Annual Strategy Refresh

But here is where I certainly digress from conventional thinking. I would no longer convene an Annual Strategy Refresh. A key question to ask here is - why do we need to update Strategies on an annual basis? That we have always done it that way, does not cut it, in my book.

It’s a bit like our adherence to the annual budgeting process – a ridiculous and dysfunctional ritualistic dance that we still willingly jump out of our chairs to participate in.

Strategies can be updated (or overhauled) at any time it is deemed necessary (and so not to annual schedule). This would require a much deeper drill than a regular Strategy Review Meeting of course, but why annually?

 My guess is that the Annual Strategy Refresh will indeed become less important and, for many organizations, will simply disappear due to the pressures of synchronizing the internal and external rates of change. Waiting a year to make significant shifts in direction is simply no longer sustainable for most organizations. .

The Importance of Advanced Data Analytics

The key to making this work, is excellence in Advanced Data Analytics.

In a data-rich analytic world, using the power of Advanced Data Analytics to test the causal assumptions that underpin the Strategy and as captured in the strategic objectives, KPIs, and initiatives transforms how we manage performance and make decisions.

Advanced Data Analytics is enabling organizations to convert their performance data into relevant information and knowledge, allowing management teams to hold richer and more informed performance conversations and make more evidence-based decisions, as opposed to decisions made on the force of argument of a member of the ELT (still too often the case).

In the Age of Uncertainty, the organizations that claim and maintain a competitive advantage will be those that have one eye looking at the internal world and one looking at the external—and utilizing, as an everyday part of their work, the power of Advanced Data Analytics to help spot sudden or emerging market/customer trends and adapting the internal organizational working approaches as appropriate.

This has significant implications for all aspects of how organizations get work done and will hugely impact the Strategy Management process, which is why being Adaptive will become increasingly vital for maintaining a competitive edge.

Scheduled Strategy Review Meetings will still take place and for good governance reasons and for regular assessments of how the Strategy is progressing, but will increasingly become evidence-based and therefore much more useful and impactful than is typically the case. Strategy Offices must develop the required analytical capabilities to make sense of what the data is saying as a matter of urgency - such analytical capabilities are now a must-have for Strategy Offices to be effective.

Parting Words

There is much work to be done in transforming the Strategy Management process to make it fit-for-purpose for this the Age of Uncertainty. This is the focus on my in-progress book, The Adaptive Organization: synchronizing the organizational ecosystem for success in the Age of Uncertainty, co-authored with Alberto Manzo

Simply recognizing that Strategy is a set of assumptions and recognizing that accepting this forces us to rethink how we formulate and implement Strategies is a good starting point.

Ends 

James Creelman is the Strategy Management Practice Lead for the Qatar-headquartered Impact Consulting.

He is also Director of the UK-based Cardinal Management Consulting and an Associate Director of Strategia Worldwide.

His available for consulting, training, or research support in Adaptive Strategy Management in the Age of Uncertainty.

James can be contacted on +44 7933 575340 or James.creelman@gmail.com.