Doing Strategy the Interactive & Flexible Way — Strategy as Football
How to Develop Strategy and Make it Happen
In a world where the rate of change will never be slower than today, our ways of working with strategy need a new strategy. This write-up demystifies strategy by answering the following questions through concrete experiments and insights from Lean/Agile transformation journeys at Ericsson 3G and NetEnt:
- Why do you need strategy in a volatile, uncertain, complex and ambiguous world and what is it?
- How do you develop your strategy with speed and flexibility?
- How do you make your strategy happen with speed and engagement?
This is highly relevant for organizations large and small that would like to realize their full potential through effective strategies.
From Strategy as Chess to Strategy as Football
Many organizations see strategy as a game of chess (see Figure 1 below): a rather slow-moving game of thought with very strictly defined rules, pieces and moves, and, an all-knowing chess master who moves the pieces.
Other organizations see strategy as much more of a fluid game of football (see Figure 2 below), or soccer for people in the US :-), where — given a general direction — the players act independently and as a team, creatively trying different approaches depending on the opposing players’ moves and feedback on how things are going. (For hardcore football fans: what I mean is Total Football.)
Let’s explore “strategy as football” based on experiences from organizations that are moving from yearly, slow strategy loops with strategy development strictly separated from strategy deployment to a more fluid ways of working where they have much more involvement in developing, fine-tuning and getting feedback on how the strategy is working — in light of a direction where they want to go.
Parts of the world have always been volatile, uncertain, complex and ambiguous — think of tsunamis, freak waves, wars, the Black Death in Europe in the Middle Ages, …
Now, the ongoing digital transformation towards software and world-wide communication is increasing the speed by up to a factor 1000 since bits are so much faster than atoms as illustrated in Figure 3 below.
Or, in the words of Verizon CEO Hans Vestberg, the rate of change will never be slower than today …
So, why do you need strategy? Isn’t it enough just to be agile :-) Let’s look at this question from five important perspectives: customers, market, organization, employees, competitors.
- Customers: secure customer delight, i.e. serving the customers’ real needs.
- Market: success in volatile, uncertain, complex and ambiguous environment.
- Organization: handle limitations — time, money, equipment, competence, people …
- Employees: know and influence direction in order to act and decide with speed.
- Competitors: sustainable competitive advantage for our organization.
Or, to summarize: We need strategy to sustainably thrive in a world where the rate of change will never be slower than today.
What is Strategy?
Let’s start by clearing out a few misunderstandings and state what strategy is NOT :-) Strategy is
- Not only a vision or a mission.
- Not only a plan.
- Not only responding to new threats and opportunities as they emerge.
- Not only optimizing current business.
- Not only following best practices.
These can all be parts of a strategy but are by themselves not a strategy. Another common misunderstanding is that strategy is about predicting the future, it is not; it’s about shaping and adapting to events and looking at future scenarios.
Modern strategy practitioners define strategy as follows:
Nilofer Merchant: “We need to let people think [together] and create strategy everywhere”
Stephen Bungay: “Strategy is thoughtful, purposive action.”
Roger L. Martin: “Strategy is a set of interrelated and powerful choices that positions the organization to win.”
Melissa Perri: “Strategy is a system of achievable goals and visions that work together to align the team around desirable outcomes for both the business and your customers. Strategy emerges from experimentation towards a goal.”
To summarize, strategy
- is a set of choices that aligns the organization towards fulfilling the needs of its stakeholders;
- emerges from experiments that guide the choices;
- is done collaboratively by people in all parts of the organization.
How Do You Do Strategy?
Enough with definitions — how do you do strategy in real life in a business context?
Jack Welsh (see Figure 4 below), legendary CEO of GE in the 80s and 90s and by many people considered to be one of the greatest CEOs of the 20th century has a very pragmatic view of strategy: “In real life, strategy is actually very straightforward. You pick a general direction and you implement like hell.”
W. Edwards Deming (see Figure 5 below) the quality guru who inspired Japanese industry in the 2nd half of the 20th century, reminds us that there’s not enough to do your best, you need to know what to do — using a method — and then do your best :-)
The not quite so famous strategist, Dr. Evil (see Figure 6 below), has a top-secret strategy and tell everyone else exactly what to do and how to do it. This is an important reminder on how things sometimes are — taken to the extreme, of course :-) One extremely important prerequisite for success in the inter-play — both in developing the strategy and making the strategy happen— is trust and collaboration, starting with trust and collaboration between business (e.g. product management) and development (e.g. IT or R&D).
How Do You Develop Your Strategy?
Developing strategy is intricately related to making your strategy happen; it’s like yin and yang, two sides of the same coin, or, as illustrated in Figure 7 below, an infinitely intertwined Möbius strip: practical experiments inform choices and choices enable actions and decisions which — through learning — encourage new choices and experiments.
Let’s look at a few experiments we did to improve our ability to develop strategy!
Experiment: Structured Process for Strategic Learning
- Learn: situation analysis of trends in market customers, competitors and your capabilities.
- Focus: strategic vision & choices based on the insights from the situation analysis.
- Align: people, culture, structure & process, measures & rewards based on the focus.
- Execute: implement and experiment according to your focus and how you aligned.
Well, Dr. Deming would have been proud — at last and at least we had a method for our strategy :-)
We learned that a step-by-step process for developing strategy was helpful, in particular the common learning and increased awareness from doing the situation analysis together in the management team of the product development unit. We also learned that we spent too much time on the implementation part, and, finally, that we totally forgot people, culture and experiments parts … :-(
Experiment: Clear Needs and Long-Term Key Performance Indicators
One of the successful experiments from our work with “Strategic Learning” in 2010 was setting up the following long-term Key Performance Indicators (KPIs) for 2015 based on our needs to improve quality, lead-time, value delivery and employee engagement, and, feedback that our wanted position was too abstract and needed to be complemented with something more concrete and quantified as visualized in Figure 9 below
- 4x more value delivered to exceed our customers’ expectations.
- 2x faster time-to-market to be more responsive to our customers’ needs.
- 10x better quality to secure our customers’ trust.
- 75% of our people fully engaged as the foundation.
This was done before we knew how to achieve these rather aggressive targets. The decision to use KPIs was by no means easy since targets can always be misused.
We learned that it was good to have long-term KPIs aiming five years ahead and not only for the next quarter, and, that we used a balanced set of targets that helped us avoiding sub-optimization. We also learned that having a quantified wanted position in the form of KPIs was useful to show progress to ourselves internally in our organization which gave us additional energy and engagement, as well as to our external stakeholders who valued the transparency. Having a set of long-term KPIs set five years into the future sent a clear message to the organization that this is not a quick fix that will be ready in a quarter or two, but rather something that requires radically different thinking and actions.
So, did we achieve these ambitious long-term KPIs in 2015? Yes, we did!
Experiment: Strategy as a Game of Iterative Choices
Next experiment is about refining our strategy ways of working using “Playing to Win” by Roger L. Martin as a playbook. It consists of five inter-related questions and coordinated set of choices about what to do and not to do in order to create sustainable competitive advantage over competition by winning the hearts and minds of your stakeholders. The five questions (see Figure 10 below) are:
- Winning Proposition: what is he purpose of the enterprise, its motivating aspiration?
- Where to Play: what is the playing field where we can achieve our winning proposition?
- How to Win: how do we win on the chosen playing field?
- Key Capabilities: what is the set of capabilities required to win in the chosen way?
- Enabling Structures: which are the systems and measures that enable the capabilities and support the winning choices?
The questions are inter-related and the way to answer them is iterative which means that as you learn more you go back and forth between the questions to refine your answers and choices.
We learned that sports is a highly useful metaphor for strategy — compared to the traditional war analogies. We also saw how “Playing to Win” was used in different parts of the organization: from business to individuals via programs and teams. Additionally, our strategy descriptions became much shorter and focused: one written page or five pages in a slide-deck including short speakers’ notes, rather than 10 written pages and 50–100 pages in a slide-deck.
Experiment: Visualize Value Offering
Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne aims to create a new, uncontested market space that makes competitors irrelevant by creating new, unique consumer value often while decreasing costs. Figure 11 below illustrates this where the current situation is highly competitive (a “red ocean”) and the strategy gives the direction to jump into the right fishbowl (a blue ocean with no competitors) and that building the company’s capabilities corresponds to building the fish’s muscles needed in order to perform this jump.
One key instrument in the Blue Ocean strategy framework is the strategy canvas. In Figure 12 below we see the Blue Ocean Strategy Canvas with two axes:
- the vertical shows our offering level, i.e. how good the offering is on a scale from e.g. 1–5.
- the horizontal shows the key competing factors of our industry.
Given this, we visualize our offering (in blue) compared to competition (in red) and look at the shapes of the curves. Preparation of the strategy canvas is normally done in a group of people from different parts of the organization at a whiteboard.
At NetEnt, we learned that preparing the strategy canvas triggers valuable conversations and collaboration around possible moves to make our offering more differentiated and unique, and, that doing the visualization together at a white-board makes people’s hidden assumptions and intuitions visible which gives better understanding and better choices during strategy development. We also learned that finding a small number of relevant competing factors for your industry can be quite hard.
Experiment: Visualize Value Chain Evolution
Wardley Maps help you visualize how value chains evolve in different scenarios. Let’s look at the example in Figure 13 below.
On the vertical axis we see a value chain or chain of needs — starting from more visible needs at the top that are dependent upon less visible needs further down the chain, e.g. the customer has the need to play games on different devices: gaming PC/Mac, console/mobile, VR headset, all the way down to the need for power.
The horizontal axis shows the evolution of ways of realizing the needs/value from unchartered to industrialized in different stages: genesis, custom built, product (+rental) commodity (+utility), e.g. the game content (at the very left) is in genesis whereas power (at the very right) is an industrialized utility.
At NetEnt, we learned that Wardley Maps are highly useful to visualize and explore value, evolution and choices by triggering a conversation, preferably together around a white-board, and that it’s easier and faster to get to decisions by consent on what to do ourselves in-house and what to buy or outsource. We also learned that Wardley Mapping takes a lot of practice and many iterations, hence it takes time.
How Do You Make Your Strategy Happen?
As we said earlier, making your strategy happen is of course related to the way you develop your strategy, hence it’s like Yin & Yang, two sides of the same coin, or, as illustrated in Figure 14 below, an infinitely intertwined Möbius strip: practical experiments inform choices and choices enable actions and decisions which — through learning — encourage new choices and experiments.
Let’s look at a few insights we had and experiments we did to improve our ability to make strategy happen!
Insight: Alignment for Autonomy Gives Results
This is one of our key insights very much inspired from the magnificent book “The Art of Action” by Stephen Bungay. From the Agile movement and Dan Pink, we know that autonomy is highly valuable. In large organizations, we value alignment to ensure that everyone contributes to the overall success of the organization.
Alignment happens when teams work towards a common purpose. Autonomy helps teams to work independently of each other. Alignment and autonomy are often seen as a trade-off or a balance act. This is a false dichotomy and we can have both if we plot them in two dimensions as shown in Figure 15 below:
- On the vertical axis: alignment on what & why, i.e. the intent.
- On the horizontal axis: autonomy on how, i.e. the actions and decisions.
We learned that strong alignment around (possibly co-created) intent enables maximum autonomy to take independent action — everywhere in the organization, and, that this gives higher speed, more engagement and more innovation.
Insight: Long Lead-Time from Insights to Actions
As illustrated in Figure 16 below, the overall strategy looking five years into the future was revised and aligned across the whole company during Q2 every year. Preliminary targets in the Balanced Scorecard (BSC) format were drafted during Q3. After review and alignment, the final Balanced Scorecard targets for the coming year were set during Q4. Starting in Q1, the focus was on reporting actuals vs targets and not so much on learning and adjusting. After three quarters, some of the strategic insights were no longer valid and hence some of the targets were not valid. The time from insights to actions was simply too long and in a rapidly changing world this meant quickly outdated targets.
Experiment: Regular Strategy Retrospectives
Based on the insights around alignment for autonomy and the long-lead time from insights to actions, we started regular strategy retrospectives to as illustrated in Figure 17 below. Here, regular means roughly quarterly with the exception of Q3. The input is the following
- The current progress towards the long-term (five year) Key Performance Indicators.
- The current business situation.
- The progress toward the current challenge, e.g. learnings and results from experiments, where a challenge is one short-term (roughly quarterly) target that gives clarity and focus for the whole organization by giving direction to all teams’ improvements experiments.
Then we secure the involvement by the business and product development leadership teams and everyone in the organization in ½-day interactive, collaborative exercises. Finally, the output is a revised strategy and a challenge — the same one, a revised one or a completely new one.
We learned that the strategy retrospectives were a regular, positive reminder of the long-term wanted position (long-term KPIs); that the strategy evolves every quarter rather than every year, and, that we therefore moved faster from new insights to action, and, that it was good to be able to change the near-term challenge more often.
Experiment: Involving Challenge
Let’s go a bit deeper into the challenge and how we involved the whole organization.
The business and product development leadership teams worked on and agreed on one challenge for everyone in the organization that would be valid until fulfilled (estimated to take 1–2 quarters).
Here’s an example of a challenge: Every sprint delivered to a live network in order to shorten feedback loops; get continuous feedback from live network environments; create an even flow of features, and, secure that our customers can take new software without stoppers.
Then, we engaged the whole organization in ½-day team-work exercises on how each team wanted to contribute to overcome the challenge as seen in Figures 18a and 18b below. We also stated that we expected all teams to work up to 30% of their time with learning, experiments, improvements, prototypes, …
This is what Lean gurus call “push the form” and then “pull the content”.
We learned that it was valuable with clear expectations for the Challenge — including leading indicators for the Challenge and that the involvement created higher engagement. We also learned that it was hard to get larger improvements done.
Experiment: Operating System for Making Your Strategy Happen
Similar in spirit to OKRs (Objectives & Key Results), the 4 Disciplines of Execution (4DX) is an evolution that adds components for driving behavioral change on organization, team and individual level. 4DX, illustrated in Figure 19 below, is a simple, repeatable, and proven way for making your most important strategic priorities happen in the middle of your daily whirlwind.
- Focus on the Wildly Important: Focus your finest effort on one or two goals that will make all the difference, instead of giving mediocre effort to dozens of goals.
- Act on your lead measures: While a lag measure tells you if you’ve achieved the goal, a lead measure tells you if you are likely to achieve the goal. Lead measures often measure actions that you predict will move a lag measure. A lead measure can be directly influenced by the team.
- Keep a compelling scoreboard: When the lead and lag measures are captured on a visual scoreboard — made by the team and for the team — and updated regularly (typically weekly), they will stand out clearly as lighthouses in the daily operational whirlwind.
- Create a cadence of accountability: Every team meets weekly in a 20-minute session at their scoreboard — where everyone accounts for past performance, what they’ve learned and what they will do next to move the score forward.
At NetEnt, we learned that we got very successful business outcomes and higher engagement from teams doing all four disciplines. We also learned that it’s easy to skip one or more of the four disciplines, e.g. meeting only once every second week, which immediately impacts the outcomes.
To summarize the exploration of strategy as football, the patterns we’ve seen are the following:
- Developing strategy and making strategy happen are strongly dependent upon each other and therefore should be done regularly at the same time.
- Collaboration, co-creation and using visualizations gives better choices, decisions and faster learning.
- Maximum alignment enables maximum autonomy which gives speed, engagement and innovation.
How do YOU want to do strategy?
For Further Inspiration and Learning
This write-up is based on the following presentations:
Schön: Doing Strategy the Interactive & Flexible Way (Agile People Conference, Stockholm). Video Slidedeck
Schön: Strategy Experiments @Ericsson 3G (Lean Kanban Conference, München). Video Slidedeck
Schön: How Do We Get Speed, Innovation and Engagement? Article Slidedeck
Additional articles, books and videos for further inspiration and learning regarding how to interactive and flexible strategy development and strategy in a Lean/Agile context where the rate of change will never be slower than today are given below.
Bungay: How to Make the Most of Your Company’s Strategy (Art of Action)
Gallo: Making Your Strategy Work on the Frontline (The New How)
Kim, Mauborgne, Charting Your Company’s Future (Blue Ocean Strategy Canvas)
Lafley, Martin, Riel: A Playbook for Strategy (Playing to Win)
Perri: What is Good Product Strategy?
Pietersen: Strategy in Search of a Method (Strategic Learning)
Richards: All by Ourselves
Roock: I’m afraid that some leaders do actually think they are God. Arne Roock asks Stephen Bungay about modern management, the Prussian Army, and the Spice Girls
Wardley: An Introduction to Wardley (Value Chain) Mapping
Bungay: The Art of Action: How Leaders Close the Gaps between Plans, Actions and Results
Kim, Mauborgne: Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant
Lafley, Martin: Playing to Win: How Strategy Really Works
Marshall: Product Aikido
McChesney, Covey, Huling: The 4 Disciplines of Execution: Achieving Your Wildly Important Goals
Merchant: The New How: Creating Business Solutions Through Collaborative Strategy
Pietersen: Strategic Learning: How to Be Smarter Than Your Competition and Turn Key Insights into Competitive Advantage
Richards: Certain to Win: The Strategy of John Boyd, Applied to Business
Wardley: Wardley Maps
Martin, How Strategy Really Works (Playing to Win)
McChesney: The 4 Disciplines of Execution in a Nutshell
Nakicenovic Boström: Swimming in the Blue Ocean
Reinertsen: Decentralizing Control — How Aligned Initiative Overcomes Uncertainty
Richards: Amazing. We did it all by ourselves! (And so can you.)
Wardley: Crossing the River by Feeling the Stones (Wardley Maps)
Mina Nakicenovic Boström — for evangelizing Blue Ocean strategy.
Jonas Plantin and everyone in Product Development Unit 2G/3G at Ericsson for making strategy happen, together!