A study by the Boston Consulting Group found that approximately 70% of companies change their strategy at least once every five years. Another study by McKinsey & Company found that approximately 20% of executives need to buy into their company's strategy. On the other hand, David Norton and Robert Kaplan, authors of the book The Balanced Scorecard, say that 90% of organizations fail to execute their strategies successfully. So why is that? Why do so many companies fail while so many are buying in the strategy on the five-year cycle, even if refreshed each year?
The problem might be not what you think. The primary suspect is on what is the merit of the strategy. Although that makes sense, there is one caveat that we often overlook. The critical aspect of the process is framing the choices and calibration steps that can lead you to multiple scenarios.
The strategic decisions will be reserved for a few in most of the organizations. Participating in 300K employee organizations at all levels, globally, and with the agile coordination process is complicated (no kidding). Let's also be realistic with those constantly complaining about "not being included." These exist and will exist as long the companies are complex groups of people relations. That's just given. That's not what we are trying to solve here. At stake is something more fundamental for your organization that must have depth and merit, creating a meaningful confrontation within your team's executives. Yes, it's a confrontation of ideas and opinions that will compete for attention and priority.
Most planning discussions bring one plan into the room. Success is seen as approving that singular plan. I've seen it too often, delivering that plan to the executive team (luckily, nobody kills the messenger) and thinking it might be easy this time. We meet, agree, and go home to be happy ever after. Nothing is more wrong. Let me pause here and dwell on the typical reactions I'm getting in the room. The most annoying thing that can happen is for someone to question the premise of the plan or to open up the solution space and bring different options into the room. The first suggests that planning is futile because "everything is changing." or "we'll never get this right." Oh boy. My blood is boiling while I'm writing this, recalling myriad conversations about that. The second category of conversations is questioning all assumptions for one reason: "They don't serve me well." Sounds familiar? How many conversations have you had with your CRO, head of sales, or GM about the targets when they said, "Yeah, that's a great target. Let me get to work on them right away"? Let's be honest. If I put a zero as a target, there would probably be a complaint that "something isn't right" with the numbers (actually, that one would be accurate for another reason). If we add another layer of ego and leaders' animosities between them and potentially some structural problems in your organization, we are on another epic movie called Mission Impossible. What happens next? Well, a boss (as always) comes in and makes the final decision, and it is game over. Nobody is happy leaving the room with a number they don't like, which differs from what they saw on the spreadsheet 5 months ago when the analyst walked to the room presenting in the deck. After 5 months of wrestling on that target, you end up with several expensive meetings that give you the same result. What happens next year? The boss being aware of that nonsense gives you 3 months to familiarize yourself with the number without giving you a chance to debate. In other words, you were cut off from the process. And that goes through the cycles, each year having silent approvers in the room who nod their heads and often underdeliver without even knowing why that is the case.
We all know that this deeper reflection is needed for fundamental business strategies.
Let's take a step back for a moment and answer the critical question about strategy. What is the business strategy in this context?
Well, the actual strategy is about making hard-to-reverse choices about how to win. If that's the case for the strategy, then the planning is about how to make those choices happen.
Seeing this too often, I must say that, unfortunately, the first step is being skipped too often, even trying to make ourselves feel comfortable by labeling the plan "strategic." As imperfectly logical (although still logical) creatures, many of us can see simply no point in precisely planning for the wrong future. In other words, you won't be able to plan if you don't know the choices you need to make between big categories. Fair enough. If you don't know what and where your strategy is, your planning will get you nowhere.
We run into another problem without framing the choices, causing the strategy to fail. Calibration is nearly impossible if you can create multiple scenarios, debate, and collect different assumptions behind the selected options. It's almost like resigning from calibrating your new car selection on the website that allows you to select the tires, wheels, color, interior, brakes, accessories, etc. At this point, your boss is coming to you and asking you to drive the car she or he selected for you (it might be used and very small). The calibration part of the planning process is the moment when you are discussing real alternatives. Often (if in place), each calibration criteria doesn't include organizational aspirations against your endowment, trends, and "outside view" in the room. Another mistake is comparing (or rather not) accurate alternative plans with different risk and investment profiles. One of the cardinal sins is the need for tracked assumptions over time with built contingencies into your plans as you learn more about them.
Bias is another elephant in the room that impacts the quality decision-making process "I've done this like that in my previous company." It's a great sentence that I usually pretend I haven't heard. Each company is different therefore, that phrase only helps people if they adapt to new circumstances and times. Remember that your strategies are focused on the Holy Grail here, called the power curve, which is directly related to a specific market, industry, etc., which might differ from what you have worked in with your last company.
Conclusion: Strategic thinking is where creativity meets logic. It’s the canvas where intuition is painted with the strokes of data. Remember, whenever you encounter the challenge of the 'Power Curve Dilemma,' it's always wise to circle back to guiding principles, framing the choices your organization is facing and calibrating them before you move forward with your planning process. In smaller or mid-size organizations, this is not a finance exercise only but a process that starts with your product, pricing, ICP, persona, etc. Keep your choices well-examined and assumptions crystal-clear, and always have backup plans ready if you fail. Because in this intricate dance of decisions and innovations, it's not just about moving—it's about advancing with purpose and vision at an accelerated rate.
Paraphrasing one of Chris Stapelton's songs, Devil Always Made Me Think Twice. Planning Will Always Make You Think Twice. Here are a few practical suggestions for improving your planning process around the issues that I've mentioned above
Frame strategy as choices. Create a simple grid with your strategic decision areas, and identify the different choices for each. This doesn't have to be in the same column in your xls. Try to provide the realistic choices you have This would be very different than signing off on another plan. While you reframe the strategy discussion as a choice-making rather than a plan-making exercise, the whole conversation will follow, bringing the ideas from the crowd into the room. Remember that these choices are hard to reverse in and long-term. Select 5 and focus on a few in the debate.
Calibrate your strategy. This can be tricky. You will need to go upstream against the traditional way of doing things however, if you consider natural alternatives, that likely leads you to more significant moves than you've made in the past. In a world where we are just focused on getting to "yes," plans can end up being discussed in a vortex with no reliable calibration. This is when the rubber hits the road, and you can test a strategy with facts. Explicitly using the "outside view" about your aspirations and big moves can help you overcome biases that let the social side bog down the discussions in the strategy room. Ditching your 150-slide deck would be a good thing in the end.
Pay attention to the competition. Keep an eye on your rivals. Holding your position on the Power Curve often demands considerable effort. However, management teams and their leaders typically aspire for more than just maintaining the status quo. They're keen on pushing boundaries and setting ambitious goals. But it's essential to recognize that sheer hard work and boundary-pushing aren't the exclusive factors to progress on the Power Curve. Your advancements are relative to your competitors' moves. And let's be honest, they aim to push boundaries just as much as you are. We've frequently observed teams expressing concerns about their leadership setting high bars. The primary focus should be on initiatives that promise a genuine competitive edge. Those are the endeavors worthy of your complete dedication and resources. Don't forget, somewhere across the city, in another conference room, your competitors are plotting their growth strategies, much like you.
Examine varying strategies. I bet you're thinking, 'Fantastic, even more data. Isn’t this just setting the stage for another decision-making merry-go-round?' Well, there's a way around it. Encourage discussions that pivot around multiple strategic options perceived to be at comparable risk and return ratios rather than just a single grand gesture. This paves the way for informed choices on which significant action to undertake. Alternatively, present varied plan scenarios with diverse resources and risks. This lets you make informed, measurable compromises instead of facing a binary decision. Keep a close eye on initial assumptions. It's surprising how the intricate assumptions fade away mere weeks after devising a plan. While discrepancies from the budget are monitored meticulously, foundational assumptions like market expansion, uptake velocities, and inflation often get overshadowed. Wouldn't it be groundbreaking if we monitored an 'assumptions ledger' with the same zeal as our financial one?
Create triggers and markers. When it's time to give the green light, we all favor well-defined plans. However, as unpredictable events unfold, we often resent their inflexibility. Rather than crafting strategies based on predictions, let's harness the power of present insights. Design strategies with specific markers prompting us to recalibrate based on fresh information. Adopting a strategy that evolves with time (pivot one) will facilitate this approach. Please don't use this as an argument not to have a plan. That's not the point!
Remove bias from decision-making. I've heard that Warren Buffet brought two investment banking teams to help him evaluate a possible acquisition. Both are offered success fees, payable only if Buffett decides their argument wins. The purpose of that is that the fierce competition sparks more honest debates that Buffet learned from. It's called pre-mortem, which helps to remove the bias from the players in the room. Some estimations say that more than 30% of investment decisions differ when opposite possibilities are pushed against each other. You can take it to the next level and assume your strategy scenario failed and what you will do next. I've never done it, but it could be another level of honesty exercise.
Make them care. Your meetings should be live, confrontational (although not personal), argument-based, and presentation-free. Allow your leaders to bring their point of view from the position they feel safe; that is entirely biased. You are peeling the onion as they provide their arguments. Verify and confront, especially when they disagree. They might disregard the argument with their first reaction, but the arguments should be rationalized over time. Keep the conversation going without assuming the conclusions will be achieved in one or two meetings. There must be a series to familiarize them with their competing priorities.
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