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The CEO of one of my SME clients remarked at the end of our engagement that for the first time he realized strategy could be a process! Coming from a person who had an MBA from an IIM and one who was looked up to by many other SME owners, it surprised me.
Later when I became a member of a network of SME owners, I was far better prepared to explain my work. Many would ask what do you mean by strategy and strategy making?
To put it simplistically, strategy is the decision that the leader makes about the moves to make. Many leaders make these decisions based on their passion, some make this from gut feel, some make these decisions based on the advice of their friends and mentors and a few make this based on advice from advisors/consultants.
Why do leaders make strategic decisions? They do so because they have goals or purpose. (However, it isn’t uncommon to find even large organizations looking for a purpose or a shared vision from time to time.) They prepare a strategy to ensure that these goals or purpose are achieved.
But do all decisions that leaders make deserve to be called strategic, despite our tendency to call them strategy? The simplest definition of strategy would call it a “general plan to achieve one or more long-term or overall goals under conditions of uncertainty”. As a result, you would call a business plan the act of planning the achievement of short term certainties, such as your immediate annual budget. You are in dangerous territory if this is shrouded in uncertainty.
Strategy then is associated with planning for the unknown, growth opportunities and future which aren’t familiar and have lots of uncertainty. This brings us to the subject of strategy making. Strategy making is governed simply by purpose.
An analysis of companies that managed to achieve disruptive growth shows two different underlying belief
Their belief that customers in the future would do their jobs differently using emerging technologies
Their belief that new technology can significantly improve our future
These two beliefs have a different impact on the purpose of an organization; the first is a burning platform and the second is an exploration into the future. A purpose that doesn’t fall into either of these categories don’t succeed in creating disruptive growth for the organizations; such organizations continue to be anchored on their present and succeed only with incremental change.
Could an organization develop a strategy based not on purpose but on other goals? Maybe you can, but for innovation-led growth you need a purpose that articulates the customer impact that you hope to deliver. The strategy process includes three critical steps; understanding where you want to play, how to play and the capabilities that are needed to play.
Understanding where to play requires you to map the evolutionary stage of the industry. Every industry has components that are in different stages of evolution, from the pioneering elements, custom-built, products with a growing market and industrialized commodities. You could be a pioneer in a commoditized industry or control an industrialized commodity in an emerging market.
How to play is a result of factors impacting the industry landscape. In every industry, there are individual elements that are constantly evolving. Competitors are working on standardizing and converting pioneering ideas into reliable standard products. Yet others are figuring out ways to commoditize custom-built products and standard products. At the same time, there are opportunities to build new pioneering ideas building on reliable industrialized components. You have the choice of selecting how to play in the industry based on the landscape and the competitive factors in operation
Finally, capabilities play a key role in strategy making. What is it that you want to achieve?
a. If the goal is to figure out how to improve the existing business, you don’t need too much strategy. You need systematic analysis and planning: what can we do better? Where can we apply our strengths to (markets, products, capabilities, etc)? what capacities should we expand? Then it is about setting these goals, identifying roles and responsibilities, executing and reviewing. The PDCA routine (Plan, Do, Check, Act cycle)
b. If the goal is short term with a defined market, then you are probably playing with the known. Two key questions need to be answered
i) Develop new assets and competencies rapidly
ii) Leverage existing assets and competencies over time
You need capabilities to do this
c. If the goal is long term with an undefined market, then you are playing with the unknown. You need to define whether you are looking to
i) Develop new assets and competencies internally through your efforts
ii) Acquire capabilities and assets through M&A
These capabilities are unique and different from what is required for excellence in existing operations
(Note: These are inspired by the work of Loewe, Willamson and Wood’s work)
The chosen strategy is a result of multiple iterations of these steps. Strategy development is more a skill of doing all of this rather than the ability to analyse target companies or carry out due diligence. Most importantly, these are not the output of a few experts, but hard work that requires the organization to participate and create together.
Do you have a plan to innovate and be disruptive?
If you would like to discuss the topic of innovation, do get in touch with me. You can book a free 60 min one on one discussion here: https://bit.ly/3eLCLGz
Krishnan Naganathan
Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email: krishnan@thinkhorizonconsulting.com
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