Understanding a Shift from Monolith Strategy to Architecture Based on Aligned Scorecards
As a response to the period of uncertainties and increasing complexity, organizations adapt their strategy-related workflows. Strategy architecture based on aligned strategy and function scorecards replaces monolith strategies. This change opens a possibility to distribute strategy work among more internal stakeholders. For the shift to be effective, strategy teams need to master value-based strategy decomposition and have access to a safe place for prototyping.
Shift Towards Architecture Based on Aligned Scorecards
In January 2023, BSC Designer conducted an internal analysis of over 8,000 users of strategic planning software represented by the individual strategy consultants and organizations diverse in their geographic location, size, and operating domain. The results of the analysis showed that
92% use an aligned strategy and functional scorecards architecture as opposed to a monolith architecture.
A similar analysis in 2019 showed only 64% of accounts use the aligned scorecard approach.
While the results of the analysis are obviously biased, as the dataset includes the organizations already automating their strategy description and execution, we can conclude that there is a trend toward a shift from monolith strategies to the aligned strategy scorecards.
What Was Wrong With the Monolith Strategy?
Is it “the strategy” or “the strategies”? A decade ago, most of the strategy experts would argue that organizations should have a single strategy — saying “strategies” in plural was a conceptual error.
In 2023, things feel different. We are passing through the stormy part of the VUCA period. The operating environment became too volatile and uncertain. On the level of strategy, we see shorter planning horizons, frequent updates, diverse new challenges and factors that we need to consider in the strategy.
Maintaining a monolith strategy updated annually is no longer an option.
Microstrategies
We could make a strategy more relevant to the emerging needs of stakeholders by converting it into a Swiss knife of strategy — capturing new inputs with PESTEL analysis, experimenting with scenario planning, etc. In the end, it would remain a monolith only from the facade. Architecturally, it will be a number of smaller aligned strategies — microstrategies.
Back in 2011, we saw a similar change in software engineering. With increasing complexity, software companies started shifting from a single-component or monolith architecture to microservices that communicate via internal interfaces.
Strategy Architecture Need to Support External Integrations
In March 2023, due to a ransomware attack, hundreds of surgeries were canceled in the Hospital Clinic in Barcelona, Spain. The hospital’s team together with local authorities mitigated this risk event. Interesting fact is that the hospital’s response was part of a cybersecurity intervention strategy integrated in the regional healthcare system.
Strategy is no longer owned 100% by the organization.
If done correctly, a strategy will be shared/integrated with the strategies of suppliers, communities, investors, regulators and other stakeholders.
Single Source of Trust
Where is the actual knowledge about the strategy? In practice, having a monolith strategy architecture meant two things:
- The existence of a comprehensive document called a “strategic plan” that was prepared by a dedicated strategy team as an output of an annual strategy meeting.
- The existence of a large number of spreadsheets, slides and other documents where real work was happening.
Although the monolith architecture was formally designated as the single source of trust about strategy, due to lags in update process and ambiguous goal definitions, in practice, it was rarely perceived or utilized in this way.
A significant part of the relevant knowledge was not in the strategic plan document but in all those supporting spreadsheets, and, of course, in the minds of the key managers.
Strategy in Practice
Although there is no agreement about the formal definition of strategy, there are common components shared among practical strategy implementations — the triangle Goals-KPIs-Initiatives:
- Goals are the desired outcome to be achieved
- KPIs or metrics are the quantification of the goals and initiatives
- Initiatives are the action plans in the context of the goal
Plus, risk definitions, risk mitigation plans, and key risk indicators that conceptually resonate a lot with the idea of initiatives and performance indicators, but traditionally are defined separately.
Introducing Aligned Strategy and Functional Scorecards
It is implied that the goals inside the strategy are quantified, so the term strategy scorecard seems to be adequate for the case and is accepted in the professional community.
In contrast to the Balanced Scorecard concept introduced by Drs. Robert Kaplan and David Norton, the strategy scorecard term does not imply a specific method of strategy decomposition.
For some applications, we are interested in measuring the performance without getting deep in the strategy context, and the term functional scorecard was commissioned for this case.
What Does “Alignment” Mean in Practice?
The strategy and functional scorecard are aligned between each other to form a strategy.
- Strategy scorecards will be integrated into the core of the strategy, like, for example, an airline’s strategy is built around safety, or digital transformation involves most parts of the organization, not just IT.
- Some alignment will be done by data, e.g., one functional scorecard contributing to another strategy scorecard that contributes to a high-level strategy.
- In other cases, the alignment will be about giving stakeholders of strategic planning the necessary contextual information.
A visual representation for a monolith strategy is a tree-like hierarchy. In the case of aligned strategy scorecards, the hierarchy will have many cross connections between strategy and functional scorecards.
Updating Strategy via Strategy Sandbox
The strategy, once developed, polished, and approved is something that people don’t like to touch, at least until the “best before” date when it’s time to do an annual strategy review.
Even if the leaders make a conscious effort to open strategy for modifications, we have another problem: the new ideas typically come in ambiguous form, and mixing existing, well-described strategy with those vague ideas won’t add any value.
How do we introduce new inputs into the strategy based on the aligned scorecards?
The solution is to include in strategy architecture a strategy sandbox, a safe place where teams can work on their ideas, do the value-based strategy decomposition by splitting up vague goals into the independent sub-goals quantified by the value for the stakeholders, and, once ready and tested, connect the new sub-strategy to the main strategy.
The value-based strategy decomposition suggests a readiness criteria for a sub-strategy: we can move the strategy out of the sandbox and align it with an overall strategy when sub-goals are quantified by the value for the stakeholders.
The concept of strategy sandbox resonates perfectly with the idea of participative strategy design popularized by Dr Graham Kenny. Having a safe place for experiments invites teams and individuals to prototype their ideas into specific strategy and functional scorecards.
Conclusions
From a practical point of view, the strategy architecture based on aligned strategy and functional scorecards is more adaptable for the periods of uncertainty and growing complexity.
Organizations need to adjust their strategy workflows to convert the high-level ambitions of the stakeholders into strategy and functional scorecards by implementing value-based strategy decomposition. To protect the core strategy and support internal discussions, strategy architecture needs to include a strategy sandbox — a safe place where teams can experiment with new ideas.
The Strategy Implementation System is an article on Medium where I connect the dots about strategic planning, including its strategy architecture component.
About the Author
Aleksey Savkin is the CEO of BSC Designer, a company that specializes in providing automation software to help both for-profit and non-profit organizations effectively implement strategic planning. He is the author of books “10-Step KPI System” and “Your Guide to Balanced Scorecard,” as well as more than 100 articles focused on the areas of performance measurement and strategy execution.
