Demystifying Business Strategy: 5 Key Principles

The direction and strategy for an organisation is pivotal to its success. Yet despite its importance, gaining clarity and agreeing on a useful way forward can feel like eating soup with a fork.

For many organisations, strategy development comes down to a 1 or 2 day offsite with the executive/leadership team. Whilst it’s great that time is devoted to it, for many executives, in reality this can lead to:

·     unproductive discussion about the past with frustrating post-match analysis

·     philosophical debate about strategy, (e.g. the difference between vision and mission or which model to adopt)

·     laborious wordsmithing

·     little chance for true debate on alternatives

·     deciding on ‘slight tweaks to business as usual, and adding 10% to business goals’

‘Outputs’ are typically still achieved, such as a vision statement, a set of business goals and a ‘strategy on a page’ – however this is often:

·     a document which few people refer to or care about

·     something which drives little change to ways of working or results

Other organisations invite strategy consultants in to work with their teams, conducting analysis and writing recommendations at great expense. Often this represents a poor investment as:

·     This can be a process to indoctrinate staff into the consulting firm’s methodology, sometimes adding complexity rather than making things easier (one of our clients reported they had just “undergone a strategy session on which strategic approach to adopt on their strategy”…)

·     The output confirms what the leadership team already know, or if it doesn’t, it’s often ignored.

With one ASX top 50 organisation we worked with, a business strategy was developed by them using our simple approach and it was enthusiastically supported by the leadership team; but then the Board recommended ‘due diligence’ on the proposals with their preferred strategy consulting firm. This took several months, (and at a cost of over 10 times the initial cost of strategy development), the executive summary of this work read – “proceed as planned”.

If any of this sounds frustratingly familiar, it may be worth considering an alternative approach…

Strategy development shouldn’t be hard, it shouldn’t be complicated and it should be a passionate and rewarding experience. Over the past few years, we’ve helped organisations achieve some incredible outcomes by keeping things simple, including:

·     A start-up to reach a billion-dollar valuation

·     A bank to achieve record profits

·     A not-for-profit growing donations by 30%

·     A tech-firm moving from single to triple digit growth

·     An Australian manufacturer to survive and grow in a shrinking market

As business psychologists, our focus is on coordinating and enabling the people involved, not on the content or quality of the strategy they choose.

In essence, our approach works on five key principles:

1.    Your leadership team already have the answers on the best way forward – they just need a process to agree quickly and feel confident about it…

Any leader worth their salary regularly thinks about the future, how to improve things, the challenges and opportunities that they face. We find that if you isolate them ahead of the ‘offsite’ and ask well-structured questions, they typically:

·      Already have well-formulated views which add significant value to the collective pot of analysis

·      Identify where additional research or information is required

Both of these lead to positive outcomes which set you up well for the strategy development process. In addition, we typically find that there is already strong alignment on the way forward; where there is a key difference, this stands out for appropriate debate.

Most of the work on an organisation’s strategy should be done before arriving at any ‘leadership offsite’. Many organisations ‘go in cold’ and end up with frustrating results, for example, the CEO should work before the ‘offsite’ to define the vision. This may sound obvious but many CEOs want to involve their team too much; similar to the captain of a ship getting everyone up on deck and then asking them ‘where do you want to go?’

2.    The strategy process must equip your people with answers to simple questions…

Your people need to know:

a)   Where are we going? (Vision with a timeframe – can you ‘see it’?)

b)   Why are we going there? (Analysis and rationale)

c)    What are our priorities and goals? (Short-term and longer-term)

d)   How are we going to achieve them? (Strategy and tactics)

e)   Who is doing what and when? (Execution planning)

The thinking of leaders and their teams also needs to flow in that order. However, all too often, executive teams passionately jump to discussion on ‘question b’ (analysis and rationale) and then move to ‘question d’ (strategy and tactics) before having any agreement on the direction and priorities.

If an organisation does not have answers to all of these questions, put simply, they don’t have a strategy.

If an organisation does not have answers to all of these questions, put simply, they don’t have a strategy. If their people can’t answer these questions, they aren’t as focused, engaged, or as productive as they could be.

One of the most startling examples of this, was a CEO we encountered who when asked about the direction of the organisation, confidently proclaimed it was ‘to deliver more for shareholders, faster’. Despite attempts to seek further clarity, detail and rationale, he remained adamant in his view that this was a simple and clear vision, and was well underpinned by the organisations’ ‘strategic pillars’ (which were equally vague and unhelpful). His staff quickly concluded he had no idea where they were going, or why; they also had no sense of what to prioritise or what strategies to employ. It was not long before performance slipped and staff began to jump ship – the company’s share price halved in one year.

It is not hard to find perfectly good answers to each of these questions, they don’t have to be ingenious, just clear, well-informed and sensible.

3.    Your people are the best placed to develop the strategy, and the tactics to achieve it…

It is frustrating how many organisations talk of the need to empower their people, then tell them how to do their jobs. Strategy development is one of the biggest opportunities to engage people, to captivate their innovative potential and build momentum in line with the organisation’s vision.

However, what often happens is that executive leaders get into a room and have fun developing the solutions – understandable, but not ideal. For example, one organisation we worked with tried to develop their customer strategy at executive level, when none of the leaders in the room had directly encountered a ‘frontline customer’ that year.

In the previous list of questions, only ‘a – where are we going?’, ‘b – why?’ and ‘c – what are our priorities?’ need to be defined by leaders. The rest are enhanced by involving and empowering staff more broadly.

4.    Business is a people-sport not a numbers game…

Many organisations want to set goals by simply drawing a line on a graph as a continuation (or a hockey stick) from previous years and then looking to historical figures for ‘trends’ and answers as to where the future lies. The numbers are of course important, but it is important to see them for what they are, i.e. ‘keeping score’ and ‘measuring whether you’re winning or not’.

Numbers can be seductive, there’s a sense that they are concrete and factual, which is easily welcomed when strategy can feel frustratingly uncertain and creative in nature. However, numbers can also lead to disproportionate emphasis on the ‘scoreboard’, rather than on building the team and approach to deliver ‘better scores’.

Numbers and people are often at odds in strategy planning; for example, people are listed as a liability rather than an asset on a balance sheet. However, strategy is fundamentally about focusing and enabling people (staff) to deliver on shared objectives for other people (e.g. customers and stakeholders) – the needs of these people and the culture they work within must take priority to achieve the best results.

Of course financial data is critical to know what you can afford to do, what may be viable, credible and probable; but it is largely historical information and used too much is like trying to drive a car by looking in the rear-view mirror.

5.    Business strategy is an ongoing process, not an event…

The days of ‘traditional’ long-term strategy development are, for most industries, a thing of the past. The pace of change is just too great and many organisations find themselves with annual strategy documents or 5-year plans that are quickly outdated and ignored.

To operate effectively, organisations need strategy planning processes that are not only quick to develop, but highly adaptable once they are up and running. The resulting plan and approach needs to be characterised by a focus on experimentation, continuous improvement and execution.

This doesn’t need to be complicated, or expensive - and can be as simple as a whiteboard or shared document with the vision, priorities, goals (short and long-term) and strategies listed with projects and initiatives either planned, in progress or completed.

Rather than a static document, it is something that gives people valuable things to talk about, to help them see their own progress and to challenge the way things are done for the better. 

Business strategy development has for many years been seen as a complex, and closed shop, driven by closely-guarded models, jargon and intellectual property. However, organisations that use good process, based on a few key principles are realising that good strategy development and execution can be surprisingly simple. 

Note: Article first published in: Governance Directions - Volume 72 - Number 1 - February 2020