Virtual Roundtable – Summary of Discussion on the Role of Strategic Signatures in Strategy

The aim of the Beyond Default Roundtables is to give practitioners in strategy and change an opportunity to share their experiences, challenge conventional wisdom, brainstorm ideas and network with peers who share the same interests and challenges.

In May 2023 a group of executives, consultants and academics met virtually to discuss the role of strategic signatures in strategy. The discussion was led by David Trafford, co-author of Beyond Default and moderated by Chris Hallam, founder of CH Coaching Solutions.

As the Roundtable followed Chatham House Rules, the summary below only attributes information that is in the public domain.

Moderator: Hello everyone and thank you for joining us today. I must admit that when the topic of strategic signatures was chosen for this discussion I had to go back to the book Beyond Default to remind myself what they are and why David and Peter think they are so important when it comes to strategy. So, David it might be helpful if you could start us off with the basics of what they are.

David: Certainly, but before I do I’d like to take a moment to explain why I picked strategic signatures as the topic for this discussion. It was triggered by a couple of conversations I’ve had recently on why the success rate of executing strategy has not really improved over the years. More significantly, what we can do to improve the chances of success. While there’s no silver bullet – at least not one that I know of – communication is important and that’s where strategic signatures come in. The more that people understand the strategy they’re expected to execute, the more likely they are to engage and the more successful the strategy will be. Strategic signatures are a simple way to enhance understanding of an organisation’s strategic intent.

I developed strategic signatures a few years ago. The original objective was not to support the execution of a strategy, but to help the Board of a FTSE100 company explore and debate their strategic options. It’s something they did every year but in recent years the CEO felt that the sessions had not gone as well as they could, hence her request for my help. I came up with strategic signatures as a way of exploring strategic options and gaining alignment on strategic intent. The technique is based on the notion that all organisations are unique – like a signature – even if they’re in the same industry. They are unique both in terms of what they do but also the extent to which they do it, hence the term strategic signature.

A strategic signature comprises a number of strategic axes, where each axis represents a source of value that the organisation creates for its customers, shareholders and other stakeholders. Each strategic axis not only represents what an organisation does in terms of the value it creates but, equally importantly, the extent to which it does it. By way of a simple example, most retail banks operate on the same strategic axes, one of these being current or chequing accounts that enable customers to transfer money, pay bills or withdraw cash. It’s a source of value that a bank provides to its customers. It’s also a source of value to the bank in terms of the charges it makes, either directly or indirectly. While most retail banks operate on this strategic axis there is a spectrum of what they offer. For example, at one end of the spectrum they could provide a simple current account that’s supported by branches. At the other it could be a full mobile service where money is transferred, balances checked and notices of payments received on a mobile device. Where each bank operates along this spectrum is a strategic choice made by them. A strategic axis, therefore, not only defines what a bank has chosen to do but the degree to which it does it.

Another strategic axis is savings accounts, where the spectrum could range from simple passbook savings accounts supported by branches to fixed term internet accounts accessible only on mobile devices. Another strategic axis is mortgages, ranging from variable rate mortgages to fixed term off-set mortgages linked to a savings account. A further strategic axis is home insurance. The strategic axes a bank choses to operate, along with where it positions itself along each axis, is its strategic signature.

A few years ago I helped a UK challenger bank understand the implications of launching a new strategic axis, namely a current account. They already operated on several strategic axes, including savings, residential mortgages and business lending. The Chairman wanted to offer a current account, but the CEO disagreed as he didn’t see how they could make money from a current account and the cost of launching one was too great. Furthermore, he didn’t think they had the capabilities needed to launch one. This was a very significant strategic choice that the Chairman and CEO did not agree on.

Strategic signatures represent the strategic choices an organisation has made – either implicitly or explicitly – in terms of where they aim to operate in the future and to what degree. Collectively they define an organisation’s strategic signature, which is unique to them. Furthermore, they can also be used to describe their current positioning along each of their strategic axes – what we call their strategic reality – as opposed to their strategic intent.

Moderator: At one level are strategic signatures a bit like marketing statements in that they define the ‘brand essence’ of a strategy?

David: They could be described in that way as they represent the strategic choices that were made when formulating a strategy.

Discussion: I see a similarity between strategic signatures and value curves in the value innovation method from blue ocean strategy. Do you see this connection David?

David: You’re right there are some similarities as they are both useful frameworks for describing your strategy and comparing it with that of your competitors. Furthermore, you could use value curves to define your strategic intent along each of your strategic axes. What they have in common is their focus on defining new sources of value, rather than delivering current value more efficiently.

Discussion: That was at the heart of my question about the comparison. The thesis behind value innovation is that while all players in the same industry may start off with different value curves, over time they spend less time listening to their customers and more time copying their competitors. As a result their value curves become the same, which creates opportunities for disruptors or innovators. The thinking is that as the ‘crowd’ moves away from providing what’s valuable to their customers a new value curve could be created that disrupts the entire industry. I’m thinking of insurance as an example where the prevailing wisdom of most insurance companies is that they know insurance and the customers don’t, so this is what they’re going to do. It’s still taking a long time for this thinking to change, but the logic says there’s a new value curve to be drawn. In the context of strategic signatures there’s either a new strategic axis that could be created or significantly different positions taken on the existing axes.

I think a big difference between strategic signatures and value curves is that the value curve method doesn’t talk about new axes, it simply focuses on the existing one.

Discussion: I was also thinking that this is very similar to blue ocean strategy. I think breaking away from what companies are currently doing, and the accepted norm in a particular industry, is key to true disruption and innovation. The value of value curves or strategic signatures comes from mapping out what your competitions are doing and asking what happens if you invert it. This is what people like Elon Musk do when they come into an industry they don’t understand and don’t have the baggage of its accepted norms. They come in and say I have no idea about the past but if I was a customer this is what I’d want. There are two ways of looking at this, they could either be naïve and have got no chance or their different thinking could truly disrupt something.

David: While I like the thinking, the number of times I’ve seen someone who is naïve pull it off is far fewer than when I’ve seen them fail. We’ll have to see how Musk gets on with Twitter.

Discussion: If you’re going to think creatively about something you probably need to break some of the paradigms, do some reverse thinking and all that stuff. I was wondering about the extent that capability relates to the ability to hold good mental models. Strategic signatures seem to me to have a direct link to the cognitive skill around mental modelling, being able to hold different models in your head and decide whether what you’re thinking about is a signature of where we are today or where we want to be.

David: You can use strategic signatures to explain where you operate today, where your competitors operate and where you’d like to operate in the future. The prime purpose of strategic signatures is to clarify thinking, communicate ideas and enhance understanding. It’s not a technique for coming up with new strategic axes. That requires a deep understanding of the context within which you operate and how the influence of exogenous forces opens up new strategic opportunities, while at the same time closes others down.

Discussion: Just one thing I’d like to add about finding out what your competitors are doing and doing something different, is to find the people who care. The risk of all of this is that you could come up with some wacky model, but if nobody cares and nobody wants to buy what you plan to offer, it’s a road to rack and ruin. You need to find out what’s the value and who you’re offering that value to.

Discussion: Could you help with another example to help me better understand this concept of strategic axes? If we take the automotive industry where I’m very active at the moment, would moving to electric vehicles or offering autonomous driverless cars be a new strategic axis or repositioning along an existing axis?

David: I would argue that ‘personal automobiles’ is the strategic axis, as the source of value to the customer is their ability to get from A to B in their own vehicle. The spectrum of opportunity along this axis includes petrol, diesel, electric or hydrogen propulsion; two or four seats; front, rear or four-wheel drive. Where you chose to operate along this strategic axis is a strategic choice aimed at meeting the expectations of your target customers and differentiating yourself from your competitors. I see autonomous driving as a strategic positioning on this axis.

I do think there is another strategic axis that’s emerging, which is ‘mobility as a service’ (MaaS). It’s a type of service that enables users to plan, book and pay for multiple types of mobility services. It’s a shift away from personally-owned modes of transportation towards mobility provided as a service. It’s enabled by combining transportation services from public and private transportation providers through a unified digital gateway that creates and manages the trip, which users can pay for with a single account. It’s about helping individuals move from A to B seamlessly by different modes of transport without owning any of the transport assets. It’s something that Mercedes-Benz and BMW are exploring individually and collectively through their Mobility joint venture. I see this as a completely different strategic axis. It’s one that offers plenty of strategic opportunity, but also risk.

Discussion: I see that the growth of electric cars, the emergence of self-driving capability and the increasing desire not to own your own car opens up new strategic axes. People don’t want to own their own car, they want to buy a ride. I’d love to never own a car ever again, but I’ll always want to buy a ride when I need it. I see this as a new strategic axis that’s a result of innovation in other axes.

Discussion: I’ve recently just come back from Tel Aviv and was shocked at how many people were flying around that place on electrics scooters. Is that an example of a new strategic axis where young people hire a scooter to get to college and then dump it when they’re done?

David: Yes, hiring electric scooters for a period of time is a strategic axis that’s been made possible by innovation in battery technology, GPS tracking and online payments.

When we think about strategic axes we must remember that one of the things that distinguishes one axis from another is not only the value that it offers to customers, but the organisational capabilities needed to establish and execute it. If we take the Mobility strategic axis I just mentioned, the organisational capabilities needed are very different to those required for traditional automotive manufacturing and auto financing. This is a common mistake many organisations make when they launch a new strategic axis, they assume they either have the necessary organisational capabilities or that they can easily acquire them.

Discussion: I work in the charity housing sector, which is not particularly competitive. What I often find is that the organisation pursues initiatives that go way beyond the bounds of our current strategy. I see strategic signatures as a useful way of communicating our strategy and thereby encouraging people to keep within it.

One of the things I’m still not sure about is knowing what you put at the opposite ends of an axis, as it could be that you’re pitting two ideas against each other.

David: I’d encourage you to think of a strategic axis as a spectrum of opportunity. As you consider the options along the spectrum you’re increasingly ‘stretching’ the organisation to deliver greater value. You can then assess what organisational capabilities are needed to move from one position on the spectrum to another and, equally importantly, how they can be acquired. Getting members of a leadership team to individually position where they think the organisation currently is and where they think it should be can help get alignment.

Moderator: We’ve talked about strategic signatures and their importance in communicating strategic intent. Having that conversation around the boardroom table could be very insightful and highlight whether the Board is split or aligned.

Are there any other aspects of strategic signature that you’d like to cover before we close David?

David: Agreed, strategic signatures are a powerfully way of achieving alignment.

Before we close I’d like to spend a few minutes talking about how you can represent strategic signatures. There are two techniques that I use. The first is ‘slider bars’, like you see in sound mixing studios, where each slider bar represents a strategic axis. In a strategy session you can then consider the benefit and implications of moving each slider bar. The other technique is spider diagrams where each axis on the diagram represents a strategic axis. You can then represent the current strategic positioning along each axis as well as the strategic intent. This is a powerful way of illustrating what’s changing. In the previous retail banking example, it could be that nothing is changing on the current account strategic axis, but the positioning on the mortgage strategic axis is significantly changing. It’s a way of helping people understand the strategic intent and the stretch involved. The importance of this is illustrated in a recent study by Strategy& of 2,200 executives where they found that 44% didn’t understand the strategy they were expecting to implement.

Discussion: That’s really worrying. How can you get a team behind the change if they don’t understand it? I’ve been in situations like that when you’re trying to implement something and 45 minutes into a call you get a question that shows the person doesn’t know what you’re talking about. The kind of business executives I work with are all over the place, they’re going from meeting to meeting where everyone is just talking at them, so it’s understandable that they’re often zoned out for the first 15 minutes of the meeting. I can certainly see how the use of slider-bars and spider diagrams could get them zoned in and focused.

Moderator: Unfortunately we’ve come to the end of our time today and before we go I’d like to remind you of our next call in August when we’re going back to basics and discussing the purpose of strategy. Having discussed different aspects of strategy over the past two years we thought it would be good to go back to the fundamentals and ask what is the purpose of strategy? We hope you’ll all be able to join us. Until then goodbye.

Note: This is a summary of the discussion that has been condensed and edited for clarity.

Please email David if you have any points that you would like to raise.

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