Insights & events

When discussing planning needs, the words' we need to be more strategic' are often uttered across organisations. But what does this mean?

The word 'strategy' is frequently used to point to something missing and much needed, but its definition remains vague. 'Strategy' is far too often used as a catch-all ¬¬phrase for all uncertainties and concerns, with little clarity about what 'being strategic' looks like.

A strategy is simply a way to win - a roadmap to success. However, the process of creating and developing strategy is often overtaken by the constraints of planning. Countless so-called strategies are little more than a rough collection of individual departmental plans and budgets brought together in a single document. A budget is not a strategy.

The main reasons why organisations struggle to create effective and coherent strategies are as follows:

There is no right answer; you do not know if it will work. Often, attempts to create sound strategies are undermined by the demand for 'proof' that it will work.

Strategies define one course of action over others. But, as humans, we do not like making specific choices in case they are wrong. So, we choose not to choose. We hedge our bets with vague announcements that 'we will put the customer at the heart of our business' or 'we will be the best value supplier in our marketplace'. These are just meaningless statements of intent, not strategic choices. A good test of their value is to examine their opposites, e.g., 'we will be the worst value supplier in our marketplace…'.

Previously, strategy focused on building competitive advantage by reducing transaction and informational costs. However, these days, as technology continues to change everything we thought we knew, organisational costs are more likely to exceed informational and transactional costs. Agility is now a vital precondition for any successful strategy, but we are still stuck in our old ways of thinking. Competitive advantage is not the sum of all efficiencies anymore.

This way of thinking sees strategy as something carried out at the top level of an organisation, with the rest of us waiting to be told what it is and what our targets are. This approach no longer works. People at all levels of the organisation must be involved and take ownership.

Roger Martin, a global strategy consultant, suggests that to create, execute, and continually adapt a successful organisational strategy, organisations need to ask the following five important questions and make choices based on the answers:

1. What is our winning aspiration?
2. Where will we play?
3. How will we win?
4. What capabilities must we have?
5. What systems do we need?

All five components are vital, but they must be interdependent, and this interdependence is why many find strategy so difficult.

The reason we find strategy so difficult is not that we do not understand what it is - it is that we are reluctant to take the risks involved in doing it correctly. We do not want to make choices and take responsibility for making those strategic calls; we do not want to tell our bosses that we cannot guarantee it will work.

Additionally, many organisations do not foster the skills needed to set a strategy properly. The challenge with strategy is to bring an organisation together, simultaneously seeing both wholes and parts, the inside and the outside, and making tough choices. Unfortunately, the capabilities needed to rise to this challenge are not ones that are readily developed in workplaces and universities.

As our technological cycles outpace our planning cycles, and the struggle to survive has never been greater, the need for effective strategy is more important than ever. We must understand how to play and win in today’s dynamic competitive environments.