Strategy seems to be a dead concept these days. The changes are too intense for the strategy. Customers (the organizations) don’t seem to want continuity, but rather enthusiasm, excitement. Amidst this scenario, strategic positioning makes no sense. What matters is agility and continuous innovation.
I partially agree with the above statement. Strategy is much more than positioning. It is about developing resources that will allow the company to create value and differentiation in this changing world.
Unfortunately (or fortunately) it takes commitment (time and money) to develop this ability to differentiate. It is something that depends on people’s talent and organizational culture. It doesn’t happen overnight, and if it were easy we wouldn’t have a success rate of only 10% among startups, for example.
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Old-Fashioned Strategy
Don’t get me wrong. I am not that old but my modest knowledge of strategy was built on SWOT analysis, BCG matrix, Peter Drucker, Michael Porter and looking at companies like GM, P&G, IBM, Dell, Xerox, etc. I was taught strategy to operate something internal (controllable) and to predict and adapt to something external (uncontrollable).
Nowadays we like to give nice names to things. A startup to be successful needs to have the idea, the timing, profiling, etc. I think that for all this we can use Porter’s 5 forces model (with the necessary adaptations of course).
We have dozens of frameworks and methodologies that promise to solve all the organization’s strategic problems. I want to talk a little bit about strategy in agile methodologies.
Strategy and agile methodologies
Even one of the creators of agile, Dave Thomas, states that:
The word ‘agile’ has been subverted to the point where it is effectively meaningless.
What I observe: it’s a great methodology, many use it, almost nobody uses it properly, nobody makes money with it.
As a good dinosaur who studied project management with PMBOK (fourth edition to be more specific), I question how agile methodologies are used, especially in Brazil. If you are able to translate the entire PMBOK into a 17-page guide… well, who am I to say you shouldn’t.
Agile development, scrum, kanban, scruban, kancrum or whatever, moves the focus from results to deliverables. It’s a bunch of people looking to greenlight the project based on deliverables, not results. What goes into production is usually waste and offers no long-term sustenance.
PMs (project managers) become more important than AMs (account/operations managers). There is no candor, transparency, and/or alignment with company executives.
It’s amazing how every project in an agile methodology works out…
It is obvious that it will work! Most companies use them in the wrong way, without quality, without alignment with managers, and without offering value for delivery. Where will they go wrong? Just paste a bunch of post it, have a zillion unproductive meetings, play at piloting the project, and you’re done. Verdinho delivered!
Don’t get me wrong. Agile methodologies have their value, as long as they are employed correctly (which happens very little).
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Phases of strategic thinking
I like to talk to executives the old-fashioned way. For them strategy is a set of actions and initiatives designed to achieve a long-term goal (perfect!). In business, the long-term goal is profitable growth.
A good action plan involves three phases of strategic thinking:
Diagnosis: Where are we?
A diagnosis of the internal and external situation is necessary.
Internally, we should look at some form of financial analysis that tells us where the company is making or losing money. In addition, some form of business model analysis is required to determine the company’s strengths and weaknesses and how they correspond to financial performance.
Externally, we need to look at current and emerging competitors. We can even use Porter’s 5 forces model. It may seem old-fashioned for today, but we will not use it to prescribe strategies. This model can serve to generate a dynamic perspective on what is happening competitively.
The second essential external diagnosis is a market and customer analysis. Where are the opportunities for growth? How are customer needs, wants, and behaviors evolving? What kind of new market segments are emerging?
Alternatives: What can we do?
Great strategists spend a lot of time analyzing past movements. They do this to present leaders with possible alternatives for dealing with different situations. In business, strategic alternatives are usually scarce, often reduced to cost leadership, differentiation, or disruptive innovation. You may want to take three different perspectives to develop your list of strategic alternatives:
- What kind of performance moves are needed to increase profit? This involves considering adjacent market movements, new products, segments, operational excellence, and portfolio restructuring.
- What kind of business models are needed to support changes in performance? They can be grouped into models that involve a customization of the value proposition (from pioneering to co-creation) or also a scope of efficiency in the value delivery system (starting with volume efficiency and moving towards ecosystem efficiency). Opportunities to outperform the competition are strengthened by quickly combining a new value proposition with a new value delivery system.
- What kind of innovative experiments are needed to give business models a truly competitive advantage? Not all possibilities are equally relevant. The return on innovation is likely to be higher if it improves/amplifies the performance movements and business models that are being evaluated. This is not to say that isolated experiments are not important, but they will possibly bring relatively less return.
Choice: What should we do?
Strategy is choice. Leaders need to concentrate the organization’s effort, focus. They need to lead the selection of a limited number of strategic initiatives, based on potential value creation vs. execution risk. Ideally, there should be three sets of initiatives: performance changes today (short term), new business models impact tomorrow (medium term), and experiments to provide the competitive advantage ensure the day after tomorrow (long term).
The execution risk is fundamental to this choice and depends on how the necessary capabilities and market opportunities will be developed. We often underestimate the challenges. Procurement needs to be integrated and the organizational culture nurtured.
Consultants and consulting firms
Strategy is not dead. It’s just not being done the way it should be done. Telling your clients that your work is strategic is no longer a differentiator, since everyone says so nowadays.
Of course, to sell your fish, you need to call it strategic (even if it is not). You can even add other terms like “insights”, “action plan”, “diagnosis”, “modeling”, “prototyping” and a bunch of other “trend” words.
Know that this will not get you very far, unless you just want to turn on the little green light at the end of the project.
Want to do real strategy? Do research (lots of research), create a repeatable method, and perform tasks reliably.
People/companies will not always buy your strategy, patience. It doesn’t mean that they don’t need it, they usually do. Those who do not adopt the strategies proposed by a strategist are more concerned with getting a good job done quickly.
The green light at the end of the day can be more interesting than the profit at the end of the year. This can be a bombshell for organizations.
Listening to someone talk about strategy is very tiring (if you have read this far you may be thinking this), unless you are really interested in strategy.
You will be doing strategy when:
- demand that your customer engages with your strategy not through a super presentation but from a well-written page without graphics;
- the price of your consulting is considerably high to the point that your client feels obliged to get a return for every penny invested;
- you use state-of-the-art tools and know how to take advantage of them;
- do research and information processing following a methodology;
- extract and interpret data reliably and with quality.
Strategy without data is very risky. I have met only one person in my life who could think strategically without being presented with data. Fortunately, I had the opportunity to work with this person for a while and it was revealing.
Now, if you sell strategy but are not too worried about it, adopt an agile selling methodology (hehehe). To top it off, create a cool title for your LinkedIn profile. Something like “Ninja of something” or “Guru of something”.
Amazing, a search for these “gourmetized” posts reveals that we have so many smart people out there, able to use strategic thinking to improve the environment around them…
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Final considerations
Strategy is more alive than ever, we just need to know how to employ it in our business.
The organizational culture needs to be tied to the strategic vision of the business. The integration between the teams (internal and external) creates a favorable scenario for strategic alignment in the organization.
The use of new methodologies and tools aims to facilitate the understanding of the strategic planning and tactics addressed.
It is important that all levels of the organization have a holistic view of the strategy so that they can contribute meaningfully and actively.
And in your company? Are you paying enough attention to strategy? Tell me, what difficulties do you encounter in implementing strategic thinking in your company?
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