Developing strategy and delivering change continue to be a challenge for many organisations. As a result, many leaders are shifting their focus from strategy to agility. The logic is that if their organisations were agile they would be more responsive to change and strategy would not be needed. While there is some merit to this argument, being agile is not the complete answer and the value of having a clearly-thought-through strategy should not be underestimated. Without a strategy the best an organisation can be is responsive. The question therefore is not whether an organisation needs a strategy but whether traditional approaches to developing and executing strategy are appropriate in today’s increasingly volatile, uncertain, complex and ambiguous (VUCA) world?
Traditional approaches to strategy
Traditional approaches to strategy typically begin by defining a vision that is then realised through the execution of a change programme. The problem with this approach is that it assumes:
- Sufficient is known at the outset to define a meaningful vision.
- The big, hairy and audacious goals (BHAGs) that are often defined in the vision are realistic and feasible.
- The context within which the organisation operates will not change during development and execution of its strategy.
- The influence of exogenous and endogenous forces that are determining the organisation’s current trajectory – the one taking it to its default future – can be controlled.
- Organisations are programmable and can be changed according to a predefined plan.
It also assumes that the organisation’s leadership is aligned, both in terms of the need for a new strategy and how the resultant strategy will be executed.
Essential purpose of strategy
In their book Beyond Default, David Trafford and Peter Boggis argue that the essential purpose of strategy is to change an organisation’s trajectory, from the one taking it to its ‘default future’ to one that takes it to an improved future. They describe a default future as the place an organisation ends up if its leaders take no action other than that currently planned. They also argue that developing a successful strategy involves assessing the influence of the exogenous forces that are changing the context within which an organisation operates, exploring emerging strategic opportunities and making an informed choice on strategic intent. They also make the point that a strategy is only of value if it is successfully executed, which is about turning strategic intent into operational reality.
New approaches to strategy development and execution are needed
Traditional approaches to strategy and change were developed in a different age, one where, to a large degree, the future was a continuation of the past. It was before the knowledge economy took hold, where wealth was created from resources and factories rather than the knowledge and skills of individuals. It was when talent was readily available and peoples’ expectation of work and their contribution to the future direction of the organisation were very different. Today’s context – often described as the VUCA world – is very different and requires new approaches to strategy and change that are cognisant of the everchanging conditions within which organisations operate today.
Establishing the necessary conditions
New approaches to developing strategy and executing change should not be linear, starting at step 1 and concluding at step n. While some things do need to be done before others, it’s more important that a set of conditions are established from the outset that enable an organisation to adapt its strategy and modify its execution plan as circumstances change. These conditions include:
- Clarity of strategic intent
If the essential purpose of strategy is to change the trajectory of an organisation, then strategic intent defines the trajectory the organisation has chosen to pursue. It’s an informed choice resulting from an assessment of the influence of the exogenous and endogenous forces that determine strategic opportunities. It’s not the same as a vision as it defines the direction of travel rather than an end-state. For example, the strategic intent of a retail bank could be to focus on being a digital financial services provider that gives its customers compelling digital exeriences over their tablets and smart phones, rather than, as in the past, focusing on expanding its branch network.
This condition is in place when the leadership team has an aligned view of the target trajectory they want their organisation to pursue, and colleagues across the organisation clearly understand this. Equally important is everyone understanding the consequences of not changing the current trajectory.
- Explicit operating principles
Operating principles define how the organisation needs to operate in order to change its trajectory and realise its strategic intent. An operating principle is a ‘conscious choice between two equally valid alternative ways of operating’. For example, if an organisation’s strategic intent was to become a ‘truly digital enterprise that engages with its customers over their mobile devices’, one of its operating principles could be:
‘We engage with customers via their mobile devices only, on a 24/7 basis.’
as opposed to …
‘We engage with our customers over multiple distribution channels.’
Note that the operating principle not only defines the intent but also what it intends not to do. It’s as important – if not more so – to be clear about how an organisation has decided NOT to operate as how it’s decided to operate. Defining an equally valid alternative principle, the ‘as opposed to …’, does exactly this. Typically, between 10 to 12 operating principles would be needed.
This condition is in place when people begin referring to the target operating principles and it becomes apparent that their actions and behaviours are guided by them.
- Agile digital platform
All organisations are digital to some degree and will become more so as advances in digital technology become more pervasive. The question is how agile is the IT landscape that forms their digital platform? Was it designed with agility in mind or is it an accumulation of applications, databases, networks and data centres that have grown and evolved over time? Agile digital platforms are based on contemporary digital architecture design principles, including the PACE framework, service-oriented architecture (SOA), middleware and open application integration (APIs).
An example of an agile digital platform is that of Alibaba, the Chinese tech giant, which is able to deploy enhancements every four hours whilst simultaneously continuing to process huge numbers of transactions. During ‘singles day’ 2019 the platform processed 1.3 billion orders in a 24-hour period.
This condition is in place when technology is no longer the major constraint and the digital platform is robust, extendable, reconfigurable and open.
- Adaptive execution capability
Executing strategy is not like erecting a bridge or constructing a building. Yes, a plan is needed but organisations are living things that respond, in often unforeseen ways, when attempts are made to change them. As a result an adaptive approach is therefore needed.
The area that has made most progress in this respect is software development, driven by the Agile Manifesto. It’s an approach where software is developed, built and tested incrementally via minimum viable products (MVP). Multidisciplinary teams collaborate closely to deliver quickly and iterate frequently. They prioritise and reprioritise the requirements pipeline continually as they deliver, experiment and learn. More recently the approach – enabled by developments in cloud computing, continuous testing, virtual machines and containisation – enables new software to be deployed on an almost continuous basis.
This agile model is increasingly relevant in areas beyond software as it allows more adaptive strategy execution. Whether in product development, marketing, sales or production the agile approach offers a viable alternative, especially where the required change is too complex for traditional approaches.
This condition is in place when cross-functional teams self-organise, the change pipeline is continually reprioritised, MVPs are delivered in sprints and product owners take accountability for outcomes.
- Experiment and learn mindset
In his book That Will Never Work, Marc Randolph, the co-founder and first CEO of Netflix, describes how the company was formed. From the outset their strategic intent was ‘to provide personalised home entertainment’ and their key operating principle was for customers to ‘select DVDs online, for home-delivery by post’ as opposed to customers ‘select and collect their DVDs in store’. They soon learned that things didn’t always go to plan and that a different approach was required. Randolph’s mantra during these early days was “nobody knows anything” and the best way to reduce the risk of getting it wrong is to experiment and learn. This mindset established Netflix as an innovator and pioneer of video streaming – making it the global entertainment provider it is today.
This condition is in place when there is a level of openness and learning, and a recognition that anything is possible if we try.
- Clarity of decision-making
During execution of a strategy there will inevitably be the need to make mid-course corrections, either in respect of the strategic intent or how the strategy is being executed. What’s therefore essential is having clarity on how these decisions are made, including who ultimately has the rights – and resultant accountabilities – to make these decisions. Nothing kills the execution of a strategy quicker than a lack of clear decision-making, whether in respect to reallocation of funding, ensuring resources are in the right place or dealing with the inevitable ‘that wasn’t supposed to happen’ twists and turns. This condition is about governance where decisive decision-making drives pace and momentum.
It’s clear that this condition is in place when people know the process by which a decision will be made, who is accountable for the decision and what information is required so that an informed choice can be made.
- Collective leadership
Collective leadership is where multiple individuals exercise their leadership roles within a group – and then the entire group provides leadership to the wider organisation. A key aspect of collective leadership is collective accountability – where the outcomes of decisions and actions are felt by every leader in equal measure. Leaders who exercise collective leadership are often described as being aligned in their decisions and actions, acting as one and are ‘joined up’ in their thinking and behaviour. Without collective leadership there will be no collective strategy, and without a collective strategy an organisation will pull itself in multiple directions.
This condition is in place when all members of the leadership group are pulling in the same direction.
The conditions are interdependent
The seven conditions described above individually contribute to a new and different approach to developing and executing strategy, one that’s more relevant to the fast-paced VUCA world that most organisations operate in today. But they don’t work in isolation. For example, it’s not really possible to have adaptive execution capability if the organisation doesn’t have an agile digital platform. Equally, if the strategic intent is not clear, self-organising teams will not have clear criteria by which to prioritise change. Furthermore, if the operating principles are not defined there is no guidance on what the changes should contain. Also, if there is not an experiment and learn mindset the result will be more of the same. And finally, without collective leadership there will be no one single strategic intent and the organisation will be pulled in many different directions.
All seven conditions – and possibly more – therefore need to be in place.
Our final thought comes from Don Tapscott in his Foreword to Beyond Default: “This is not a time for tinkering. Strategy is coming to the fore once again.” Are you and your organisation ready?
We welcome your thoughts.
Co-author of Beyond Default and Managing Director of Formicio, a strategy and change management consultancy
Digital transformation strategist and advisor. Frank can be contacted at firstname.lastname@example.org.