It’s time for the annual strategy process.
This may be something you do every year, but have taken time out to notice some of the behaviours around the strategy table as the plan starts to take shape? A recent McKinsey article (Strategy to Beat the Odds) points out that “jobs—even careers—are on the line, so caution reigns. The budget process intervenes, too. You may be discussing a five-year strategy, but everyone knows that what really matters is the first-year budget. So, many managers try to secure resources for the coming year while deferring other tough choices as far as possible into the future. One outcome of these dynamics is the hockey-stick projection, confidently showing future success after the all-too-familiar dip in next year’s budget.”
These behaviours probably mean that the outcome of your discussions won’t be the best possible strategy to drive your business forward into the future, to tackle the challenges of competition, changing user needs and the potential threats of market disruptors or the impact of new technologies. Take a few minutes to think, do you ever witness any of the following as your team develops your strategy?
Risk Aversion – the team rule out the higher risk options early on, especially the ones that affect the key individuals in the room, and focus on a safer strategy. Alternatively, they push back the ‘riskier’ options to years 3 and 4 of the strategy. In that way, the big, game-changing options remain in the plan but the responsibility for delivering them is deferred – possibly to the next strategy team. Another observed behaviour is for the team to include some of the riskier options, but only to take those risks on lower impact projects. That way, if things do go wrong, it won’t make too much of a difference. The problem is that if they do go well, they probably won’t make much difference either. The overall result with this type of risk aversion is that some of these ‘riskier’ options you discount may just happen to be the ones that will best secure the future of your business.
Self-Interest – members of the strategy team only really apply their focus to the projects that impact them and their team. They are only really interested in selecting and applying any thought to those that that can be implemented in the time horizon for their tenure in role. As a result, all strategic options aren’t fully evaluated or debated. Whilst these ‘pet’ projects can help to make careers, they may not necessarily be in the best interests of the overall strategy.
Lack of Challenge – members of the strategy team don’t feel qualified to challenge a colleague in an area in which they aren’t ‘experts’. After all, the functional head must ‘know best’. Alternatively, there’s some form of collusion – if you don’t challenge my projects, I won’t challenge yours. Or, do you notice that the extroverts in the room hog the discussion space – the introverts, who probably have valid points to make, can’t get a word about the projects under discussion. Then there’s the issue of team members not feeling confident to ‘challenge the boss’. This leads to the views and projects of the most senior people in the room getting the most traction. Under all these examples, the strategic option in question isn’t given a thorough examination, resulting in a potentially sub-optimal decision to proceed. or not, with the project. This lack of challenge can also can also lead to the next issue………….
Overoptimism – the technical challenges in implementing a particular strategic option are underestimated, the capability to deliver it is overestimated, the team overestimate the extent to which the product/service/company in question is truly differentiated vs. their competitors (a recent survey I read suggested that only 9% of consumers thought a range products they were presented with were truly different, whereas that number rose to 80% of company executives who were responsible for these products) or they underestimate the strength of their competitors (or overestimate their ability to counter a competitors moves).
Misaligned time horizons – you are working on a 5 year strategy, but how often does the focus turn to the annual budget and/or team members use the strategy process to secure resources for their projects/to help deliver next year’s targets.
Time – how much time can your senior team afford to take out of their busy daily lives to spend on strategy. The daily pressures of running the business drag you all away from the strategy project. The time available for the work to be done in between meetings is taken up by more immediate priorities – those customers can’t be kept waiting. So, you turn up to the next meeting with perhaps a less than perfect information on which to make your decisions.
Does any of this ring true? Another McKinsey article suggests these are common issues (How biases, politics and egos trump good strategy). Of course, you could just contract out your strategy development to an external consultancy. Their independent view will mean that these sorts of biases are much less likely to be manifest in the final strategy. They’ll have the time to trawl through the necessary data. They’ll challenge your thinking, encouraging you to consider those riskier, bigger plays. They’ll be on the lookout for those decisions clouded by self-interest.
There are however drawbacks to this approach. Firstly, no consultancy can know your business as well as you do. No consultancy can know as well as you do what will, or will not ‘work around here’. In some cases, what ‘feels like’ the right thing to do is the right thing to do (but read Strategic Decisions: when can you trust your gut? to avoid some of the pitfalls). The there’s the lack of ownership of the end result. You don’t want a strategy that’s just a document that sits on the shelves of the senior management team, with key projects never fully executed because no-one really believes in them. It’s someone else’s strategy, not mine. After all, as it’s your strategy, isn’t that why you chose to do this yourselves in the first place?
This is where working with a strategy coach can be a really good alternative. The coach provides a ‘halfway house’, working with the strategy team, guiding them as they develop and review strategic options, challenging the team to review options fully, tackling potential areas of self-interest, ensuring all voices are heard through the process and encouraging the team to be brave in their choice of strategic options. A good strategy coach will not involve themselves in the details of the strategy itself, their job is to ask challenging questions of the team. They are there to ensure the team focus on creating a strategy, not next year’s budget. They are there to make sure that the team create the best possible strategy they can.
The big advantage to this approach is that the end result is much more likely to be owned by the team – they created it. As a result, the strategy is much more likely to be executed. And it is only in its execution that a strategy has any value to anyone and you’ll get a return on the time everyone spent creating it.
You may also want to consider keeping your strategy coach involved as the team set to work in the delivery of the strategy, helping your executives to work through the inevitable challenges they face in the implementation process, leading updates on the strategy with the team and, as the world evolves and new opportunities and challenges emerge, working with the team to keep the strategy up-to-date. Ultimately, the best (and arguably most successful) strategies are a living thing, not a document – they evolve, new options emerge and, where necessary, the team take a different direction. This is where great strategic planning pays back – if you have time to read McKinsey’s book, Strategy Beyond the Hockey Stick, you’ll see the pay-off for getting strategy right and executing it, if you want to create genuine value for your business. Mediocre strategies deliver, at best, mediocre results. And who wants to be mediocre?
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