Great corporate strategies thrive on the right amount of tension or strategic stress. This is especially important if your company is pushing transformation and growth. After all, strategy making involves both deliberate execution of intentional plans and responsive actions to emerging issues.
Strategy is defined by the Oxford Dictionary as a plan of action designed to achieve a long-term or overall aim. It is about aligning the big picture with the day-to-day. Employees should see the value of both challenging and executing the strategy.
To ensure that your company moves forward efficiently and keeps you alert and responsive to emerging developments, sufficient amount of strategic stress is critical.
Too little stress will cause employees to be disengaged, bored and unable to adapt when change is necessary. On the other end of the spectrum, too much stress will cause burnout as we move past the peak and it can be detrimental.
So how much is the right amount of tension?
1) Employees are not feeling burnout
Having too many different and overly complex projects causes a loss of focus, and it impacts productivity. This may cause a strategic burnout and employees may experience a 'busyness paradox'. This means when they're busy and have that high-octane and panicked feeling that time is scarce, their attention and ability to focus narrows.
For example, this happened at Lego in 2004, the multitude of projects drove the company in numerous directions at the same time. This led to Lego losing focus on their core business and a decline in business. The resulting complexity was an underlying cause of the company’s strategic burnout. You will not want to do what Logo did at that time. Now that they have refocused, Lego is back on track.
"The essence of strategy is choosing what not to do", Michael Porter
Most companies struggle to kill initiatives, even when they don't align with strategy. Leaders often feel compelled to do more with less resources. In a research conducted by Bain and Company, executives say that they lose 40% of their strategy's potential value due to breakdowns in execution. You should choose to do less to do more.
2) Employees are sufficiently challenged
Strategy should not be too relaxed either. When strategy aligns perfectly with initial plans, it results in strategic boredom, the opposite of strategic burnout. The concept of strategic boredom does not mean that the content of strategy is boring, but rather there is strategic complacency which is a silent corporate killer.
Complacency leads to compliance, and not big picture thinking. This happens when companies do not encourage employees to challenge the status quo. For example, employees are not put in a position to challenge themselves, or implement their skills to take a project to new heights. Therefore, companies are discouraging innovation and engagement.
It is the opposite of organisation agility. Complacency ignores opportunities - big and small. Over time, employees feel less motivated and lose productivity. This will cost the organisation a lot of money. You need to make your company agile to survive in today's competitive world.
For example, Blockbuster ignored the entry of Netflix. Blockbuster earned an enormous amount of money by charging its customers late fees, which became an important part of its revenue model. Netflix offered a subscription model which was in conflict with its late fees. As such, Blockbuster did not see a need to innovate and was facing strategic complacency. The market went digital, and this led to Blockbuster physical stores shutting down and descended into chaos, then bankruptcy. Netflix is now a US$162 Bn company, about fifty times what Blockbuster was worth.
Another example is Kodak. Kodak was one of the world's most powerful companies, but today it has a market cap of US$100Mn. The company filed for bankruptcy protection in 2012, exited legacy businesses and sold off its patents before re-emerging as a sharply smaller company in 2013. Today Kodak focuses on imaging services for the corporate market. It did not keep up with technology changes and discouraged innovation as it wanted to protect its primary product - film. Cameras went digital and then disappeared into mobile phones. It missed the rise of digital technologies and fell.
3) Strategy execution is not far from plans
When strategy execution does not differ significantly from the initial plan, the company is in a strategic sweet spot, that is just the right amount of stress. Goals set are achievable and does not take an unrealistic amount of effort to execute.
You need to balance alignment and non-conformity to have a good strategy. When there is alignment, employees move in the intended direction to achieve strategy. However, the execution of strategy does not mean full alignment, it needs to encourage some autonomy which can result in innovation. There is a fine balance between alignment and non-conformity.
You need to proactively think about how emerging autonomous projects can influence strategy and its execution. For example, companies can have Innovation Days, where employees have one-day burst of autonomy to experiment with alternative projects. By providing a clear limited space for employee autonomy, companies ensure that it won’t step into the “too many different projects” pitfall, potentially leading to strategic burnout.
The gap between strategy and execution of that strategy is often referred to as “strategic dissonance.” Strategic dissonance is something we all face. Finding the optimal point in your company takes time and patience. Strategic success results from balanced pressure on your strategy. Effective strategy relies not just on deliberate execution, but the ability to adapt and remain on track when things don’t go as planned.
We work with companies to develop strategy based on insights from data and market research. What do you think is the level of strategic stress in your company. Leave us a comment. Subscribe to our newsletter for the latest industry, strategy and analytics insights delivered straight to your inbox.
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Forbes, A look back at why Blockbuster really failed and why it didn't have to, https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/, published 5 September 2014
HBR, Great corporate strategies thrive on the right amount of tension, https://hbr.org/2017/11/great-corporate-strategies-thrive-on-the-right-amount-of-tension, published on 24 November 2017
Josephine Stomp, Strategic conformity and non-conformity: Integrating institutional theory, the resource-based view of the firm and the creativity research, York University, published 1998
The 8 percent, How strategic stress can improve your business, http://the8percent.com/how-strategic-stress-can-improve-your-business/, published on 29 November 2017