Practicing strategy in an uncertain world
Strategy + Business
MK: I’ve heavily reworked the article, so ~60% of the material consists of my thoughts.
65% of executives don’t believe their firms have a winning strategy as they’re frustrated by goals, bullet points and statements being passed off as a strategy.
This can go on for quite some time in predictable business conditions, but as the uncertainty period don’t come to an end (actually, it gets worse as more factors like global climate change, geopolitical melee and societal fragility play a larger role).
The modern approach to strategy is not searching for a knight in shining armour, but rather is diligently focusing on behaviours, frameworks and tools. [MK: there are times for fishing and times for mending nets.]
[MK: in my mind, the most suitable definition of a strategy is: “an integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition”; note the word “sustainable”.]
Strategy can be thought of as a means to maximize the overall value delivered to all relevant stakeholders [MK: I’ve rephrased another definition but love my version more]. This can’t be achieved with a short-term outlook, of course.
Needless to say, business configurations (enterprise, business units, functions) and the resources + processes oiling the big machine are unique and not frictionless, but that is an expected nature of all complex systems.
The “top down” process of strategy formulation (i.e., the Board + CEO are presenting the strategy to the management) has never worked anyway, and it’s safe to say that in most companies there’s a two-way strategy formulation heavily leaning on the “bottom up” approach. The practical effect of this is that firms need to acquire more information (via trade partners, industry sources, hiring, R&D, etc.), transform it into organizational knowledge and deliver it (along with the context) to the right people in the organization. This approach gives voice to the people with things to say, but not occupying the right branch on a corporate tree, and also encourages the top brass to actively listen and ask questions. True, there can be too much information, but with the modern information retention and retrieval systems it can get more eyeballs and sift through to ensure less bias.
While it may be depressing and seemingly dangerous to the executives’ careers as they no longer remain information brokers, there is a huge demand for the integration skills, i.e. proactively seeking the possible futures of the firm from across the relevant parts of the organization, and incorporating the matching components into the firm’s strategy.
The importance of building strategic foresight is quite obvious as building several scenarios based on the possible emergence of one or several key factors is every executive team’s job (and the Board should demand this from them, too). It’s not the same as following the vision; I daresay the adaptability of the organization is infinitely more important than the clarity of vision, which may become obsolete as a result of the prolonged crisis.
Another risk of getting too obsessed with the future and ignoring the present is the misallocation of resources towards “new bets” and maintaining the “business as usual” activities. While a crisis is a good time to make large changes under the guise of steering the ship towards survival, cutting too deep or emphasizing certain parts of the business (“more future-ready”) at the expense of the strategic / supporting ones or cash cows never ends well.
While it’s obvious that there’s not much room for yet another major ecosystem the size of Google, Amazon or a few others, fostering a culture of dependency on value chain partners (including investing into them) at least temporarily solves the resource allocation problem and allows for the shared value creation, which in itself can lead to innovation.
MK: the article goes on to mention how to use AI in the company, but this is boring.