Strategy is more “How” than “What”
What is your definition of strategy? How do you put strategy in place? The “how” is at least as important as the “what”.
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“What” is Not Enough
People stress about strategy. If their team or company does not have a vivid picture of what the future looks like and how their team or company is part of it, they are uncomfortable. But, how many teams and companies have such a pointed strategy? Very few.
The technical landscape of the business world is changing faster than ever before. And the change continues to accelerate. As a result, who can really have a clear picture of what the future looks like? If they do, how long will that picture hold? Not long.
In the startup world, it has become common knowledge that being able to pivot is often more important than the big idea you started with. Startups that survive and ultimately thrive have a finger on the pulse of the market and make changes when they sense that a signal may become a trend. If they adapt faster than the competition, they get an advantage…and increase the probability they will survive. How many companies are still working the same exact strategy they started with? A small number…probably none.
This does mean that the “what” (goals, objectives) of your strategy is not important? No. Having vivid objectives is critical. It is the common direction that the team works together to move towards. But, it is only part of strategy.
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“How” and “What”
I have believed for a long time that the “how” is at least important as the “what”. I am fond of saying that strategy is 10% objectives and 90% initiatives and execution. When I say that, I am drawing a distinction between a futurist and a strategic leader. The futurist is focused on envisioning the future and articulating where a company can play and win. This is the “what”. But, a vivid description is just words if it is not acted upon. The strategic leader is the one who builds the plan/system that takes the team from where they are towards that future. This is the “how”. The “how” makes the “what” real. Even further, the “how” is the difference between results and sustainable results. It is why I am keen on operating models, which I also call “strategic management”. Given the right vivid objectives, everything in this paragraph is critical to success. But, I have come to believe there is a gap. How do you integrate my earlier point about startups and pivoting? The answer is to align at least a portion of your operating model to it.
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3 Horizons & Your Operating Model
As a strategic leader, your operating model should have three horizons:?
Adding routines focused on the transformational horizon is how you adapt to the changing future. It is the main point of this article.
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Risk Tolerance
If you dedicate resources to the manage horizon, you will improve efficiency and quality. If you dedicate resources to the incremental horizon, you will deepen your go-to-market, sharpen the skills of your client-facing team, and drive modest growth. Much of these two horizons is simply solid management. If you are playing in a growing marketspace, the risk of failure is fairly low. The transformational horizon is different.
The transformational horizon is placing bets that you know have a low probability of coming through. Again, that is very different from the manage and incremental horizons. Given the lower chances of success, a proper strategy places multiple transformational bets. If the average probability of your transformational bets is 20%, you need to place at least 5. If you do not, you may be putting yourself in a “bet the company” situation. Sometimes that is the right path depending on your ability to invest or the upside of the experiment.
Your company’s market position helps to determine what percentage of your resources you dedicate to the transformational horizon. If you are a stable company, my gut says that 10-20% is probably the right investment.
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Whirlwind Risk
If your company is bureaucratic or political, it can detract from your focus on the transformational horizon. All your resources might get consumed “keeping the trains running on time”. Your executive leadership might treat transformational bets like incremental efforts. They might overestimate the chances of success. When the transformational bet does not come through, they view it like a failure on the manage or incremental horizons. Failure there is bad. It results in revenue loss or stagnant growth. Failure on the transformational horizon just means the experiment did not work. But, if you did it right, you probably learned a great deal in the process. That new intelligence can be fed into the next experiment and increase its chances of success. The mindset required to lead on the transformational horizon is much different than the manage and incremental horizons. Risk tolerance, continuous learning, and dedication to experimentation are critical.
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Where are you?
Does your company’s management model take into account all three horizons? Are different expectations placed on the manage and incremental horizons versus the transformational horizon? If not, is there an opportunity to model the way within your team and management system?
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Thank you for reading my leadership blog post. I hope you found it interesting and thought provoking.
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? 2024 Don Graumann.?All Rights Reserved. Other than personal sharing, please do not redistribute without permission.
I could spend hours with you discussing this topic and we still wouldn't scratch the surface. Two immediate reactions: 1) There has to be a "why" in strategy. 2) Manage/increment/transform is a great construct, but the magic is in the resource allocation between the three (where resources=time, money, and mindshare).