In the mid-1980’s, strategy emerged as the hot topic for businesses. Michael Porter’s assertion that “strategy is the antidote to competition” shaped how leaders defined their goals and ran their companies. During this time, businesses had a clear-cut view of their competitors. The list of competitors shifted slightly, if at all. Competitors’ strategies evolved slowly, if at all. Classical frameworks facilitated the design and implementation of long-term strategies focused on growing market share and profit in a stable environment.
These traditional strategy frameworks, while foundational to today’s thinking, do not hold up in our current business environment. Relying on outdated strategy frameworks in the new world can have costly implications. The pressures of our market forces erode the profits of those who stand still. Competition has evolved, as disrupters move nimbly to create new business models and expand market share. Operations have digitized, accelerating the rate of business and the speed of commoditization. The expectations and priorities of talent have shifted. So why do companies keep their approach to strategy the same?
Performance hinges on an adaptive strategy built around today’s dynamic, customer-centric environment. It requires a transition from traditional strategy governance to a new way of viewing and operationalizing how we build a fluid approach to business management. We are able to uncover the stark disparity between new strategy and old strategy and identify critical adjustments when we take strategy down to the studs:
The Big Idea
The Big Idea is the nucleus of your strategy. Our changing world has shifted companies’ focus from being “the biggest and the baddest” to being agile and adaptable. Rather than beating the competition to get a bigger piece of the pie, new strategies innovate to increase the size of the pie. They are focused on creating and capturing value through innovative customer experiences and delivery models. Shifting to an agile mentality pays off, literally. Companies that have adopted agile practices report on average 60% higher revenue and profit growth than their counterparts.[i]
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Success Measures
In pursuit of the old Big Idea, being the “biggest and baddest,” success measures were directed at market size and scale. The evolution to the new Big Idea, centered on people, adaptability, and uniqueness, has shifted how businesses gauge success. In the new strategy, companies are valued for efficiency, throughput, speed, agility, and the ability to deliver a unique and memorable customer experience.
Values
Values are deeply held organizational opinions and beliefs that dictate organizational attitudes, perceptions, and behaviors. In old strategy, values often emphasized doing the right thing for the company. They were internally focused on driving the Big Idea — e.g., boldness, performance, and focus on impact. New strategy values are other-focused. They address “how can we elevate our team, better serve the customer, and make a greater impact on the community?”.
Process and Approach
There are distinct stages that dictate the old approach to building strategy. First, leadership builds a plan. Next, they execute. In old strategy, due to the bureaucratic nature of the company and process, there is little room for dissent, and the strategy lacks transparency and flexibility. The approach is top-down and rigid.
Conversely, the new approach to building strategy is fluid. The different stages of the process — design, implementation, and adjustment — interact in a continuous feedback loop, so changes can be made in real-time based on insights from across the business. The process is more collaborative, the feedback is more data-based, and the output is more agile.
Financial Management
To manage the staunch strategy process in the old model, the finance function operated independently to create tight budgets with increased measures and controls. Layers of management would ensure that budgets were strictly adhered to, using the budget as a mechanism to dictate strategic decisions and enforce accountability. In new strategy, siloes are eliminated, and the CFO and the finance team work across strategic initiatives to create localized, rolling forecasts. The focus shifts from how to control to how to improve, as finance explores strategic cost cutting techniques and opportunities to accelerate financial results.
Profit
Being the “biggest and the baddest” corresponded to earning the highest profits. Profits were the goal of the old strategy and therefore the driver of decisions. New strategy shifts profit-focused to people-driven. The strategy is designed around the desired impact on employees and customers, and the outcome is higher profits. Decisions are made within the guardrails of the business core — the purpose, vision, and guiding principles.
Tools
Old strategy information was housed in large PowerPoint presentations and complex spreadsheets that were hard to navigate, use, and update. Outdated approaches to data management limit collaboration, hamper and often misinform decision-making, and reduce efficiency. New strategy is digitized. Information is housed in a web-based, integrated software. This drives scalability, efficiency, and transparency across the organization.
Execution
In old strategy, third-party subject matter experts or consultants were typically hired to oversee and manage a transformation. Rather than building the strategy muscle internally, organizations outsourced execution to outside parties. Organizations’ initial reliance on external resources created dependencies that became apparent when the experts left. The business strategy unraveled. Unfortunately, because time and resources were poured into third-parties, internal resources lacked the information, experience, and capabilities to push the strategy forward.
While third-party expertise can provide important input and oversight during the strategy design and implementation process, unless your internal team is equipped with the skills and knowledge to execute independently, your strategy will eventually fail. In new strategy, employees are empowered through training, skills development, and coaching. Employees play a pivotal role in the IARs process and build the strategy muscle to drive successful, ongoing strategy design, execution, and adjustment.
By refining the fundamentals, you can transition to a new people-focused, purpose-driven, agile strategy. Whether you are seeking to revive a struggling business, unleash the true potential of your organization, or continue to build on your success, revamping how strategy is created and managed will drive relevance, receptivity, and resilience.
[i] Surya Panditi, “Survey Data Shows That Many Companies Are Still Not Truly Agile,” Harvard Business Review, March 22, 2018.
