Developing and executing effective strategy is never easy, especially in today’s increasingly volatile, uncertain, complex and ambiguous (VUCA) world. It’s something all organisations do, but some do it better than others. Developing and executing good strategy is important as it ultimately determines the fate of your organisation. But why are some organisations better at it than others? One reason is that they don’t fall into the following common traps.
- Shared understanding
This trap assumes that colleagues have a shared understanding of what strategy is, along with the terms used in its development and execution. Just because everyone uses the same words doesn’t mean they have the same understanding as to what they mean. Terms like objectives, outcomes, goals, intent, capabilities, context, trajectory and plans often mean different things to different people. A lack of shared understanding can lead to confusion, frustration and lack of alignment.
How to avoid: Spend time developing a share understanding of what strategy is and the terminology used in its development and execution. Ask questions of clarification rather than assuming you know what a term means.
- The future is an extrapolation of the past
The future of your organisation is shaped by the influence of powerful exogenous forces that determine the context within which it operates. Some of these forces, like population dynamics, globalisation, energy availability, climate change, pandemics and technology, have a global influence, while others like regulatory controls, trade agreements, political unrest and talent availability, are more local. Your strategy cannot change exogenous forces, it can only respond to them. The trap is to assume that you understand how these forces will change the context within which your organisation operates over time – you don’t. The default is to assume that the future will be an extrapolation of the past – it won’t.
How to avoid: Identify and assess the changing influence of exogenous forces that are defining the context within which your organisation operates. Assume you know nothing, seek out original research, talk to relevant experts and get first-hand experience of how these forces are shaping your organisation’s future.
- Best strategies have BHAGS
Past wisdom was that the best strategies are based upon visions that have big, hairy and audacious goals (BHAGs). Goals – ambitious or otherwise – are of little value if they don’t relate to the change in trajectory that the strategy aims to achieve. After all, the essential purpose of your strategy is to change the trajectory of your organisation, from one taking it to its default future (where it will end up if you take no action other than that currently planned) to one that leads to an improved future. The trap is to focus on setting BHAGs and not the indicators – both leading and lagging – that tell you how the trajectory of your organisation is changing.
How to avoid: Get clarity on your organisation’s strategic intent and the trajectory it needs to travel, then identify the indicators – both leading and lagging – that tell you whether the trajectory is changing in line with the target. Only then establish goals that ‘pull’ the organisation onto its target trajectory.
- Anchoring capabilities
Your organisation is on its current trajectory for a reason. It’s a result of strategies that have made it successful in the past. While travelling on this trajectory your organisation developed capabilities that enabled it to do what it does. These capabilities are the muscles of your organisation that became stronger the more they were used. The trap is underestimating the degree to which these capabilities are anchoring your organisation to its current trajectory, and thereby preventing it transitioning to its target trajectory.
How to avoid: Identify and assess the influence of these anchoring capabilities. Ensure your strategy recognises their influence and contains actions that mitigate their influence.
- Strategic planning
A strategy is not a plan, and a plan is not a strategy. They are related but distinctively different and the trap is to assume they are one and the same. Strategy is about making an informed choice on the trajectory your organisation needs to take. This choice is based upon a thorough understanding about how the context of your organisation is changing; the influence of endogenous forces anchoring it to its current trajectory and the conditions that need to be in place for the change in trajectory to happen. Planning is about defining who needs to do what over time in order for the strategy to be realised. Furthermore, strategic decisions, once executed, are difficult if not impossible to reverse or undo. Planning decisions can be reversed, albeit at a cost.
How to avoid: Distinguish between decisions that are strategic and those that are planning. Never prefix something ‘strategic’ in order to make it more important than it is.
- Organisations are programmable
This trap assumes that organisations are deterministic and programmable, and that the best way to execute strategy is through the execution of a series of steps. Essentially implementing a predefined plan, where the completion of each step takes the organisation closer to its target state. Yet we all know that organisations are not predictable, particularly during times of significant change. They are dynamic systems that respond – often in unforeseen ways – when attempts are made to change them.
How to avoid: Rather than ‘pushing’ your organisation to its target trajectory through the execution of a plan, create a context where colleagues can exercise their judgement, apply their experience and use their expertise to ‘pull’ the organisation onto the target trajectory.
- Enterprise strategy is the sum of divisional and functional strategies
All organisations are hierarchical to some degree. As a result they don’t end up with one coherent strategy, but a collection of divisional and functional strategies, each focused on achieving different outcomes. At best, the respective strategies might have some degree of alignment; at worst, they are in conflict and pull the organisation in different directions. The trap is assuming that the best strategy for your organisation is the sum of a diverse set of individual strategies.
How to avoid: Develop strategy top-down, not bottom-up. Define the strategic intent for the organisation as a whole, then develop divisional and functional enabling strategies.
Avoiding these traps – and others – is important. It’s important because the very future of your organisation depends on it. If you fall into these traps effort will be wasted, wealth will be lost and the livelihoods of colleagues compromised.