Strategy is important to every company, but we often hear that strategies fail to get implemented despite the ample efforts of hard-working people. This is likely because they do not represent a clear set of choices. A real strategy involves a clear set of choices that define what the firm is going to do and what it’s not going to do. It is important for the firm to reframe the strategy discussion to focus on fundamental strategy choices.
The goal of most strategy discussions is to approve or reject a single proposal brought into the room. But deeper reflection on the plans premise, whether it should be under consideration or if there are other options should be practiced. Weighing strategic alternatives - such as different combinations of moves and scenarios with different levels of resources and risk attached - is the essence of strategy development.
Simply labelling a plan “strategic” doesn’t make it so. The outcome of a strategy needs firm commitment to the key decisions that will drive all planning. Strategy needs to be better than peers, and makes the company stand out although it performed like an average company over previous five years. Such conversation can be uncomfortable, but it is important. It is about unlocking big moves such as M&A.
However, strategy should be treated as a journey, where progress is tracked. Development in the real world doesn’t always co-operate, therefore, assumptions need to be tracked over time. Usually variance to budget gets tracked very carefully but few review the underlying assumptions such as market growth, uptake rates and inflation rates.
In this way, managers will then know to be continually accountable, so they will be less likely to sandbag or make bold claims in a bid for resources. Companies also need to estimate the predictability of the industry they are in, and then decide how often the strategy should be re-visited and shaped. Flexibility is paramount. For example, a strategy in China where the environment is more unpredictable needs to be shaped more often.
A clear, compelling strategy increases productivity, profits, performance and engagement.
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