The building blocks to a great business strategy
In this blackswan article Lisa Bean outlines Maurice Duffy’s thinking on the building blocks to a great business strategy from a presentation that was delivered at a Geneva conference in June 2011.
Maurice Duffy, blackswan CEO, suggests that a good business strategy should address the following:
· The core purpose and the aspirations of the organisation
· The path chosen for further growth
· The basis for choosing the path
· The keys for execution
· The ways to constantly sense, change and adjust accordingly
blackswan have found that most organisations have four core elements of strategy in varying degrees and with varying levels of consciousness ("Do we have a clear direction?"). When looking at an organisation, you can use these four elements to decide – "Are we effective at this aspect? If not, how can we maximise it in the organisation?" As you develop your strategy, be more conscious and deliberate. You'll be able to develop a group that can check how they are going on certain strategy challenges ("Are we concentrating our resources?").
The purpose of strategy should be, according to Duffy, to achieve the following four elements:
1. Setting direction - Defining a clear and simple long-term goal which is capable of motivating effort.
2. Concentrating resources - Focusing all resources, efforts and enthusiasm in the agreed direction.
3. Maintaining consistency - Progressing in the same direction, with the same focus over long periods of time, deviating only when necessary.
4. Retaining flexibility - As a successful strategy becomes more embedded in the organisation's culture it tends to become set and increasingly resistant to change. It is therefore vital to maintain a continuous assessment of the various environments and key variables on which the strategy depends and continually review the necessity for revising the agreed strategy.
However, Duffy goes on to explain that in building the strategy there are 10 other considerations that need to be factored into the process.
1. Where to place your bets. Not all ideas are great and it can be very difficult to understand where you should place your bets when it comes to developing strategy. Domain bias, powerpoint re-engineering, silo thinking, extending the past into the future or top-down /bottom-up mandates all create a cocktail of poor analytics and very bad strategy. Organistions must apply the blackswan thinking VPRID.
· Virtousity (doing the ordinary in an extraordinary way) - do what you currently do very, very well.
· Plot (premediated planning) - plan your forward strategy grind and understand the white space as well as the opportunity for exploitation.
· Risk (structured risk) - be prepared to take risk on predicted white space, not gambles on group intuition.
· Innovation (directed open innovation) - be very clear at the core of your strategy message and allow for fuzzy edges where you will allow innovation to thrive.
· Disruption (compute where you can or others go) - be a disruptive force.
2. Look outside to identify threats and opportunities. In building the blackswan TransformationDNA®capability, Duffy says that blackswan have identified 5 levels of organisational maturity. At the Transformational level, strategy is concerned with the external market and how the firm's resources should be allocated to create an exploitable advantage. There are always threats: new entrants, demographic changes, suppliers who might cut you off, substitute products that could undermine your business and macroeconomic trends that may reduce your customers' ability to pay.
Gather the views of customers, suppliers and industry experts. These outside views can be powerful. The best firms enlist outside-in thinking to validate/challenge or test the robustness of their outward look to markets, competitors and technical developments. This outside-in expertise can help identify anything that could threaten a firm's current business or point toward new directions in the industry or market.
3. Look inside at resources, capabilities and practices.One of the major challenges organisations have is identifying the current strengths and how engaged that capability is in delivering the future. Resources and internal capabilities can constrain the choice of strategy. That constraint may now only reside in the people but right across the resources of the business. For example, a strategy to exploit an unserved market in the electronics industry might not be feasible if your firm lacks the necessary financial capital and human know-how.
These internal capabilities, especially the human ones, matter greatly and are too often overlooked by strategists. A strategy can succeed only if it has the backing of the right set of people and other resources; these must be properly aligned with the strategy.
4. Consider strategies for addressing threats and opportunities. Duffy advocates that strategy teams must first prioritise the threats and opportunities they find and then discuss each in broad strokes. As you follow this advice when developing strategies that focus on each core threat and opportunity, be sure to do the following:
· Create many alternatives. There is seldom one way to do things. In some cases, the best parts of two different strategies can be combined to make a stronger third strategy.
· Check all facts, and question all assumptions.
· Look for missing information; there is bound to be some. Determine what data you need to better assess a particular strategy. Then get it.
· Vet the leading strategy choices those who can look objectively at your market. Doing so will help you avoid "groupthink" within the strategy team.
5. Build a good "fit" among strategy-supporting activities. Strategy is more than just a blueprint for winning customers; it is also about combining company activities into a chain whose links are mutually supporting and effective in locking out imitators.
You need to use a whole system of activities, not a collection of parts. Competitive advantage comes from the way activities fit and reinforce one another.
6. Create alignment. Once you've developed a satisfactory strategy, your job is only half done. Now you have to create alignment between the people and the activities of the organisation and its strategy. Alignment is a condition in which every employee at every level understands the strategy and understands their role in making the strategy work.
7. Communicating.You must help people understand the strategy and how their jobs contribute to it. You want to create a situation in which everyone can articulate the goals of the organisation and explain how what they do every day furthers them.
8. Coordinating work processes.You must align people's activities with the business's strategic intentions.
9. Be prepared for change. Create a winning strategy and implement it well, and you might cruise along for years without any problems. But no strategy is effective forever. Something in the external environment eventually changes—new technology appears, customer needs shift, new competitors emerge—rendering it ineffective. Unfortunately, many management teams cannot recognise when their strategies have become obsolete.
The temporary nature of successful strategy should caution you to continually scan the external environment for threats and new opportunities, as described in Step 1. Does your company do this already? If it doesn't, who would be the people to conduct this duty?
Strategy formulation, then, is an ongoing requirement of good management. It is, to quote Michael Porter, "A process of perceiving new positions that woo customers from established positions or draw new customers into the market". This is a process you must permanently embed in your organisation.
10. Scenario planning. Duffy advises adapting your capabilities to the environment and the speed you want to travel at.
· First, decide what kinds of things make sense to look out for.
· Second, identify the specific tenets of management's conventional wisdom (often different from official assumptions) and ventilate them with truly distinct, 'orthogonal' views of potential futures.
· Third, examine specific hypothetical examplesas archetypes, not fixating on truly catastrophic'act of God' events at the expense of ones that can be influenced.
· Fourth, rehearse key events, scenarios and potential responses together. A management team cannot outsource scenario thinking.
In conclusion, Duffy maintains that the process is very structured and is highly creative. In the current environment, he says that conventional 'steady-state' planning alternatives are actively misleading (i.e., more of the same will only get you in trouble faster). Turn up the headlights and you'll be blinded. Slow to a crawl and you'll be passed or hit.
