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What leads to good (or bad) strategy?
Good strategy is as important as it is hard. Strategy is a guide for the organization to work together towards shared goals. So searching for what leads to more or less good strategy means looking deep within and broad across the organization.
Understanding how hard strategy is gives a clear indication that good strategy is not a superficial framework-issue, but runs much deeper and broader:
- 90 percent of organizations fail to execute their strategies successfully
- 5% of leadership teams spend less than one hour per month on strategy
- 50 percent spend no time at all
- 5 percent of employees have a basic understanding of company strategy
- 61 percent of executives acknowledged that their firms often struggle to bridge the gap between strategy formulation and execution
- Only 17 percent of respondents said that implementation was seen as strategic in their organizations
(Source: Intellibridge, 90-percent-of-organizations-fail-to-execute-their-strategies-successfully/)
Secondly, is asking ‘what leads to good strategy’ important? What is the impact of poor strategy?
- 36% of drugs launched in USA between 2012 and 2017 missed their launch forecasts. .. 46% of this is credited to inadequate understanding of market and customer needs, and 44% poor product differentiation (2).
- Cisco’s lack of strategic planning in 2011 led to job losses for over 6,500 employees and hurt the company’s financial performance (3)
- Both Motorola and Nokia made the strategic error in the late 2000’s to focus on the upper end of the mobile phone market leading to both their known failures. (3)(4)
I therefore want to conclude that strategy is important, it is hard and doing it poorly can have a negative effect. But how can we do it right?
It takes a village
Strategy can bring together the whole organization towards a shared desired outcome.
Therefore the answer to the question ‘what leads to good strategy?’ comes from several elements across the organization.
In my experience I’ve found there to be five significant elements directly influencing good strategy, and then a handful of ways to improve them.
Please note that this is based on my own analysis and experience, but one where part of my work was to identify what led to good or bad strategy and develop improvements. I’ve listed below what the immediate influences are and for each of them I’ve also listed where and how to make improvements.
#1. Competence
Does the team putting together the strategy know what strategy is? E.g. do they know the difference between strategy and planning, tactics or execution? It is very common to mistake strategy for planning. These are good questions to ask to test if we are doing strategy or planning:
- What is the outcome of our strategy?
- What is the strategy telling us to stop doing?
- What are the outside influences we can’t control and we need to monitor?
If teams focus on outputs instead of outcomes, if they are not making any priorities or are controlling all the elements in their strategy these are good indications that they are not doing strategy, but planning.
Roger Martin shares the difference between strategy and planning in this excellent youtube-video:
How can we improve a team’s strategy competence?
- Quality of internal training and upskilling. We need to train people on good strategy when they need it, where they need it and in the format that works for them.
- Diagnosis and policy; how good are our tools and frameworks at helping our talents discover and use the right data/insights and diagnose it in a good way? What are the elements of a good strategy, which questions are we asking our colleagues to answer?
- Talent management; are we hiring the right people? What is the background, experience and expertise of the people we are hiring as it relates to setting and executing on strategy?
#2. Accountability
People must be held accountable for their strategy. If they are not held accountable then they won’t care (why should they?). People need good feedback and measurements to keep improving on their strategy and leadership needs good measurements to hold people accountable (measure what matters).
The truth is that people prioritize work that is measured. If we are not measuring our strategy then teams won’t prioritize it. Frameworks will be filled out, Power Points created and presented. But as soon as these boxes are checked the strategy becomes drawer-ware and the team goes back to product-centric planning.
A good way to check if the team is held acountable is to ask:
- What is our progress towards the results we want?
- What are the changes happening as a result of our strategy?
- What do we need to do more of and less of?
How can team accountability be improved?
- Are leaders showing up holding teams accountable to their strategies and guiding their improvement?
- Are we measuring what matters and at a good cadence? Do these measures have a clear owner and are they helpful to make decisions about the quality of the strategy and guide improvements?
#3. Leadership
Are leaders doing good leadership? Are they asking the right questions? Trusting, guiding and inspiring the team to do good strategy (5)? Are they holding the team accountable asking for necessary improvements?
Leadership is a balance. Between inspiring the team and holding it accountable. Asking for the right level of quality, discussing the larger picture and motivating the team to get where they need to go.
Good leadership is based on a shared agreement of what the world looks like, where teams can go and how to get there. As reality happens (“no plan survives contact with the enemy” Helmuth von Moltke) good leaders are there to support the team in listening, diagnosing and adapting to the environment they are in and successes they are able to achieve (6).
What leads to good leadership?
- Culture, does the organization have a good leadership culture where leaders show up and support teams in a productive way? Do leaders trust their teams and inspire improvements?
- Measures and feedback, do leaders have good measures enabling them to listen to what is happening and make good decisions amplifying the team in the right way? Before any measure is collected the team needs to know a. what are we trying to achieve, b. how do we assume we can do it, and c. who needs to listen and make decisions, and what do they need in order to make them?
- Talent management, are we hiring leaders or managers, chess masters or gardeners, people who demonstrate trust or micro managers? Not all managers of things are good leaders of people. Are we making sure our most talented leaders are put in the lead?
4. Market Understanding
How deep and broad is our understanding of the market? How good are we at listening to both the center and the edges of what influences it? How are we interpreting the signals we are capturing and how aligned is the team across business or subject areas?
We can only make decisions based on the information and experience available to us (8). Are we inviting in a broad and deep enough view of the market to include the most important forces of influence? And do we know the relationships between these forces helping us make priorities and act?
Simon Wardley delivers a magnificent talk on the importance of situational awareness.
I’ve found that the easiest way to make sure everyone on the team equally contributes producing the least bias map of the market, is to simply gather around the shared goal and ask: “what leads to more or less of this?”. And as the team adds their input onto the map keep asking this questions to every input until the team agrees that the most significant influences have been captured.
What leads to good market understanding? Do we have:
- The right insights and experience, what is the quality and relevance of the insights we have available. Beware of bias and gaps.
- The necessary global and local alignment (in international organizations), is the Global team responding to input from teams closest to the customer and local market dynamics (or serving local needs in any other way)?
- Cross-functional team engagement, are we involving and including expertise representing a broad, deep and diverse understanding of the market.
- Good leadership and guidance, are we listening, interpreting, aligning and deciding together as a team.
5. Insights and experience
What is the quality of the insights and experience we have available? Which data / insights is closest to us (wielding most influence) and which is further away? A lot of organizations have product or channel data readily available, while insights into customer needs, motivations or desired outcomes is far away and infrequent.
With poor insights and experience we are more likely to make decisions based on what is most easily available or most commonly bought, not what matters most.
When deciding what insights should have most influence always start with what decisions we want to make. Data serves decisions, not the other way around. Make sure we know what data has what influence on the decisions we need to make and that the best possible data and insights is available, or data is removed if it isn’t relevant or can lead to bias.
What leads to good insights and experience? Do we have:
- Good market understanding, do we know what influences the market where we need to make decisions and which decisions to make?
- Culture, do we have a culture of curiosity, investigation, responsiveness and challenge? If we learn something new will we act on it?
- Team engagement, making sure we are involving and including a broad, deep and diverse understanding of the market and their data.
- Available data, how biased is our data? Are we able to identify and confirm our riskiests assumptions? Do we have any data-gaps and the opportunity to close them? Are domain experts rather than data experts determining the quality of the data and its capacity to influence our decisions?
- The right talent, do we have the right people in the room. Did we hire to strengthen our culture and are we upskilling our talents to keep our strategy good?
Strategy is not a framework exercise. It is the accumulation of elements broadly across and deeply within the organization. To do good strategy we need to put aside the frameworks and rather ask if we have an organization that can handle it?
Update:
Based on the conversation related to this article on LinkedIn I have updated the model to include execution, feedback loop and two more nodes/ connections (marked in yellow).
Source:
(2). https://www2.deloitte.com/us/en/insights/industry/life-sciences/pharmaceutical-market-access.html
(3). https://www.achieveit.com/resources/blog/13-notorious-examples-of-strategic-planning-failure/
(4). Tricia Want, Why big data needs thick data,https://medium.com/ethnography-matters/why-big-data-needs-thick-data-b4b3e75e3d7
(5). Stephen M. R. Crovey, Trust & Inspire, https://www.blinkist.com/en/books/trust-and-inspire-en
(6). Mary Parker Follett, The Giving of Orders, https://180360720.no/_resources/mary_parker_follett_the_giving_of_orders.pdf
(7). Paul J. H. Schoemaker, Steve Krupp and Samantha Howland, Strategic Leadership: The Essential Skills, https://hbr.org/2013/01/strategic-leadership-the-esssential-skills
(8). James Paine, System Dynamics: Systems Thinking and Modeling for a Complex World, https://www.youtube.com/watch?v=o-Yp8A7BPE8
(9). The journey, the experience and the system, https://medium.com/design-bootcamp/the-journey-the-experience-and-the-system-f9e369f1b724
