Good practices for deriving and defining your organization’s strategy — part 1
A strategy is a means to help us move from the here and now toward a desired future. It offers us orientation for future situations in which we have to make decisions. Thus, it helps us navigate through a future that is still uncertain.
For a strategy to be meaningful and actually provide orientation, it must be linked to the company’s mission and vision. Otherwise, in the worst case, the company’s mission points west and the strategy points east. I shared how organizations can derive their purpose, mission and vision in a recent article.
In this series of articles (Parts 1 + 2), I want to show ways how to derive and define a strategy based on an organization’s mission and vision. In the spirit of the headline, I am talking about a good practice. This means that there is no one right way (= best practice), but different approaches can lead to the goal of a meaningful strategy. In this article I would like to show such an approach of deriving a strategy, as well as our (the team at creaffective GmbH) view on how to define strategy in the first place.
The approach works for the entire organization as well as for individual departments and teams.
Two aspects of the future
What exactly is a strategy?
Similar to the topic of mission and vision, you will find various definitions. From our point of view, it is important that the organization and those in the organization who derive a strategy have a common understanding and definition. At creaffective, we wrote our own document how to derive our strategy at the end of 2021, which we decided on beforehand. Only then did we start the actual process.
The process of deriving a strategy and the definition of what a strategy is, can be viewed separately. We have also accompanied customers in deriving their strategy who had a different definition of what strategy means for them.
I have already written the definition of strategy we use in bold above.
With regard to the future, we assume two aspects of the future, following an argumentation from Lars Vollmer:
- There is a short-term (lasting several months) and relatively known future.
Here we can know to some extent what is likely to happen or assume reasonably stable conditions for certain aspects, to which we can orient ourselves. Nevertheless, of course, there can always be events that are unanticipated or difficult to anticipate (such as the Ukraine invasion or a Covid lockdown of a mega-city like Shanghai).
In this case, we will have to change even our short-term plans.
For this known future, we can usually define concrete goals (or OKRs — Objectives and Key Results) and develop plans on how to achieve these goals in a manageable time horizon. These plans could be a strategic roadmap that starts with a concrete prioritized to-do list for the first few months and then moves into a backlog to be prioritized at regular intervals to derive more detailed planning for prioritized backlog items. - Second, there is a medium to long-term future (several years). This is characterized by the fact that large parts of it are unknown and uncertain. We cannot know the details. This also means that it cannot be planned in any meaningful way. This future requires a strategy, as opposed to concrete plans and goals.
Therefore, we understand strategy as something that relates to the uncertain and unknown part of the future, not the known part. For the know part, we use plans. That also means that a strategy is not a long-term plan.
Strategy as a decision heuristic
A strategy provides guidance for decisions for the part of the future that is unknown. This guidance happens in the form of heuristics or orientation principles, such as “generally go east” or “always prefer paved roads” or “establish long-term and continuous cooperation with customers”. A strategy is thus like an enabling constraint that provides us with orientation and helps us to make a decision when there is a need.
Thus, a strategy is comparable to a compass in unknown terrain or a light on a foggy path in the forest.
In our understanding, a strategy excludes from the sheer infinite possibilities what you don’t want to do (“go west” or “follow the dirt road”). This makes us flexible for dealing with the unknown. Strategy must therefore guide action and enable decisions to be made. People can consult a strategy whenever surprises/unknowns occur in their daily work. They will be able to identify things we don’t want to do and consider options within our enabling constraints that we want to do.
The strategy can then also support us to define concrete short-term goals and derive plans and concrete steps from these goals.
A concrete way to formulate these heuristics can be the way Holacracy suggests in the form of “X more important than Y” formulations.
For example, “Long-term collaboration with customers is more important than isolated one-off interventions” or “Product longevity more important than short-term low material costs.”
Another option could be to focus only on the specific principle, if it does not make sense to phrase the second part of the comparison. So for example: “Focus on long-term and continuous cooperation with customers” or “Focus on longevity and repairability of our product”.
The opposite of strategic principles must make sense!
For a strategy to make sense, the opposite of the formulated strategic principles must also be a serious alternative. So, for example, going west instead of east, or “focus on standardized offerings more important than solutions developed individually with the customer.” Or even “Focus on frequent product renewals more important than product longevity.”
“We want to provide great customer service” is thus not a strategy because the opposite is in my view not be a viable alternative. Even though I often get the feeling that some B2C companies are taking exactly this approach: Getting new customers is more important than serving existing customers.
“We want to be market leader”, that is a nonsensical statement that nobody can create a meaningful opposing statement to.
In part 2 of this series, I will describe a concrete process of deriving a strategy, building on the definition presented here.
