This is part 5 of a series on strategy fundamentals and how the concept will evolve.
Here are the previous posts in case you missed it.
In this conclusion, we will cover the importance of alignment during execution, creating feedback loops and the future of strategy.
Everything is a people problem
Once we’re comfortable with the design of the strategy, it’s time to execute. The biggest factor to execute on your strategy, boils down to people. It’s an obvious statement but yeah, it’s all about the people. In my experience, you can design a beautiful strategy but you need to get people to execute it. Aligning a leadership team around a common goal and vision is easy to slap on a powerpoint slide yet requires thoughtful mechanisms in place. The key reason for this is strategy by its very nature is uncertain. You can always look in the rearview mirror and connect the dots. You can’t do that looking forward.
This graph by Roger Martin explains the concept wonderfully.
When executing on a strategy, a leadership team will encounter obstacles they haven’t faced before. It’s best to get people in a room (or zoom) and debate blockers & required resources early in the process. If you don’t actively debate what is required to execute on the plan, you will often fall into the trap of having big ambitions but not enough capabilities. McKinsey calls this the hairy back problem.
A team will write a big plan with lots of profits coming but actual performance won’t be there since the execution falters.
There are some ways to solve this. One of my favorite techniques to use is to conduct an alignment survey of the leadership team at the start of the execution cycle.
Here are some examples of questions to ask at the start of the strategy execution cycle
- Is the company’s long-term goal clear?
- Is our strategy aligned with that goal?
- Are we focusing on the right products / services in order to achieve that goal?
- Are we focused on the right customer segment(s)?
- Are we employing the right sales & marketing channels in order to achieve our goal?
- Do we have the right talent to achieve our goal?
Do we have the right tools & processes in place?
- Are we confident in our ability to successfully achieve our strategy?
These questions can be revisited on a regular basis to track progress and question underlying assumptions. It’s a simple trick that allows you to see where there are potential areas of misalignment.
Creating feedback loops
Once you have a plan and start executing, that plan can’t sit in a drawer. You need to create feedback loops to adapt your execution in real time. There are many different methodologies and approaches to measuring and adapting your strategy execution. No matter which approach you take (OKRs, Agile, etc.), it’s important to revisit assumptions and track progress. For instance, at our firm we help our clients employ an agile process. We run strategy sprints every month and tweak the execution plan. The key point is to find a way to create feedback loops on a regular basis. Needless to say that the old set & forget way of implementing a strategy just doesn’t work today.
Since the start of this series, I’ve shared my thoughts on how to run a strategy process. There’s no one “perfect approach” for a company to design their own strategy. An important recommendation is to do your own research and read multiple sources. I’ve tried to abstract at a high level the things I’ve learned from the past few years of running a small management consulting business. I want to turn my attention to what’s next in the world of strategy.
The future of strategy
To look at the future, let’s start with the past. Here’s a breakdown of the growth of strategy frameworks by BCG.
I laughed out loud when I saw this image. Strategy has increasingly become a buzzword and a way for consultants (like myself) to sell fuzzy concepts to customers.,
Yet it fundamentally remains the most important item on the CEO’s checklist.
I do see the plethora of methods as a good thing. There cannot be one way of doing things and as new forms of organizations emerge (remote, DAOs, etc), more ways of working are a good thing. With that warning label, here are a few bold predictions.
Much more aggressive inorganic growth plans
There are many tools in the strategy playbook and they boil down to organic and inorganic growth. In recent years, acquisitions have become much more commonplace as a means to grow. This chart shows the growth of acquisitions since 1985 and there is a clear growth trend. It takes skill to make an acquisition work and leaders are much more comfortable in deal making.
Scanning the market will be a core competency
Due to connectivity, the world’s information is increasing at a rapid pace. Being able to reduce the noise to signal ratio is a key skill. A leadership needs to continuously scan and monitor the environment for new technologies, companies to acquire and trends. I expect more and more startups to provide products in this space. A good technique I recommend learning is Wardley mapping. It’s creator is a savant in strategy and built this wonderful framework. He states that strategy is all about observing the landscape, understanding how it is changing and using what resources you have to maximise your chances of success. His mapping method provides an awesome way to understand how components of your value chain are changing over time. Mapping itself isn’t about giving you an answer, it’s about helping you think about a space and learn from what you did.
Competitive advantage isn’t what it used to be
Sustained differential returns will be harder to generate over a long period of time. I predict that dominating a market for decades will be much harder to do. As software eats the world, more companies are deeply embedding software in their business models. Software comes with two key aspects; high margins and low barriers to entry. As soon as a successful business emerges, a startup willing to take less profit will chip away at the incumbent.
Another way to understand this phenomenon is the Red Queen effect. The Red Queen effect, is an evolutionary hypothesis which proposes that organisms must constantly adapt, evolve, and proliferate not merely to gain reproductive advantage, but also simply to survive while pitted against ever-evolving opposing organisms in an ever-changing environment. Companies can’t be complacent or they will simply fall behind.
I’m not super confident in this prediction and can just as easily argue the other side.
We’ve seen the power of network effects and the current cohort of technology giants seem only to have tailwinds at the moment. The other reason I’m uncertain is that the size of markets today are instantly global giving a startup ability to grow super fast with more chances of building a scale moat.
Difficult to summarize a concept so ethereal such as strategy and it’s been great learning more from giants in the space like Roger Martin, Simon Wardley, MIchael Porter, et al. I’ve enjoyed writing and learning more about strategy in the course of writing this series. Any feedback is greatly appreciated! You can email me here.