Always-On Strategy: A Guide to Agile Strategizing For Disruptive Times (3/4)

This is the third article in a series on "Agile Strategizing."

You can?read the first article here , and part 2 here .

Part III: Better Strategy – The Content of Strategy

“Effective strategic thinking is the process of continually asking questions and thinking through the issues in a creative way.” – Costas Markides, Professor London Business School

Back to our question: If strategy is no longer about long-term planning, what else could it or should it be?

Focus on your most critical challenges and highest-value opportunities

When leaders approach me to work with them on their strategies, they seldom ask where to take their company in the next five or ten years. It does happen, but it’s the exception.

Usually, they are facing issues that need to be solved right now.

“We don’t grow in North America. We don’t know how to tackle the European market. We have way too many initiatives going on. Our product portfolio is too large. We’re losing money and can’t seem to stop it. We’re not aligned in this company.” And so on.

These are strategic issues, yet they have nothing to do with three to five-year plans. Maybe they could have been avoided three or five years ago, but now they need an immediate solution. Some might need three to five years to be solved, but that doesn’t mean you need to plan out the next three to five years in every detail.

In his book “Good Strategy/Bad Strategy,” Richard Rumelt introduced the idea of “challenge-based strategy.” To him, strategy is a “...cohesive response to an important challenge.” And this challenge should be one that you can address in the next 12-18 months.

A good strategy:

1. Clearly identifies the challenge to be solved,
2. Formulates a response on how to deal with the challenge (what Rumelt calls a “guiding policy”), and,
3. Outlines a set of coherent actions to implement that response.

This thinking is very much in line with my experience. Most strategic challenges require an immediate and focused response in the short term. Once you have achieved the first objectives, you can consider what is required next.

Does that mean you no longer need to care about vision/mission/purpose or any other longer-term considerations?

No, it doesn’t mean that.

Suppose all you do is react and focus on the challenges or any opportunities ahead of you. In that case, you will eventually end up in a situation where you must manage an ever-increasing array of incoherent, seemingly strategic initiatives.

The challenges you’re tackling, and the opportunities you’re seizing should align with your ambitions and the definition of your business. They should be guided by your longer-term vision of where you want to take your business.

The challenges you focus on are obstacles on your way forward. The opportunities you focus on are stepping stones toward your ambitions.

Management thinker John Hagel discusses an approach called ?Zoom Out/Zoom In.”

Zooming out, you need to think about what your relevant market and industry will look like 10 to 20 years from now and what your company will need to look like to be successful.

Zooming in, you then think about the two or, at maximum, three initiatives that you need to pursue in the next six to 12 months that would have the most significant impact in accelerating your movement toward that longer-term destination.

Combing the two approaches, strategy will require you to solve the challenges that you’re facing today while at the same time opening up opportunities towards your future vision.

Guided by your ambitions, focus on the next step. Think about it as an intermediate objective. A first hill you need to climb, from which you’ll have a better overview of where to head next on your journey to your destination.

Now, some of you might still call this “long-term planning.” Fine with me. Yet, it’s not the type of detailed planning of activities and financials that most companies think about when they say “long-term planning.” That’s the difference.

Let’s consider an example. Netflix is in the streaming business. That strategic decision of the past forms the boundaries of what it does today (the boundaries of the grey boxes in the figure above). Originally, Netflix licensed the movies and TV shows it streamed from the big studios. At some point, these studios began to launch their own platforms. They wouldn’t license their content to Netflix anymore (Game of Thrones is not on Netflix, for example), or only considerably later, when everybody had seen it already. In addition, others, like Hulu, Amazon, and Apple, entered the streaming market, creating competition for content.?

So, the strategic challenge Netflix faced was how to get content. The “guiding policy” response was to produce its own content (a boundary of the red triangle in the figure above). House of Cards, for example.

This quickly became very costly, which created a new challenge. In addition, as Netflix became more international, its audience wanted also to see “non-American” content. Hence, it scaled down its own productions in favor of licensing and financing locally produced content (another boundary of the red triangle).

This is a good illustration of how strategy becomes a series of responses to your challenges—one after the other.

Let’s consider another example. One of my clients decided to differentiate by focusing on the relationship with customers and essential stakeholders as part of its ecosystem.

The strategic hypothesis was that customers come because partners refer them. Therefore, strong relationships with ecosystem partners mean they send more customers, and better customer experiences mean that they are happy about the referral, which makes the partner look good and makes her send more customers in return.

The focus on “relationship building” and making it easy to do business with this organization was one of the key pillars of the strategy. This pillar acted as a guideline (a boundary of the red triangle in the figure above) for which challenges and opportunities to focus. Working with a few key partners, we identified the most significant and immediate barriers to building a better relationship and making working together easier that we could solve in the next 12-18 months.

A second pillar, again acting as a boundary of the red triangle, was the customer experience. Again, applying a similar approach, we co-created solutions with customers to the most significant and immediate barriers to building a better customer experience that we could solve in the next 12-18 months.

After solving these first barriers, we looked at what to do next.

At the same time, the decision was taken to build a new building to offer even better customer experiences. This, obviously, needed longer-term planning. Yet, as a first step, the possibilities had to be explored, which was the focus of the first six to 12 months.

Conclusion

“Agile Strategizing” will require you to shift from thinking about strategy as long-term planning to focusing on challenges and opportunities you can address in the next 12-18 months.

This shift will also require you to move away from focusing too much on analytics and data crunching to having strategic conversations about ambitions, challenges, and opportunities and how to address them (something you’re unlikely to find in data of the past).

And it will require you to open up these conversations to include other relevant parties, as the example above illustrates.

Call to Action: How do you think about strategy? What is your definition of strategy?