“We are hardwired to handle threats and opportunities at the animal level – not the corporate level”
Typically, a growth strategy involves months of analyzing whether to engage in intensive growth in the same industry like the classic Ansoff matrix, integrative growth in a related industry with swallowing a new value chain step or diversification growth in an unrelated industry, where unique parts of the current business model can be profitably reused.
There is nothing wrong with the logic in that. It is the consequences of theory meeting practice, that should concern you. You see 70% of all strategic initiatives fail for fairly everyday reasons related to how the strategy process is conducted. We tend to underestimate competitive reaction, have difficulty letting first ideas go and anchor in our existing setup, so our strategy is simply not solid. We also tend be overconfident about what our existing organization can do and overestimate the consent to actually doing it, so the strategy – flawed as it is – will never see the light of day.
These everyday reasons are not a matter of competence. Many companies have learned to assign their best people to their most exciting opportunities and outsource to expert strategists, when they do not have the right expertise inhouse. So how is it possible, that every time a company starts thinking strategy, they are likely to fail? Enter behavioural economics – the study of how our millions of years old brain actually make decisions and the impact on modern day complexity. We are hardwired to handle threats and opportunities at the animal level – not the corporate level.
“A solid strategy is about process – not analysis”
There are ways out of this. We recently finalized a growth strategy for a midsized IT company with quite a number of potential routes to growth. Standard strategy problem solving would break it down into the different options and analyze each one for attractiveness and difficulty to deliver a prioritized action list. While that sounds beautiful, it often misses wider opportunities, it generates zero buy in throughout the company and it takes quite some time.
Instead think of widening the options substantially through mega trend analysis for the core internal teams in step 1 and give them some indications of possible directions through high level analysis of what it would mean to enter a particular new growth avenue. This will limit the effects of underestimating competition, sticking with early ideas and anchoring in our existing setup.
The next step is about closing down those options. Building on the foundation of the much wider options generated in step 1, take a progressively closer look at what to do about it. First, the winning aspiration of the company – who do you uniquely want to be and what do you want to be known for among your best customers? Second, select the playing field – what customers do you want to serve with which products? Third, define your value proposition for each customer – how do you intend to win and just as importantly what will you not be doing? The last steps focus on what core capabilities and management systems are needed to deliver on this strategy. Going at it deeply and together like this limits the effects of overestimating company ability and consent.
A process like this have not spend considerable time on analysis yet, because the right process can surface most of the information needed inside the company to make the decisions – but not all. Thus the third step takes deep dives, where necessary – areas that require new data. The key learning here is that a solid strategy is about process – not analysis.
“Execution starts at day 1”
Throughout the process the core internal teams are heavily involved in discussing the widened view of options, the process of closing down those options and the deep dives.
During the widening view of options, they are interviewed and take part in smaller focus group like workshops, where they are gradually presented with megatrend analysis – this starts discussions outside the formal process of opportunities and ensures that the whole group has the same view – but not view point – on the opportunity space.
During the closing down process, the teams are now brought together for a series of workshops, where they are slowly channeled to make decisions together, while bringing out all the discussions and disagreements in a constructive mode. This is critical, because no companies succeed by external analysis making decisions or just a few vocal leaders in the group.
Finally, the deep dives are facilitated. Again this is about bringing new knowledge to the team and it is a balance between speed and buy in on analysis, when we agree on which part of the deep dives are completed internally and which are not. There is no right answer – it depends on the type of deep dives, the context and the team.
There is a substantial amount of good old fashioned leadership involved in the process as well – both as a core team and as facilitators. This is not special for this process – it is just common sense, that when you want to take the most critical leadership decision for a company it will involve… leadership. So both as a process and a supporting leadership element, if you want to your strategy to be implementable, execution starts on day 1.
“Speed is of the essence”
The third feature of this growth strategy process is speed. While there are three individually large elements and a host of high involvement activities, it does not have to take long – in fact speed is of the essence. Without speed in the process we as humans will need to zip in and out of the process with each move requiring extra effort to remember the exact issues and how they relate to each other. Because a strategy process is a set of closely interrelated decisions – without coherence they fall apart.
The trick is finding the right activities to involve the team in – the ones that build new knowledge quickly and start dialogues crisscrossing the team – and then moving the team along. Suddenly everything is about the new opportunities, then the strategy and finally the deep dives. It can be slowed down at certain points, but it is much more powerful done relatively fast.
In the case we mentioned we (we like to say we about BSG and our clients combined) went from a project go from the board to getting strategy approval from the board in 1 1/2 months. Now analysis can be scaled up to this speed by large strategy consultancies, but typically it will be at the cost of execution. Our client here has a prepared and united team – we cannot wait to see them start growing!