Gone are the days where technology and business lived in separate worlds. The lines dividing them are not only blurred but probably non-existent. This has thrown existential challenges to enterprises in the form of lack of responsiveness to competition, cost transparency, risks and partial insights for business-critical decisions.
Having led many large business transformation programs, our very own Ramesh Raghavan, who is a certified “CEO Coach”, and a strategy & transformation professional for past 20 years, suggests the traditional approaches of defined outcomes, clear boundaries of engagement and targeted action will probably be detrimental in the current scenario.
Forces such as digital innovation, hyper-competition, speed-to-market, and consumer behaviours impacts every layer of business from strategy through execution and requires the ability to quickly assess and determine a course of action. Hence the enterprise strategy needs to be far more layered & malleable as opposed to consistent & fixed.
A good strategy (comprehensive strategy is a myth) is just one aspect of the overall organisational transformation journey. It is not a mission to a tangible goal, the vision to reach a desired future state, or value map for customers, shareholders, and partners. Strategy, as per my definition is the guiding principles outlined for the organisation to make decisions or choices to accomplish key objectives within the available resources. It is impossible for an organisation to have controls and governance to monitor every decision being made and check its alignment to the core strategy. Therefore, a good strategy aligns the people towards decision making in their day jobs in their respective worlds. Everyone understands this, but when it comes to crafting the details of the strategy, we tend to get lost in the complexities of execution and lose sight of the primary motivator behind the strategy.
Three guiding principles of Strategy formulation:
1. Motivator (Why)
Most organisations are focused on disentangling complex operating environments in pursuit of a target end state. This never yields sustainable results as they are not often closely coupled with an Organizations’ fundamental business goals and objectives and make it difficult to deliver measurable progress towards Strategy. These business goals and objectives need to address the 2 questions which will be there on the top of the mind of every leader.
1. Why should we change from the status quo?
2. What’s in it for everyone (and for me)?
These questions are answered when one re-visits the reasons why the business exists and the diagnosis lead us to the "nature of the challenge" in achieving our purpose. The case for change drives the motivators for the strategy definition. In the absence of the Why, strategy will be in a vacuum.
While the origins of strategy comes the Art of the Troop leader to achieve specific goals to win a battle. In a corporate construct “Success” becomes a shifting goal post, hence the goals/target definition need to be more recursive in nature than fixed. Hence finding the right balance between competing tensions while defining desired end state is like choosing between multiple options, where the outcomes depends on action of planned activities and mitigation of potential risks. A strategy will need to recursively look ahead and consider what actions can happen in each potential scenario.
3. The Formulation (How)
The most popular and active aspect of the strategy as it appeals to our basic human instinct of tangible actions. While most would akin the “Formulation” to an actionable plan or as we call in the consulting world a "Transformation Roadmap", it actually hinges on decisions and choices made based on the nature of challenge and the nature of the End Game. Successful strategies not only show the path to the envisaged outcomes but also explain the rationale behind the decisions and the actions. Hence successful strategies have three core dimensions which has critical implications on the pattern of decisions and choices in the roadmap.
• Mission Centric - A clear set of actions to achieve set Goals. This is time bound and highly measurable in outcomes. This approach articulates both the decisions made about the organization's goals and the specific steps to achieve those goals. This approach is most effective for targeted mission statements as there is a definitive end to this journey. For example a Retailers strategy to reduce the cost of doing business by X% requires a very actionable plan, a clearly defined measurable end state within a specified time frame. These plans typically are visible in organisations as targeted transformation programs with clearly defined business outcomes.
• Vision Centric –The core purpose of the organisation. Vision centric strategies typically stand the test of time as they are more forward looking. They are driven by how you would like others to see you both in terms of sheer aspiration and a view to where you would like to be in the near future. This has a direct impact on the organisation balance score card. Hence the pattern of decision and choices are consistent across the organisation. In scenarios like these the initiatives emanating from the strategy are cascaded across the organisation units and sub-units. For example an Energy retailer’s strategy to be the 1st choice of the customers, requires the outcomes to be looked at with a multi-faceted (Customer Experience, Operational Excellence, Innovation etc.) lens. This will be achieved with a constant focus on business capability build, which has direct/indirect impact on every organisation unit.
• Values Centric - Based on the "values or principles of business". The focus is to create sustainable business capabilities that are key to serve the organisations true “Purpose”. The need for strategies in this category are linked to the existential reasons behind doing business. They are realized over time and is more emergent in nature than intended. Hear the end state is more like a broad brush principles providing guidance to the journey the organisation has embarked upon. For example a Bank’s strategy to buy down the risk to fight financial crime is linked to the core values of protecting the customer and communities it serves. This will require the Bank to build sustainable business capabilities to fight financial crime, but the measures of success and the end game is a never-ending cycle.
Strategies will just exist on paper if the people executing it don’t understand rationale of change, envisaged outcomes and the enabling actions. Hence clarity on the type of strategy being formulated is foundational to the journey.
Factors driving a successful strategy
Embracing Risk & Ambiguity: Strategy, by definition, is about making complex decisions under uncertainty and limited resources to achieve long term goals, Hence ambiguity is not a challenge in strategy but the reasons why a strategy was needed in the 1st place. Majority of organisations fail in achieving the original intent behind strategy due to the inability to deal with ambiguity. The decisions and choices from the strategy is what will help in dealing with ambiguity.
Establishing benefit traceability: If it cannot be measured it cannot be managed. Hence a clear line of sight for value realisation is critical to manage the journey. The shift in mindset from solution to outcomes is what businesses are seeking. Consideration should also be given for the scale/scope of the benefit – too large and it will be difficult to manage, too small and you could end up with too many benefits to manage.
Create an Agile mindset: As there is no defined path to value, there is no one perspective on value. The definition of value as multifaceted as the stakeholders in an organization. Hence it is key that the formulation of strategy has the innate ability to adapt to the fluid environment. The digital world has enabled new levels of agility and flexibility allowing businesses to embrace risk. This requires large-scale restructuring and transformations, not only in the processes but also in strategy planning. This has created a landscape that promises high returns on risks taken.
So what’s the secret word??
While strategy is about decisions and choices to achieve certain business objectives. The kernel of any strategy are the people executing it. Hence establishing the WHY is not only essential for creating a strategy, but the driving force for execution.
Start with the “Why” …Strategy is just a by-product!