What’s the strategic plan for your organization?
You might have a gut reaction to the word “strategy.”
It may conjure up images of an offsite strategic “summit.” Where a group of leaders spends a few days in a conference room brainstorming and whiteboarding. You might be able to point to a powerpoint deck or pdf that explains the vision or “strategic plan” for the next few years.
Perhaps you’re the type of person that loves thinking about the future and dreaming up possibilities. But end up frustrated when the organization doesn’t reach the goals outlined in the strategy document.
Or maybe you don’t think that creating a strategy is a good use of time because you haven’t seen it result in real changes. So you bias toward action because the business needs to run and you already have a long list of things to do, including requests from customers, problems to solve, and improvements you’d like to make.
Strategy is the link between our goals and how we invest our time and resources. But for many organizations, strategic planning just isn’t providing value.
How can we make the time spent on strategic thinking more effective?
If you feel like your organization’s strategy could be better, Richard Rumelt agrees that strategy in many organizations is lacking. In his book, “Good Strategy Bad Strategy” he outlines what’s wrong with the typical way enterprises think about strategy and offers a better way to go about crafting it.
Where “strategic planning” goes wrong
According to Rumelt, strategic planning can go wrong in a few ways.
Many “strategic” activities stop at setting goals or defining a vision. While helpful, setting a target of attracting more users or higher profits isn’t enough to be a “good strategy.” Growth can be a desired result, but it’s the result of a successful strategy, not a strategy itself. Setting a compelling vision isn’t enough to help an enterprise achieve it.
Another problem is that some strategic documents are full of generic and meaningless words. If the content simply describes the type of business that the enterprise is, or outlines goals that any business in the same industry would have (like “be a leader in our space”) it’s not good strategy according to Rumelt. Good strategy requires some tough work digging into the specific challenges and opportunities that are unique to your business.
Strategies can also be bad if they go beyond the “what” and incorporate “how” but:
- Don’t address the key challenges the organization is facing
- Don’t focus on the key objectives that would help address those issues
- Aren’t feasible for the organization to achieve in the timeframe
- Address too many challenges or actions at the same time
The first two problems result in projects that might produce some benefits but don’t help the enterprise achieve its bigger goals. The second two can weaken your organization’s ability to take action by being too vague about how to reach the goal or not investing enough resources in key activities.
A better way to set strategy
Rumelt proposes what he calls a “kernal” structure for strategy that consists of:
- A diagnosis of the core challenges and obstacles
- A guiding policy for how to deal with those challenges
- Coherent actions that fit the policy and address the challenges
“Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.”
– Richard Rumelt
Diagnosis
Start by identifying and analyzing the challenge to overcome.
Something needs to change. If you could hit your goal by doing exactly what you’ve always done then it’s not an interesting goal.
A good strategy directly addresses the biggest obstacle standing between you and your ideal future.
The results of the diagnosis can spark ideas for potential policies and actions. It can also help you evaluate if policies or actions are a good fit for the challenge. If you find that your actions aren’t working, you can always pick different actions or policies to address the core challenge.
“If you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen.”
– Richard Rumelt
Guiding Policy
A guiding policy doesn’t dictate the exact actions to take. It does help constrain your options by narrowing down your choices and ruling out sets of actions that you won’t take. You can think of it as a framework for your solution, while the actions make it tangible. Ideally, it draws upon your advantage to address the challenge you diagnosed.
For example, a diplomatic approach would require different actions than a military one but they are both ways to address a national security threat. Focusing on the customer experience, narrowing down your target customer segments, investing in emerging tech R&D, or streamlining your backend processes are all examples of guiding policies that could help you better leverage your resources to create value for customers.
Your guiding policy tells you how you’ll make investment decisions. It may be difficult or impossible to determine if the guiding policy is the “best” option available. But declaring one will help to organize actions so they all support each other instead of canceling each other out.
Coherent Actions
The actions need to work together and support each other and the guiding policy. Focusing resources can help you overcome threshold effects and see results from investments that would otherwise be diluted across many projects.
Coherent actions mean that the work that everyone is doing helps the overall organization achieve its goals. For example, a company focusing on customer experience would invest in learning more about customer needs, sharing those insights across the company, and using those insights to inform everything from marketing to product design to the billing process. Accomplishing this might require changing current routines, social networks, and knowledge management tools, which could mean significant investments in some areas and choosing not to invest in others.
Test and change
Think of crafting strategy as writing a hypothesis. You think that the guiding policy and set of actions will help you address the core challenge to achieve your goal, but you run an experiment, review the results, and make adjustments to the strategy.
By shifting how we approach strategy, we can make sure that our time spent on strategic planning is more impactful. This requires considering how our business design and resource investment decisions help us achieve our goals. I encourage you to check out Rumelt’s book for more tips on identifying sources of advantage to include in your strategy.
If you’re interested in learning more, there are a number of resources here on this site to help you tackle system redesign, set up a portfolio to make smarter investment decisions aligned with your core goals, challenges, and values, and lead others through change.
- Techniques for system analysis & design
- Tips for leading change initiatives
- Custom services for enterprises tackling complex transformations
Which part of the strategy does your organization need to focus on next? Diagnosing the challenge? Selecting a guiding policy? Or crafting a set of coherent actions?