If the essential purpose of strategy is to change the trajectory of an organisation, from one taking it to its default future to one that leads to an improved future, there are three aspects that need to be aligned. These are the WHAT, the HOW and the WHO. Not only do they need to be aligned when the strategy is designed, but also throughout its execution.
The WHAT defines what the organisation wants to be, become or achieve. Not to be confused with vision or purpose, it defines the organisation’s strategic intent.
For example, an organisation might want to:
- be known as a leader in sustainability.
- become carbon-neutral by 2035.
- increase its online presence.
- find a cure for dementia.
- increase literacy and numeracy within the community.
The WHAT defines what an organisation wants the strategy to achieve, which itself is a strategic choice.
The HOW defines how the organisation intends to operate in order to achieve its strategic intent (the WHAT). Often called the operating model, it explicitly defines how an organisation’s products and services are designed, developed, produced, delivered and supported. There are many aspects to an operating model, each describing one or more of the operational facets that work together to achieve the strategic intent. While there are many frameworks available to describe an operating model, each with their own merits, they all essentially cover how the operational and management processes, governance, structure, roles and jobs, technology and sourcing work together to create output.
Unfortunately, the term operating model is still not well understood, and much confusion remains about what it should describe and to what level of detail. For some, it means structure or operational footprint and for others, core business processes. Some executives feel the term is so overused (or misused) that it has lost all meaning and, as a consequence, have banned use of the term. This is unfortunate, as decisions on an organisation’s future operating model are critical to determining whether or not it will realise its strategic intent.
It’s important to remember that all organisations have an operating model – irrespective of whether it’s explicitly defined or not. The model is simply an abstraction of how it creates output – and hopefully value for its customers. It’s also important to remember that over time an organisation builds up a set of organisational capabilities that are embedded in its operating model. These capabilities are in effect the muscles of the organisation that get stronger the more they are used. What’s often forgotten – or ignored – is that these same muscles can anchor an organisation to its current trajectory when attempts are made to change it.
The WHO defines who the people in the organisation think they are in terms of their identity within the workplace; their relationship with management and colleagues; how they perceive their contribution and worth; and their connectedness with what the organisation is trying to achieve. The operating state is ultimately reflected in the level of employee engagement and the prevailing mindset.
As with operating models, there are many frameworks for describing an organisation’s operating state. The one I find most helpful covers:
- Power: The extent to which individuals up, down and across the organisation feel empowered, ranging from resignation to possibility.
- Identity: The extent to which individuals identify with the organisation and what it is trying to achieve, ranging from separateness to connectedness.
- Contention: The extent to which individuals effectively handle contention and conflict with colleagues, ranging from fear and suppression to safety and resolution.
- Learning: The extent to which individuals learn, grow and develop, ranging from arrogance and defensiveness to inquisitiveness and receptiveness.
In many respects, the operating state creates the context within which strategy can, or cannot, be executed. If the right operating state is in place, there exists a level of openness and engagement that creates the conditions for changing an organisation’s trajectory. Indeed, some argue
that any strategy exercise should start by addressing the operating state.
An organisation’s operating state should not be confused with its culture. If culture is defined as ‘how things are done around here’, then operating state is a facet of culture, as is operating model.
If these three aspects are not aligned, then the strategy will most likely fail. Fail in the sense that the organisation’s trajectory does not change or, even worse, follows a trajectory that leads to a worse future than the one it’s currently headed for.
I welcome your thoughts.