Coping with uncertainty in the business environment
Develop a clear strategy and then maintain strategic direction and integrity when times get tough
2011 is proving to be no less “interesting” than any of the last few years for many in the business community. No sooner had we come to terms with the likely impact of public spending cuts and the Euro zone crisis, than oil prices begun to spiral and the terrible events in Japan sent shock waves through global supply chains.
It is at times such as these that we are often asked about the role that strategy should play in shaping an organisation’s decision making. “How can an embedded strategy maintain relevance during such turbulent times? Surely such a fixed strategic framework would not allow us to respond and react to all these changes in our environment?” But this is to confuse the importance of having an ultimate sense of purpose and direction with the navigational intelligence that underlies it.
Imagine you were the captain of a ship threatened by an impending storm. What would you do? Perhaps you’d start by battening down the hatches to ensure survival. You’d likely plot a different course to your chosen destination to avoid the difficult waters immediately in front of you. You may have avoided today’s difficulty, but you are likely to be sailing directly towards another.
Alternatively you could begin by mapping out the likely places where the storm will develop and plotting a clear route through. After setting sail you would pay close attention to your navigational decisions as your visibility became impaired – you’d want to keep your crew focused on reaching the destination as safely and as efficiently as possible. Each decision and action in this situation would follow a discernable and logical pattern because you remained clear about the capabilities of your vessel and the destination you ultimately wanted to reach.
Without this clarity of purpose your crew might be tempted by the idea of ‘any port in a storm’. As conditions worsened and your resolve weakened, you’d find every decision becoming a negotiation as new threats emerged. Different factions would lobby for their preferred alternatives and you could end up by compromising on your ultimate destination – finding yourself in a place where your ship is unknown, your crew can’t really speak the language and your cargo has less value!
If helping some of the world’s leading organisations to formulate and implement strategy over the past forty years has taught us anything, it is that the more uncertain the environment, the more important it is to have a clear sense of strategic direction – because it is precisely at these times that maintaining complete unanimity of purpose is imperative. In fact, if there’s any question about the clarity of your strategic destination, now might be the ideal time for a review, as it will provide your leadership ‘crew’ with the opportunity to shape the future and create shared understanding and ownership of the strategy.
Kepner-Tregoe’s five-phase model for strategy formulation and implementation has been used effectively with many of the world’s great organisations and it is our experience that only when all five phases are in place can there be a realistic chance of maintaining strategic direction and integrity when times get tough.
Phase 1 – Understanding what’s on the horizon
Before setting sail it is imperative to examine everything you know about the ocean in front of you. Where can your loot achieve the most value? Where is the competition weak and the ocean easier to navigate?
In business strategy terms, this involves strategic intelligence gathering and analysis to ensure that the depth and breadth of information on which strategic decisions are based is up-to-date, accurate and relevant. The intelligence to be gathered includes an understanding of competition, technology, macroeconomic factors, political, social and regulatory trends, as well as the behaviour of customers and suppliers. The key to this phase is to understand the implications of each environmental assumption to the organisation during its strategic time frame.
Phase 2 – Agreeing on the best destination
Having assessed this world in front of you, and made the best predictions that you can about likely outcomes, it is imperative to get the crew aligned to a common, agreed destination. We must create a “Strategic Vision” by asking:
- What are our fundamental beliefs and values?
- What products will we offer and not offer?
- Which customers will we serve and not serve?
- What is our geographic scope?
- What products & markets offer the best potential?
- What is (are) our competitive advantage(s)?
- What key capabilities will we need?
- What goals do we aim to achieve?
Phase 3 – Chart the course
Having agreed on a destination, and with the crew now focused on achieving it, our captain must consider the speed at which the ship can sail (smaller, lighter ships may be able to move faster), the size of the crew, the resources available and the level of urgency required to reach the destination.
During this phase, the plan for strategy implementation is developed. The execution of a significant number of projects is required for the successful implementation of any strategy. The creation of a Strategic Master Project Plan, or road map, and the development of an optimal project portfolio will guide the organisation as it defines, prioritises, sequences, schedules, executes, and monitors each project.
Phase 4 – The voyage
Having agreed a common destination and charted the course, the long, daunting journey is mapped out into a series of achievable milestones, so that the crew know what they have to achieve each day, each week and each month until the destination is reached.
As the voyage progresses, new information may come to light; new opportunities emerge and new threats appear. However, many of them will have been foreseen during the initial scoping of the horizon. They will have been assessed and prepared for so that corrective or advantageous actions can be taken.
During the strategy implementation phase, planned actions are taken, implementation is monitored, and the Strategic Master Project Plan is modified as circumstances change and projects are amended, completed, or abandoned and new ones added. During this phase, the involvement of significant numbers of employees is a vital ingredient to successful execution. The higher the degree of ownership for the strategy among employees, the more commitment they will have to playing their part. This ownership, commitment and involvement begins with a major communications exercise to ensure there is full understanding of the strategy for each employee.
Phase 5 – Plotting progress and navigating safely
Some dangers that we face over the voyage may be new and unforeseen but only require a minor adjustment of the rudder in order to avoid them without compromising the ultimate destination.
Given the rate and pace of change in the 21st century, it is vital that strategy must be continuously reviewed and updated. Monitoring of strategic progress, goals, and indicators of success is a full-time task and a key input to regular reviews. Such reviews examine whether the assumptions used to underpin the strategy are still valid and whether the organisation’s strategic direction is still robust and viable. They are also critical for monitoring the progress of implementation.
Following these 5 phases for Strategy Formulation and Implementation can allow your organisation to survive and thrive during tough times. So here are a few final questions to ask yourselves and check whether you are on the path to loot and luxury, or barnacles and the sea bed….
- How well has your organisation understood the dangers and opportunities that lie ahead and plotted a clear path through?
- How aligned are your leadership team on the direction you are all taking?
- How well have you mapped out your journey?
- How well are your intentions carried out by your crew?
- How are you checking that you continue to stay on the right path?
Sam Bodley-Scott & Pete Wright; Copyright © Kepner-Tregoe, Inc. All rights reserved. 18th April 2011