When you see the word ‘strategy’, chances are it means an operational plan. You can call a Toyota Corolla an exotic Bentley, but it is still a good old reliable Toyota.
Why do companies have such a problem with being truly strategic? For most, the so-called strategic planning resembles rain dancing.
There is a momentary enjoyment in the feverish pirouetting process, but the results in terms of much-needed rain don’t appear, and the drought persists.
“Most corporate strategic plans have little to do with strategy. They are simply three-year or five-year rolling resource budgets and some sort of market share projection. Calling this strategic planning, creates false expectations that the exercise will somehow produce a coherent strategy,” says Richard Rumelt.
McKinsey, the wise [now digital] sages of management consulting refer to Rumelt as the ‘guru of strategy’, whose easy-to-read 2011 book Good Strategy, Bad Strategy is becoming a classic.
“Core work of strategy is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors,” notes Rumelt.
Good strategy has what Rumelt calls ‘the kernel’ which has three elements -diagnosis, a guiding policy, which are the signposts -setting the direction, and coherent action, the ‘nitty gritty’ details of what is to be done by who, and when.
Start with diagnosis
Setting strategy begins with a diagnosis which includes understanding the dynamics of the industry one is in. Useful here is to go back to basics and apply Michael Porter’s five forces analysis to assess the competitive position.
Crunch the numbers, where does one make money? Which product lines and products are most profitable and why? What do your customers want?
What do your non-customers want [given this is the majority of the market]? What variant of the 80/20 rule applies?
There are all sorts of tools to diagnose an organisation on the financial, operational and people dimensions.
Be analytical, then, throw in a dash of out-of-the-box, creative thinking. Strangely, the mention of a SWOT [strengths, weaknesses, opportunities and threats] approach keeps coming up like a bad penny. Doing a SWOT is like when you are feeling unwell, going to your physician.
Invariably, they will inquire, as a conversation starter, how you are feeling, are you sleeping well? SWOT is that friendly conversation starter, shallow, more superficial, to get the ball rolling.
Slow twitch, fast twitch
With most companies, there is a need for fast learning to navigate through the next 1 to 3 years effectively. The wise approach to strategic planning may need to be more open-ended, rather than fixed in time.
A better mental model is to think about developing a new “muscle”: an organisation-wide ability to absorb uncertainty and incorporate lessons into the operating model quickly.
The muscle has to be a “fast-twitch” one, characterised by a willingness to change plans and base decisions on hypotheses about the future—supported by continually refreshed dashboard data about what’s happening.
And the ‘muscle’ also needs some “slow-twitch” fibres to set long-term plans and manage through structural shifts.
How do you tell the difference?
Kamal Munir of the University of Cambridge’s Judge Business School believes that you can tell if the strategy is good or bad by looking at two factors.
First, does the strategy help the organisation adapt and stay agile in a world of constant change? After all, in the world we live in, things can change significantly, sometimes by the close of business.
Secondly, does the strategy provide the power, the ability to have significant control, influence over customers and the competition?
Apple and Amazon would be the classic examples, where they have been able to create their own unique ecosystem that customers are very much bound to.
In Kenya, Safaricom is in a similarly dominant position, both within the traditional telecoms business and with M-Pesa money transfer, which overshadows the banking system.
In our age of ChatGPT artificial intelligence and Worldcoin scanning the iris of potential users, confirming they are human, technological change is speeding up, Heaven knows what’s next. All one can do is go with the flow, with time for an occasional digital detox.
Perhaps we get paralysed in the planning process. Like an animal frozen in the lights of the oncoming vehicle, we are afraid to move, to make a mistake.
As Rumelt points out, the key is to get to the essence, the crux of the problem the organisation faces in improving its profitability and market share.
Out of all the, say 15 or 20 issues and concerns, what are the three most critical? Often the best of strategies are counterintuitive, not the obvious, and may come to you at the most unexpected of Eureka moments.
David is a director at Catalyst Consulting → [email protected]