To act strategically is to know the path to your goal and keep the balance between your capabilities and resources.
In order to start moving, you need to push off from something. A runner starts moving the moment their foot pushes off the treadmill. In the East, they say that even our speech and thoughts must have a footing — their foundation.
Strategic behavior is focused on efficiently achieving goals that are remote from the current state of the company in either a considerable period of time or complex combinations of actions.
In order to act strategically, the company, similar to the runner, needs to build on something. In this article, we’ll try to figure out what serves as a basis for strategic behavior in business and how this approach has changed in the modern VUCA world.
Main Road: Designing and Constructing the Strategy Bridge
Strategic behavior involves going through several stages: analyzing the market and your own resources, setting goals, developing a plan for achieving the goals, and, of course, implementing this plan.
A strategist has to erect at least three bridge supports and four bridge spans to pave the way to the positive result.
1. The first strategic support is the result of the external environment Analysis. For now we won’t dwell on the details of how to better perform it, but this first support allows you to build the bridge further, towards the next support. The purpose of the external environment Analysis is to search and latch the available opportunities for expanding the company’s market power, while at the same time learning what risks will it have to take.
2. The second support is the list of goals, each representing directions and expected results of all the key business aspects. It aims your thoughts towards outcomes, keeping you goal-oriented, which is a vital benefit in business.
Indeed, how can you plan your next move when you don’t know what game you’re playing?
First of all, goal-based management makes business data-driven. This approach allows to rechannel the emotional and irrational business discourse towards the area of measurement and rational points.
Second, using goals in management allows to implement Goals Alignment. This is the most reliable way to foster accountability for work efficiency in both employees and leaders.
The main objective that a strategist faces is selecting the indicators that best represent the reality and lead toward the primary goal — the Target. Solutions used to this end allow to employ systems of goals, e.g. BSC, OKR, North Star metrics. These approaches allow to keep track of the actual status of your business by establishing a system of goals united by a specific logic and/or relations.
3. The next span leads the company from Goals to the third strategic support — the Plan. The plan is a set of productive, goal-oriented actions. It is in the plan that distant goals turn into a set of daily, current routines. Daily practice and tactics lie behind it: execution meetings, difficult decisions, negotiations, calls, collaboration with colleagues, disputes, common communication, and even coffee breaks.
If you can find a similar construction in your life or in the life of your company — you’re acting strategically.
VUCA and the Second Bridge — in the Opposite Direction
Modern business conditions change rapidly. For example, the number of new products launched on the market in the US alone has increased tens of thousands of times over the past 40 years. This whole situation got a special designation — VUCA (Volatility, Uncertainty, Complexity, Ambiguity).
It is no longer enough to just set long-term goals or have a plan. A good strategy should remain relevant and effective when external circumstances change. For this, a second, reversed bridge is needed — feedback from the current situation to the original plan, from plan to goals, from the goals to the market itself.
This other bridge is required for effective strategic behavior. It is more complex architecture-wise — the so-called feedback loop on which any control is based. Feedback loop helps to take care of our bridge’s support, otherwise they could collapse, bringing down the entire bridge. The purpose of feedback loop is to make timely changes to the original plan, or even the goals of the company, if something goes wrong.
Maintenance of the Strategy Bridge Spans and Supports
Before discussing the measures to take care of the spans and supports of the strategy, it’s important to first say a few words about the bridge builders themselves, because the strategy is developed by humans. It is always a decision, a choice of what to do and what not to. So, what qualities of a strategist are the most relevant in the VUCA world?
Strategic behavior in VUCA implies that the company will have to change something eventually, start to do something in a new way. As they say: it is insanity to keep doing the exact same things and expect a different outcome. But to do something in a new way is not human nature.
As Schopenhauer said about this, any person takes the limits of his worldview for the real world’s limits. Our perception is limited, its ability to process incoming signals has a limit. In addition, people do not like situations that lead to increased risk and uncertainty, even though without this no movement towards the new is possible. Any changes increase the feeling of anxiety — this is the necessary price to move to a new level.
Balancing Resources and Opportunities
There are two ways to act strategically: by focusing on opportunities, or by focusing on available resources. Business strategy is always a challenge, conservative resource-based movement most likely will not let you get the necessary momentum for a breakthrough in the market.
According to Drucker, “Culture eats strategy for breakfast,” meaning that it’s almost impossible to make fly someone who was born to crawl. This is arguably the most important point in a strategic approach — the strategist must find their balance between risk and certainty, between the new and what they’re used to. Just like the Greek hero Odysseus, who sailed his ship between the rocks where Scylla and Charybdis — two monsters — lived.
Attention to Detail
The main question that the strategy should answer is how and why should clients choose us and our product. A strategy that does not answer this question is simply a money drain. Modern competition requires specifics and details. Where and how will the value be created? Where and how will we achieve victory? This is the sign of a good strategy.
Proficiency with KPIs
Zen Buddhists say: “to give something a name means to limit.” In business, KPIs describe reality. However perfect the used KPI model, it is still a very simplified way to look at the world around us.
In turn, a worker who’d received a goal expressed in a KPI can successfully accomplish it, and yet still harm the business. For example, the KPI of cost reduction achieved due to savings on vehicle service can lead to problems in the next planning period, e.g. significant overspending due to capital repairs. The cause of many business crises can be found in KPI formulation errors. To sum up, KPIs are necessary, but they’re only part of the overall picture.
Know the “Bad” Scenarios
A smart person differs from a fool in that he knows what he will do if he fails. Strategy is a scenario, good strategy — is when a company has several action scenarios in case something goes wrong.
Bridge Supports Maintenance Tips
As noted many times, a lion’s share of plans do not achieve the set goals (the proportion of strategic decisions ending in failure is substantial). How to explain such low efficiency?
Continuing the metaphor of bridges and supports, this problem can be divided into two parts: problems with supports, and / or problems with bridge spans.
At first glance, problems with supports are of two types:
- Too few supports — one or several stages have been missed, which means that goals and plans are formed without sufficient grounds and are more like dreams than the result of careful calculation
- The supports are unreliable, i.e. of bad quality.
The first type is simple. Getting a quality strategy, just like quality bridge, by starting construction from the final development stage — the plan, or the last support — is risky. Plans need foundation, they must have goals. The goal itself also needs a foundation — an analysis of opportunities and resources.
As to the quality of supports, it could be compared with missing a critical piece of information. For example, incomplete (that is, of poor quality) information about the market and competitors can turn the entire “strategy” into a sink for a company’s budget. Unrealistic goals will lead the company to a non-working plan, and so on.
Bridge Spans Maintenance Tips
The situation is different in the case of the bridge spans. In our metaphor, bridge spans mean the transition from one stage (support) to another. The main problems of such a transition are the loss of important information and interpretation errors.
When going hiking in the mountains, you do not know exactly what you might need. You have to consider your options — the weight of the equipment, and carrying everything you need with you.
This is the logic behind strategic behavior:
- A company does not know what lies ahead
- In order to realize its plans, the company must have solutions planned for all possible cases
- The company’s resources are limited
Common mistakes when building bridge spans and how to avoid them:
First Bridge Span — Analysis
The transition from an abstract conditional entity — the market — to a rational conclusion of what product or service it needs.
Misinterpretation of the market
Markets are in constant motion — this is an ongoing process. They are born like bubbles, and some disappear just as quickly. Many factors influence markets, e.g. fashion, memes, political agenda, and competition. The task of a strategist is to understand how the “truth of the buyer” will be changing, predict their future wishes and expectations. A number of questions must be answered before anything starts:
- Will it beat the market?
- Does it tap a true source of advantage?
- Is your product granular about where to compete?
- Does it put you ahead of the trends?
Error in assessing their capabilities
Any strategy is a difficult choice between conformism and rethinking the usual forms of existence of the company and team. It’s a big risk to trust the construction of bridges that are designed using new technologies to a team that has neither the experience nor the knowledge of how to use these new technologies. A strategy depends on the current situation, current tactics, the state of the company in which it exists.
Second Bridge Span — Goal Setting
How much do your goals belong to the team or company? In reality, a company’s goals are partially or fully determined by external factors that the company cannot control — competitors, legal restrictions, global trends. This fact further underlines how much attention a company should give to the background on which the company’s strategy unfolds.
Different understanding and interpretation of goals
Client informedness and freedom of choice makes competition a game in which even a small difference in the delivery time or product design can be a critical advantage. Different understanding of what and why is being done by a team can deprive a company of these opportunities.
No support from the team
Strategy is commonly perceived as a frame, a set of rules and goals; strategy is supposedly about constraints, discipline, rules, plans and budgets. But no strategy can be implemented without the main driver — the desire to act and the freedom to choose. Team support is vital for strategic goals.
Targeting short-term goals without considering consequences
In his famous book “That Which is Seen, and That Which is Not Seen,” Frédéric Bastiat cites many examples where the short-term results of economic policy are often radically different from the long-term consequences they cause, which may be the opposite of what was expected. The same logic is applicable to the goals. A manager who seeks to achieve cost-cutting goals by saving on motor pool maintenance usually leads the company to overspending on repairs in the future, due to more serious breakdowns.
Third Bridge Span — Plan Development
The plan is not goal oriented
Actions inevitably have results and consequences, whether you like it or not. It can’t be otherwise. But sometimes the result does not exactly lead you to the goal.
Say, you want to increase productivity and think that the introduction of IT planning systems should help. But then… nothing changes.
Your team takes the IT solution formally and it does not affect the actual processes. If that’s the case, the proposed solution clearly does not lead to the achievement of the goal, and the plan needs to be improved.
Lack of prioritization and scripts
It’s great to have a strong plan, but this is not enough in the VUCA world that’s full of “black swans” and where anything can go wrong. Prioritizing and development scenarios help companies avoid situations where they’re cornered with a product that no one needs, and frightened pitchfork-wielding investors are gathering outside.
Fourth Bridge Span — Management
Habits and anchors
It is important to understand that, while you may have wonderful goals and a great plan, behind all this is a team with its suspicion of everything new and the resistance to change. We’ve all been there — you set to start doing something new, but then habits take their toll and you never actually start that.
Not enough expertise
Ambitious goals and innovations assume that besides business goals and resources, the team itself must change — learn new knowledge, master new practices. It is fair to expect that to achieve an innovative goal, the amount of effort per team and per person should be boldly multiplied by two.
Endurance is often considered a key resource for success. As Churchill said, success is the ability to go from failure to failure without losing your enthusiasm. VUCA assumes that you will often be engaged in reflection and retrospective, recognizing your erroneous decisions, and changing everything. Modern business is not a sprint, but trail orienteering using a far-from-perfect map.
Fifth Bridge Span — Feedback loop
Inability to take criticism and lack of learning skills
Reflecting means focusing attention on oneself. For business, this idea manifests in any cyclic process, for example PDCA. Reflective people are active, approve innovations, respect continuous improvement, and know how to achieve their goals at minimum expense.
Non-reflective people, as psychologists claim, are conservative, do not like to change anything or themselves, are passive, and often take a wait-and-see attitude. Reflecting helps to understand the origins, causes, and effects of events that otherwise are usually interpreted as random due to habit and incompetence. This allows you to build a holistic system representation.
Reflecting is the basis of any improvement, where conclusions are drawn and corrected according to observations. After all, it is absurd to expect a different result where decisions and actions are made as usual, habitually.
A Strategy Bridge is a system, a collection of different elements working as one, a single organism:
- Supports — a fixed set of facts that support bridge spans
- Spans allow the company to act strategically — they bring strategic meaning, information, and evaluation criteria for all current and routine operations
- Reversed bridge — feedback loop, which is a mechanism of maintenance and improvement of the entire Strategy Bridge
Studies of evolutionary processes state that it’s not separate, autonomous units that drives the development, but the so-called holobionts — systems of closely interacting organisms. It takes not separate construction units, but the sum of elements working as a system to ensure future success.
Improving one span, such as the development of the Tree of Goals, will be a critical success factor only if it is backed by the other spans and supports. Likewise, you can’t expect a strategic breakthrough after improving just one support, such as the Action Plan.
All improvements are critical for a breakthrough and the Strategy success, if supported and implemented by all elements of the Strategy Bridge structure. You can’t expect an increase in the traffic capacity of a bridge by expanding only one of its sections — its overall performance is determined by its “narrow neck” — the weakest point.
There used to be a custom of commissioning railway bridges — the entire project team would line up under the bridge, while the first train crossed it. Using our metaphor, it’s appropriate to ask a question — will the team that developed the strategy bridge line up under it, and will it not collapse?