June 4, 2018
It used to cost millions to launch a tech startup: now it’s thousands. We can no longer be certain who or what we will be competing against tomorrow. Friend can become foe overnight. Is your strategic planning process ready for this new reality?
Strategic planning isn’t what it used to be. Decades ago, we used to put our 20-year plans in a binder and pull them out when a major strategic choice had to be made. Change sped up and we switched to the 10-year plan; then the 7-year and the 5-year. Now many consider a “long-range” 3-year planning document to be too static to be useful as anything more than a compass.
In fact, smart executives no longer believe that winning will be guaranteed just because they execute their strategic plans. Inevitably, whatever direction they choose to take will be challenged—constantly. You can see this in their faces every day as they hunker down on their smartphones. They’re trying to make sure they don’t miss anything in the chaotic complexity all around their companies. They refresh their tactics at least every quarter, sometimes every month, in response to emerging disruption.
We’ve got to be able to move fast, flex with change, and make quick course corrections along the way.
No one can control all the change that is happening in our world today—and no one can make it go away. But when it comes to our organizations, we CAN do something about it. We can develop a dynamic, more resilient approach to strategy. An approach more likely to keep us well positioned and well prepared to take advantage of emerging opportunities. That approach focuses on three practical steps: thinking strategically, deciding strategically, and acting strategically.
Strategy was an organizing principle in the relatively simple business environment of the 1950s. Then computers gave us the ability to quickly organize and analyze all the data we gathered for strategic decision making in a much more complicated world. By the ’90s, increasing globalization was challenging us to probe into the complex subtleties of international business environments. Now rapid advances in technology and business models present us with new challengers and new challenges almost daily. In the chaos of today’s competitive environment, we need to act faster than ever before.
We at Ankura find many senior executives still come into the strategic planning process with the expectation that they will be shaping and securing the long-term future of the organization by setting the direction of the organization for the next three years. To a certain extent, in some cases, that may be true. However, we quickly point out that no strategic plan survives its first contact with reality intact. When the present is as fluid as it is, no one can anticipate and prepare for the long-term future with 100% certainty.
That doesn’t mean you can’t have definitive goals and metrics in mind in terms of growth and productivity, innovation and automation, and social and environmental responsibility. But there is no clear path to the future. You’ve got to be able to keep crafting and improving your strategies as you go without relying entirely on your CEO to make every little adjustment and course correction on the fly. In our ever-changing world, everyone in the company needs to be thinking about what customers will need and value tomorrow—and then figuring out how to provide those solutions. And so we encourage clients to stop their people from focusing almost entirely on process (doing everything “right”) and to start focusing them primarily on strategy (doing the right things).
Set people up to do the right things, rather than to do things right.
Figuring out what those “right things” are in any given moment for any given business calls for a few essential skills. You will want people paying attention to what’s going on inside and outside the company and discerning which “weak” signals actually hint at what’s around the next corner. Your leadership team and your cadre of team leaders, for instance, can more accurately anticipate the future when they regularly synthesize data from various sources, identify emerging patterns and trends, and consider diverse interpretations about what’s happening and why. They will all be making tough calls, more often than not without complete information. Whether they make wise decisions or not will depend on how well they can push through ambiguity and their own discomfort to look at things from diverse perspectives.
Whatever is coming next will probably threaten the status quo. And so your leadership team in particular will require a “safe zone” where they can have open dialogues about old assumptions that are still driving the business and new assumptions being made about the future. A place where they have permission to play devil’s advocate and challenge each other’s perspectives. A place where they can hash out answers to five questions that will form the company’s strategy:
- What is our winning aspiration?
- Where will we play?
- How will we win?
- What capabilities do we need to win?
- What systems must we have in place?
Get your answers down to one page each—at most—and you’ve got your strategy. That’s right. Just five answers. Anything more ventures into the realm of traditional strategic planning, an exercise aimed at essentially creating a detailed budget with explanations.
Strategy only gets realized when people know what the company is doing, why, and how their day-to-day decisions matter.
The key here is to line everything in the organization up with the few big bets, the pilots, or the staged commitments that will position the company in the marketplace, deliver returns, and create competitive advantage. Ideally, you want to break down your high-level strategy into a set of basic principles that everyone in the organization can understand and use to guide their moment-to-moment decisions at work. Only then can people begin to act in a way that iteratively incorporates what they learn as they execute that will help realize the corporate strategy.
Acting strategically can be a matter of etching a strategy in stone and getting people to follow best practices to get on par with everybody else. Or it can be a matter of etching our planning processes in sand and working with emergent practices to get ahead of everybody else. In today’s chaotic competitive environment, it’s pretty clear which way to go with this.
Fortunately, we have access to much more data and many more insights than ever before. We can digest information available on exchanges about public companies and extract the strategy of our competitors from transcripts of their earning calls. We can track the expressions, behaviors, and sentiments of our customers and use artificial intelligence to figure out how to respond to their needs and wants much faster. We can let natural steps emerge as our cross-functional teams engage with data-driven, next-generation ideas.
Yet, even with all this information and all these insights, we may still have a misstep in the fast tango between chaos and order.
The challenge is to find the right balance of risk as you place your bets across various dimensions. Some bets may develop into sustainable competitive advantage; others may simply disrupt the organization. Only time will tell. That’s why we recommend companies take a “test and learn” approach to their strategy and continually revisit their execution plan. “Test and learn” definitely beats placing all your eggs in one basket and just waiting for them to hatch.
Any forays into the chaordic dance also call for a faster-than-normal play at building capabilities. We call this the art of “embrace and expand”. Instead of building the right capabilities and core competencies to make your bolder plays, acquire and amplify the resources you need as you expand into the future. Companies like Google, for example, do this well: acquiring the right talent in particular is what allows them to experiment with the potentially disruptive at top speed.
The days of long-term planning are over. And that means it is imperative we look into the future, place bets across the spectrum, and set our people up to be able to act strategically in the face of continuous change. Only then will strategy be the living, breathing thing we need it to be. So set direction. Make your five strategic choices. Start to act. Learn. Adjust.
1 Anand Sawal. “Gradually…then suddenly” (CB Insights). Slide 29 from keynote address given December 13, 2017 [where?]. The cost to launch a tech startup used to be $5M in 2000: by 2011, it was down to $5k. Data source: Upfront Ventures.
2 Inspired by Paul J.H. Schoemaker, Steve Krupp, Samantha Howland. “Strategic Leadership: The Essential Skills”, Harvard Business Review, January-February 2013.
3 Inspired by Roger L. Martin, “Don’t Let Strategy Become Planning”, Harvard Business Review, February 5, 2013.