Here are my notes from the following sources:
- Bringing Science to the Art of Strategy,
- Your Strategy Needs a Strategy,
- and from Gina Airey’s talk on strategic planning.
Problems of strategic planning:
- In some cases, “strategic planning does not product novel strategies. Instead, it perpetuate the status quo.”
- In other cases, out-of-box thinking “may result in radical new ideas, but more likely than not, those ideas cannot be translated into strategic choices that guide productive action.”
- In many of conventional strategic planning, the use of hypotheses and hypotheses testing is lacking.
Steps to create a strategy:
- Frame a choice: In this step, the authors state that one should define options that can resolve the issue that the organization is facing, which focus the attention on what to do next, not just on the challenge itself. On the other hand, people might not know enough about the root cause of an issue to frame the options. Perhaps Gina’s proposed starting point of defining a strategic question will be more appropriate. Gina also pointed out that depending on how you frame the question (or the option), it may lead you to different paths. The choice of different path should be guided by organization’s mission, vision, values and data/information that answers the strategic question.
- Generate possibilities: “A possibility is essentially a happy story that describes how a firm might succeed.” A possibility should “specify in detail the advantage they aim to achieve or leverage, the scope across which the advantage applies, and the activities throughout the value chain that would deliver the intended advantage across the targeted scope.” Another possibility is status quo. Participants involved to create these possibilities should be diverse and no more than 8. According to Gina’s slides, stakeholders may play the following possible roles: “be informed, provide input, validate/consent, decide” It’s important to not shoot down possibilities early.
- Specify conditions: “What must be true for each possibility to be a terrific choice.” The conditions may be generated out of the analysis in the following areas: industry, customer-value, business model, and competition
- Identify barriers: Identify an ordered list of barriers to each possibility.
- Design tests: Test each key barrier conditions. The person “who is most skeptical about a given condition should take the lead in designing and applying the test for it.”
- Conduct the tests: Test the barrier condition that has the least confidence first.
- Make the Choice
A strategy for making strategy:
- Factors for choosing a strategic style: predictability (“How far into the future can how accurately can you confidently forcast demand, corporate perforamnce, competitive dynamics, and market expectations?) and malleability (“To what extent cna you or your competitors influence those factors?”)
- To understand predictability, “regularly reviewing the accuracy of your forecasts and also objectively gauging predictability by tracking how often and to what extendt companies in your industry chagne relative position in term of revenue, profitability, and other performance measures.”
- To understand malleability, measure “industry youthfulness, concentration, growth rate, innovation rate, and rate of technology change”.
- A classical strategy (if your industry is predictable but you can’t change it, example: Paper & Forest products, Consumer Finance, Water Utilities, etc.) This strategy includes five forces, blue ocean, and growth-share matrix analyses. This strategy often “aimed at achieving economies of scale and scope often create company cultures that prize efficiency and the elimination of variation. These can of course undermine the opportunity of experiment and learn, which is essential for an adaptive strategy.”
- An adaptive strategy (if your industry is unpredictable and you can’t change it, example: Biotechnology, Transportation infrastructure, Computers, etc.) “Plans take the form not of carefully specified blueprints but of rough hypotheses based on the best available data.”
- A shaping strategy (if your industry is unpredictable but you can change it, example: Construction, Internet software, household durables, etc.) “Like an adaptive strategy, a shaping strategy embraces short or continual planning cycles.” “But unlike adapters, shapers focus beyond the boundaries of their own company, often by rallying a formidable ecosystem of customers, suppliers, and/or complementors to their cause by defining attractive new markets, standards, technology platforms, and business practices.”
- A visionary strategy (if your industry is predictable and you can change it, example: Aerospace, insurance, media, etc.)