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July 07, 2009

Strategic Thinking - The Role of Formal Planning versus Organizational Learning

Developing corporate strategy involves three categories of activity – definition of principles, strategy formulation and effective strategy execution.  Traditional “Strategic Planning” tends to organize these activities into a short term, linear process at the executive level.  This is an oversimplification since:
  • Strategic Principles include both current, fixed elements that precede strategy formulation (mission) and future, variable elements that precede, evolve with and are used to communicate after strategy formulation (vision).
  • Strategy Formulation includes more than just analysis and planning – new insight generally requires an intuitive understanding of the business that is only achieved with long term organizational learning.  The people most likely to have the experience and creativity to see new business approaches are often deep in the organization closest to the customer and internal business processes.
  • Strategy Implementation is not just an exercise to convert the strategy into action plans.  It must also engage a broader group of employees (ideally done during strategy development) and provide direct feedback into both corporate vision and strategy formulation.

A more complete model allows the Vision to develop and mature throughout the Strategy Formulation and Implementation phases.  It also recognizes that strategy involves both scheduled (planning) activities and evolutionary (organizational learning) aspects.  Once we see strategy from this perspective – “Strategic Thinking” becomes the objective for a robust corporate strategy process.  Strategy creation is no longer an annual event but a long term process that has both non-linear and re-entrant elements.  Strategy is no longer the exclusive domain of senior executives but must incorporate the best business intelligence (from those close to the information source) and the most creative minds (those not yet biased by established industry practices).


In order to harness the insight and creativity of a broad cross section of employees – the technique of strategy focus teams has proven effective.  These teams are composed of mid and lower level people with direct customer contact and/or business process insight.  They report to the executive strategy committee but must also maintain a high degree of independence to encourage new ways of thinking about the business.  This requires a unique mix of strong executive support yet minimal executive influence.  The CEO in particular must endorse a more democratic and inevitably more critical approach to understanding the business and creating new approaches.  For those executive teams that have sufficient discipline and self-confidence, the application of a broad “Strategic Thinking” process can yield exceptional new insights.


For more information see my white paper at:


http://www.strat-edg.com/files/Strategic_Thinking.pdf

 

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January 07, 2009

Moving from Strategy to Results

When the senior management team invests their time and energy in developing corporate strategy, they expect to see measureable progress.  When that’s not forthcoming, the time spent offsite brainstorming seems like just so much group catharsis.  In my experience, the best mechanism to ensure execution against the strategy is the concept of Key Result Areas or KRA’s.  These KRA’s represent business processes, skills or projects that have been identified as critical to the strategy – areas where the firm must excel.  Examples might include product quality, lean manufacturing, fast product development, expertise in new markets or specific new products.

The KRA’s are a mechanism to move from long term strategic concepts and objectives to short term, executable projects.  They are typically built into the annual plan for a business unit.  Each KRA includes a description (explaining how it supports the strategy), metrics and a set of projects.  These projects are where the action takes place - each has its own definition, owner, metrics and schedule.  The owners are typically direct reports to a business unit VP and are expected to marshal internal and cross functional resources to achieve the desired outcome.  To ensure progress, each KRA and its related projects are reviewed by the business unit VP on at least a monthly basis.  In this way, the strategy is broken down into well defined pieces that can be implemented by working level managers and teams.

I’ve led traditional strategic planning exercises and I’ve led teams in the formation of an executable strategy using KRA’s.  The former sat on the shelf until the following year with only some residual influence over the course of day-to-day business management.  The KRA approach, in contrast, became an integral part our staff meetings and yielded an 85% hit rate on achievement of strategic goals.  For additional information, see the white paper on my website at:

http://www.strat-edg.com/files/Strategic_and_Business_Planning2.pdf


 

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December 11, 2008

Strategic Thinking

Have you ever been confused by the multitude of concepts (and buzzwords) that have been proposed as essential elements of strategy development?  These include Mission Statements, Values, Vision, Strategic Intent, BHAG’s (Big Hairy Audacious Goals), SWOT Analysis, Core Competence, KRA’s (Key Result Areas), etc.  To the extent that these are a bit ambiguous and intimidating – many companies don’t even engage in strategic planning.  And if they do attempt to apply these concepts, they can fall victim to long debate and meaningless jargon – much like the mission statement crafted by Dilbert’s pointy hair boss – “We enhance stockholder value through strategic business initiatives by empowered employees working in new team paradigms.”  Oh! Now I understand.


Another barrier is the negative experience of execs who have participated in formal strategic planning.  Weeks of staff analysis and days of executive off-sites often result in little new knowledge or change in corporate behavior.  This is generally attributed to the fact that strategy is based on insight into customers, markets, competitors and your own organization.  Insight is gained from experience, learning, recognition of patterns / relationships and synthesis of this information to find points of competitive leverage.  The limited scope, participation and timeframe for annual planning is not conducive to developing this insight.  Quoting the pointy hair boss from Dilbert again – “I’m putting you on the strategic planning team.  It’s like work but without the satisfaction of accomplishing anything.”  All this has led to an ongoing debate between the “planning” approach to strategy creation versus the “organizational learning” approach.


In order to make sense out of all this, I’m in the process of developing a model of strategic thinking that simplifies and integrates these concepts into something that will hopefully clarify and help guide strategy formation.  I’ve been doing a lot of research and came across an excellent Harvard Business Review article by Gary Hamel titled “Strategy as Revolution.”  Gary manages to avoid the buzzwords and debate on approach while outlining 10 principles to help companies find revolutionary new strategies.  In spite of being published in 1996, the conclusions are as insightful and relevant as ever.  You can get an electronic download from Harvard Business Publishing at:


http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml;jsessionid=FVS0L4P2CKPFAAKRGWDSELQBKE0YIISW?id=96405&referral=2340


I’ll be publishing my paper, “The Elements of Strategic Thinking – An Integrated Model” later this month on my website at:


www.strat-edg.com


Happy Strategizing and Happy Holidays!

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