The undisputed importance of good strategy has faltered. In fact, it is increasingly the case that strategy work is even perceived as an obstacle for future-oriented, agile organizations. But in times of upheaval it is particularly important that companies have a convincing answer to the question of how they intend to approach the future: Good strategy delivers the blueprint for this and lays the foundation for unbeatability.
The strategy lies in pieces on the ground. The remarkable book by Belgian economic philosopher Frederic Laloux, “Reinventing Organizations”, presents a woeful picture of this discipline that should be supreme in management – it is a stab through the heart for any strategist. It had been standing so recently:
A giant machine in the form of a person, still on its feet. Right at the top, on a kind of viewing platform, managers would scan the horizon for the right direction. As soon as they glimpsed the North star – setting their course for the future – they would start issuing commands to the interior of the machine, where countless employees toiled: “Turn right!” “Faster!” “More precise!”
But now the strategy is broken into 1,000 pieces, overgrown by mighty trees – managers and employees use the branches to keep progressing, still moving towards their destination, the North star. Frederic Laloux summarizes this by saying: “Agile organizations achieve extraordinary development without a central plan in place. Wouldn’t it be much more effective for an organization to constantly seek out new opportunities and adapt to them, rather than developing a major strategy every few years and sticking to it in the interim?”
LONGING FOR RENEWAL
The age of digitization, which simultaneously brings entirely new technical possibilities and entirely new competitors, means that managers are confronting the decision of how they want to develop their companies. In order to survive, organizations must undergo constant change. Existing logical approaches to leadership and organizational logics are applied here, and the very necessity of strategy work should also be called into question – not least because in many cases it has deteriorated into a merely ritual process. So there is an opportunity to ask: Should a new concept of strategy work be developed to suit the current age? Do we need a kind of strategy that functions more quickly, more flexibly, more creatively, and that is smart and agile?
In our fast-paced world, applying a consistent behavioral pattern seems outdated, particularly in light of the various young savages on the market who are teaching major companies the meaning of fear. Very few of these disruptive start-ups have a fixed idea of how they want to achieve their success right from the outset. Instead, they apply a trial-and-error method, with plenty of room for creative testing. Then established companies are effectively forced to adopt the pace of their agile attackers – with everything getting quicker, they find themselves wondering if detailed planning is at all necessary.
Forward-looking companies require a blueprint for the
future that functions as a conceptual framework,
guiding the entire organization towards consistent action.
MUDDLING THROUGH IS NOT A STRATEGY
Of course, an elaborate blueprint for the future is not essential when initially starting entrepreneurial activity. Missteps and wrong turnings while seeking the right path form part of the process, especially for young companies and new products. And of course, established companies should also use new developments as an opportunity to constantly develop themselves further rather than always inertly following the same procedures.
However, anyone who feels committed to the future of the company must not rely on just successfully muddling through: The survival rate for start-ups is 1:10 at best. When considering responsible management in established companies, a 10% likelihood of success cannot be the standard.
Laurence Fink, CEO of BlackRock, the world’s largest asset manager, emphatically called for clear strategies right back in 2015. In a letter to the CEOs of the largest market-listed companies, he wrote: “It is critical, however, to understand that corporate leaders' duty of care and loyalty is not to every investor or trader who owns their companies' shares at any moment in time, but to the company and its long-term owners. Successfully fulfilling that duty requires that... they clearly and effectively articulate their strategy for sustainable long-term growth.”
Despite such prophecies of doom, in principle strategy – when correctly applied – continues to be the supreme discipline in making a company unbeatable, especially in disruptive times. Of course, monolithic strategies that are developed and followed with surgical accuracy and based on historic data are no longer relevant. Nonetheless, in times of upheaval more than ever, companies still need a convincing answer to the question of how they want to approach the future. In other words, there comes a point at which companies need a clear blueprint for the future if they want to achieve successful growth. A blueprint that functions as a conceptual framework, guiding the entire organization towards consistent action.
Strategy functions as a plan of this type, and as such forms the basis on which a company mentally sets its path to long-term success. Strategy work should also be oriented in a way that acknowledges how important this is: It should be a structured process of thinking, decision-making and communication, seeking to bring together strengths, look to the future, and move the company to an attacking position.
AGILITY IN THE INTEGRATED STRATEGY PROCESS
But what format should that strategy work take, to result in convincing content while also meeting today’s requirements for customer orientation, speed, participation, and adaptability? The answer can be found in the integrated strategy process. This focuses on shaping a company’s corporate statement, business model, and power to implement – three considerations that are central to good strategy. The statement addresses the question of why an organization wants to develop in a certain direction. The business model stipulates how it can be distinct from its competitors, while the power to implementis targeted at how it becomes better. If these three aspects build on each other in line with the market, the foundation for unbeatability is laid.
All companies should strive to positively set themselves apart from the competition, whether through prompt commissioning, conceptual features that underline how the company is distinct, or through exemplary implementation – being better. As such, it is surprising to realize that in their strategy process, many organizations fail to differentiate between being distinct and becoming better. In the worst case, they just conduct a SWOT analysis, on the basis of which they create a strategic action plan. We refer to this abbreviated approach as a “strategic short-circuit”, as those who apply it have invariably engaged insufficiently with the mission statement, the business model, and the target system. The outcome is a program that purely resolves weaknesses and pretends to be a strategy.
In conducting strategy work, strict
differentiation must be made between
“being distinct” and “being better”.
A STRICT DIFFERENTATION BETWEEN "BEING DISTINCT" AND "BEING BETTER"
In conducting strategy work, strict differentiation must be made between “being distinct” and “being better”. This may initially seem surprising as both characteristics are rather blurred together by the market – because to customers these are components of an integrated service package that they do or do not prefer to other service packages.
However, from an internal company perspective, being distinct and being better are two sharply defined factors for differentiation, each of which raises fundamentally different questions for corporate management. Anyone wanting to be distinct must promote the brilliance, foresight, and courage of a few individuals to find the spaces that competitors have not yet occupied. This includes the basic assumption that the essential features of today’s business logic (business model) should never be considered immovable, for example in terms of products, customers, and distribution channels. On the other hand, anyone wanting to be better must activate their entire organization, because extraordinary performance – whether in terms of quality, speed of implementation, service orientation, or costs – is only possible when all forces interplay successfully.
When correctly applied, the strategy is the
supreme discipline for making the company
unbeatable, especially in disruptive times.
THE FUTURE BELONGS TO THE MARKET CHAMPIONS
We have created a term for the companies that have the capability to continuously be distinct and be better based on a convincing mission statement: “Market champions” are the companies that are able to survive in their industry for a long time and with great success. They are not necessarily the largest or coolest or most sophisticated companies, but those that in the overall picture have found solutions that make them distinct and make them better on their own playing field. Companies that are never satisfied with the status quo, who want to constantly develop, and to which complacency from success is alien. They take strategy work seriously, and in this way they make themselves unbeatable.
Find out more at www.horvath-partners.com/strategy
Dr. Oliver Greiner