Day 92 — Management series 5/7: “Strategy”
One of the most important job in management is forming strategy and plan, then executing it. As Michale Portor once said: “At general management’s core is strategy: defining a company’s position, making trade-offs, and forging fit among activities… Strategy renders choices about what not to do as important as the choice about what to do”. Seems straight forward? Or does it kinda make sense but a little vague to you? In today’s article, I’ll break down the concept of “strategy” in the following structure:
- What Is Strategy
- Why Is Strategy Important
- How to Create Strategy
- When & How to Refine Strategy
What Is Strategy
One of the most iconic definition of strategy, according to Michael Porter, is that “Strategy is the creation of a unique and valuable position.. involving creating “fit” among a company’s activities.” He also pointed out that “operational effectiveness is not strategy”, and “strategic competition can be thought of as the process of perceiving new positions that woo customers from established positions or draw new customers into the market.”
To give you some examples of what a strategy could be like, below are several famous strategies that are widely adopted in the business world:
1. Competitive Strategy
Created by Michale Porter in the article “How Competitive Forces Shape Strategy”, Competitive Strategy is probably the most classical strategy that’s been broadly adopted in most of the business Strategy published in Harvard Business Review, March/April 1979. With his famous Five Force Analysis (see figure below), companies can utilize the framework to determine a holistic view of competitiveness against the competitors.
2. Blue Ocean Strategy
Arguable the hottest business strategy since 2005. INSEAD business school professors W. Chan Kim and Renée Mauborgne wrote the book Blue Ocean Strategy and it became one of the most dominant guidelines in creating business strategy. The idea is that companies need to go beyond competing (in the Red ocean with limited resource, many competitors), and find a Blue Ocean that’s outside the existing competition, so that they can avoid zero-sum game and find new profit source.
3. Platform Strategy
The most popular strategy in business digital transformation. It is based on the theory of multi-sided platform (MSP) from the book “Invisible Engines : How Software Platforms Drive Innovation and Transform Industries” — David Evans, Andrei Hagiu, and Richard Schmalensee (2006). The idea is that a multi-sided platform creates value by bringing together different groups who can create more value together than apart; the platform vendor can profit by capturing a portion of the money that changes hands; and also they can serve as de facto regulators of their markets.
Why Is Strategy Important
The reason why strategy is one of the most commonly used buzzword in business world, is that most of the companies are in some form of competition against its competitors. In order to sufficiently utilize its resource and maximize its profit for shareholders, a sound strategy is imperative for these goals.
Also, a good strategy has other benefit in project-team level; for example:
- Teams can utilize the agreed and approved strategy as a blueprint to come up with detailed implementation plan;
- It helps align efforts from different departments to reach a common goal; for example, Game Theory.
- It also helps team to get senior leaders’ support on funding, resource, and advocacy.
How to Create Strategy
In one of my past article, I used the Google Map (or any other navigation) analogy. If you want to get from point A to point B efficiently, you’ll first need to have a clear understanding of:
- Point B, the vision, the end goal
- Point A, where we are now
- Vehicles & Routes: what are the options, a comparison of pros & cons of different solutions
- Timeline: assessment on how fast can we get there
- Roadmap: what are the steps, where we need to take turn
- Warning: risk assessment, potential roadblock
From my experience, this analogy which derived from the cliche’ “From point A to point B” is an effective way to communicate the elements of strategy, and helps the team to visualize the steps they need to take in order to formulate a sound strategy.
So how do we create a strategy? First, we need to get the right input in order to formulate the strategy. What are the types of input we’re looking for? Let’s take a look at The 5 P’s of Strategy by Henry Mintzberg:
Strategy 5P
Canadian management scientist Henry Mintzberg described these 5 dimensions of a well structured strategy, in the name of “the 5 P’s of Strategy”. 5P stand for Plan, Pattern, Position, Perspective and Ploy. Let’s take a closer look:
- Pattern: A historical view and analysis to understand what past strategies work and what not;
- Position: An ideal state where the organization or team wants to be;
- Perspective: A view from outsider (e.g. customer) about the organization/team, and way of working;
- Ploy: A surprising way to customer or competitor to achieve the goal;
- Plan: A detailed description of how to achieve the goal.
Another way to look at the input for forming a strategy is using the classical SWOT techniques, in order to understand the internal vs. external status and competition. Let’s take a look:
SWOT Analysis
This is also a common technique for strategic planning. According to wikipedia, it is “used to help a person or organization identify strengths, weaknesses, opportunities, and threats related to business competition or project planning”. Let’s break down the elements of SWOT analysis:
https://en.wikipedia.org/wiki/SWOT_analysis
- Strengths: characteristics of the business or project that give it an advantage over others.
- Weaknesses: characteristics of the business that place the business or project at a disadvantage relative to others.
- Opportunities: elements in the environment that the business or project could exploit to its advantage.
- Threats: elements in the environment that could cause trouble for the business or project.
When & How to Refine Strategy
When it comes to strategy, I always think of Mike Tyson famous quote: “Everyone has a plan ‘till they get punched in the mouth.” Mike Tyson is right, everybody has a plan, but how do we know whether a strategy is good enough or not? It’s one thing to have a strategy and plan, it’s another thing to blindly follow through without a swift course correction.
So, how do we effectively examine the quality of strategy? Here’s a simple framework to examine if the strategy needs to be tweak:
Pre-Execution
In order for strategy to work, there are many aspects need to be considered. I’m inspired by the book Good Strategy, Bad Strategy, and from that knowledge I formed a framework, Strategy A-E, for us to think about the maturity of a strategy:
- Authenticity: is the strategy truly address the problem and provide tangible plan/ solution, or just fluffy words? Are the goals and planned action realistic and achievable?
- Breath: Does the strategy consider the whole ecosystem? For example, the marketing 6Ps: Product, Price, Place, Promotion, People, and Process. There are many tools to help you analyze the ecosystems; for example: Porter’s five forces, Service blueprint, and Ecosystem analysis.
- Concrete: Is there a clear action plan? Or the so called “strategy” merely stating goals, but without tangible action items? Is there any time line or roadmap? What’s the cost associated with it?
- Depth: How detailed is the analysis, action plan, and milestone/timeline? For example, is there a clear understanding of the customer’s journey? When it comes to quality, how much do we know about how users define a quality product/service?
- Evaluation: Is there a success criteria, KPI, or any other way to measure the performance and efficacy of the plan? Is there any risk assessment or plan? Is there any Definition of Done (DoD)? Tools like OKR can help teams setup desirable metrics to drive the momentum and measure success.
Execution
Once the project kick start, we’ll need to constantly gather input to make sure we’re still on the right track. Having high flexibility on strategy pivot is the secret of keeping the project agility.
“Ideas are cheap, execution is everything” — David Brear
In order to stay on top of strategy course correction, the team will need to have a routine check-in to understand if the performance and direction is still aligned with the desirable goal. Except for the methods I mentioned above, there are also a couple other ways to stay on top of the project.
Firstly, a daily standup an efficient way to quickly capture project risk, and make plan to remediate. A routine Retrospective is an effective way to gather input from the team to identify the project health. A Sprint release is a quick way to verify with users to decide if there’s a need to pivot project direction.
Another way to evaluate the efficiency and efficacy of a project, is by adopting the Lean approach, namely the concept of 7 Muda (7 waste, aka TIMWOOD):
- Transport waste: Is there unnecessary transportation happening in the project? For example, if a team is not co-located, time could be wasted for team to organize to collaborate
- Inventory waste: Is there any left over due to failed marketing/business strategy?
- Movement waste: Is there any unnecessary movement happening? For example, no centralized documentation system which could cause team member wasting time searching their email inbox of personal computer just to locate a file?
- Waiting waste: Is under-utilize resource happening often? If there’s too many players on the bench and doing nothing, there must be something wrong with the plan or the execution.
- Over-production waste: Do we spend too much time “creating” without “validating”? Often time that causes large chunk of deliverables gone into waste because they are not done based on the right direction.
- Over- processing waste: Do we over-engineer a simple problem? Do we fall into the trap of analysis paralysis?
- Defect waste: Do we create too many bugs or defects, and have to redo it again? Do we create too many tech debt or UX debt to clean up?
Post-Execution
When it comes to the end of the execution, it’s important to know if the time is well spent, effort has not gone into waste, and the goals are achieved. Therefore, it’s time to review those OKRs or KPIs to see if we reach to where we want to be. If there’s any unmet goal, a root cause analysis could be very helpful to see if it’s uncontrollable/ unpredictable issue (e.g. macro economy factor) or something we can improve upon.
Except for the tangible numbers and metrics, as mentioned above, a retrospective ceremony is also very helpful for us to understand all different perspectives from the team, so that we can learn the WWW (what went well and what went wrong), and use that to craft our strategy for the next project.
Also, it’s crucial to understand how the project success fit into the bigger scheme; for example, product portfolio, organization goal, company vision, etc. This type of analysis is very useful for senior leader to adjust their grand strategy.
Conclusion
- Strategy is about evaluating all the existing factors and determine the most beneficial activities in order to achieve a set of desirable goals.
- A good strategy can help the team reach their goals faster, cheaper, and better; as long as the strategy and plan is carefully crafted, clearly communicated, and flexible to adopt the changes.
- Strategies need to be refined during the project lifecycle in order to address the obstacles and discover new opportunities.
Have you seen some effective way to create a sound strategy? What are steps to do so? I’m eager to learn from you.
ABC. Always be clappin’.
The opinions expressed in this article are those of the author. They do not represent current or previous client or employer views.
