Strategy is dead. Long live strategy!

Red and Yellow strategy

It was the title of my presentation’s first slide, the one I made for my speech at Dubai’s business conference. I deliberately made it a little bit provocative to invite participants for discussion. And I succeeded - the discussion appeared to be very vivid. Many entrepreneurs and CEOs do believe that long-term thinking is dead because of the "fast-changing world." I don’t see it this way, so I decided to summarise its key takeaways in this article.

Old good classic?

"Strategic planning” was the name of a subject I learned in a business school almost twenty years ago. Our teachers were proponents of a classical strategic theory with PEST, SWOT, and many other tools. The theory didn’t look simple, but its logic was rather clear. If I simplify it a little bit, I could describe it as follows:?

– Learn your environment, both at the macro and micro level.

– Learn your strengths and weaknesses?

– Find new opportunities and identify threats?

– Formulate long-term goals

– Find an optimal way to reach these goals (considering strengths and weaknesses, resources available, etc.)

– Build a roadmap and implement it.

I have deliberately left out some other key elements of strategic theory, such as mission, vision, financial modeling, etc. because they are used notwithstanding the method.

It is quite a logical and straightforward approach based on common sense - analyze your environment, forecast the future, and prepare for it. But, from my experience, it doesn’t seem to be working well for variety of reasons.

1.?????Tools such as PEST, or even PESTLE analysis, provide a relatively short-term vision of the environmental trends. They let us see the trends, whereas that things that will inform our future are often below the radar for some time. According to the Diffusion Of Innovation theory (read more?here ), they can stay invisible for a long time, even when so-called “early adopters” notice and start using them. For example, the first bitcoin was mined in 2010, but until 2017 it became a point of interest for a relatively small group of enthusiasts. We need longer-term tools for future thinking (I’ll tell you about them in the second half of the article).

2.?????Finding new opportunities is critically essential, but the classical strategic theory offers rather vague advice on how to find them. That’s one of the reasons why I never use a SWOT analysis (read more?here ). We need some tools to inspire creativity (I will mention them in the second half of the article either).

3.?????There is a book Key Strategy Tools: 88 Tools for Every Manager to Build a Winning Strategy, by Vaughan Evans, a former strategic consultant who started his career back in the 80s. It is a result of impressive work, a collection of conventional and less famous tools belonging to the classical strategic theory. It may be helpful, but one will hardly find the word “customer" in the book in the meaning of deep understanding of customers' needs. It doesn’t provide any practical methods of identifying these needs as well. I use none of these 88 tools in my work.

Many attempts to overcome the limitation #2 have been made, from Ansoff 2*2 matrix, introduced back in 1957, to BCS’s 3D “strategy palette” invented in the XXI century. These ideas were reinforced by some statistics, but with all due sincere respect to the authors, I am quite skeptical about the “if-then” approach when it comes to business strategy. Every company and every market is unique, so not only a strategy but also a strategic avenue must be unique in any case.

"Strategic planning”?

Everyone has a plan until they get punched in the face

Mike Tyson

The term “strategic planning” is criticized by many experts. According to them, strategy is a direction, a path, and a vision, while “planning" belongs to operation management. I only partially agree with them. The quality of any plan depends more on the accuracy of the incoming data than on the method of planning. As analysts say, "garbage in – garbage out”. If our plan is based on false prerequisites, or wrong or incomplete information, it will fail, whatever good planners we are. But, as futurists say, “there are no facts about the future”.?

It doesn’t mean that old good long-term planning is obsolete. In some industries, such as automotive, oil&gas, aviation, and some other heavily regulated and slow-changing domains, it still works well. I call such a strategy a “red" one. It is applicable for the cases when:

1.?????A product lifecycle is relatively long;

2.?????A company doesn’t have any plans to diversify its core business.

Suppose you are a CEO of a concrete manufacturer, and you believe that your company should produce concrete on a long-term horizon. In that case, you can still rely on the conventional business planning method. It doesn’t mean that you can neglect your customers’ changing needs. Your team must identify these needs and adjust your product and accompanying services according to their findings. All the crucial variables you need to consider while long-term planning are relatively predictable – at least to an extent. It is a “red strategy”, or a “product development strategy” concept.?

But if a product lifecycle is short, as it happens in the IT industry, service sectors, FMCG markets, and many others, you don’t have the luxury of relying on linear planning. And if/or you are contemplating diversifying your business, you should think of a “organization development strategy”, or a “yellow" one.

If the product lifecycle is short, and you are going to enter new markets, the key variables for your business, such as future customers and their needs, core customers’ values, a range of future products, etc, stay highly unpredictable, making traditional long-term planning tools useless. In this case, the only option you have is to create and develop a culture ready for any changes and uncertainties.?

If you keep to a "red" strategy, you invest in efficiency, and the main employees’ virtue will be discipline (even though it does not exclude creativity and open-mindedness).?

If you vote for a “yellow" strategy, you invest in culture, creativity, in willingness to constant changes and learning. The "red” strategy is not outdated or wrong, and the "yellow" one isn’t better. Every “color" suits some situations and doesn’t suit others. Moreover, a border between two “colors" is vague, and you may choose the “orange" approach if it is relevant to your conditions. These colors are not names of methods or sets of techniques, it is only a concept, a high-level approach.?

A new approach to strategy

I am not an academic researcher but a practitioner conducting dozens of projects every year. On the one hand, it makes it difficult for me to prove my ideas with in-depth scientific research - I don’t do them. On the other hand, I don’t need it – I develop my approach by testing different ideas and choosing the ones that work.?

I don’t think that strategy is dead. Even if we, for some reason, can’t use long-term planning, we still need long-term thinking. My approach to strategy formulation is as follows:

1.?????Initial foresight work - horizon scanning, emerging issues analysis, etc.

2.?????Foresight game - to see and broaden horizons.?

3.?????Data collection – customer research, market research, etc.

4.?????Initial ideation - stakeholders maps, CJMs, customers’ needs maps, etc.

5.?????Future business model choice based on four previous steps.

These five steps give us what I call a “strategic concept”, or a general view of a future strategy. The next steps depend on the “color" of our strategic approach. If we, for any reason, opt for the “red” one, we may switch to traditional long-term business planning. If we believe that the “yellow" approach is suitable for the situation, we make some long-term plans to build a respective culture. But regarding action plans and financial models, we vote for short iterations rather than long-term Gantt charts, wherever it is possible and reasonable.

Of course, it is only a brief description of the approach, and many details were omitted for the sake of saving your time. But the main idea is clear. Scott Newton , what do you think?

If you like this article, do not forget to subscribe. Follow me on Twitter , and watch the video versions of my articles on YouTube .