By Jason Myhill and Paul Skivington
There are four phases to maturing in strategic thinking for businesses:
1. Financial Budgeting
Found in all companies and is the process of setting budgets and using these to monitor progress.
2. Financial Forecasting
Similar to the first phase except that it covers a longer period of time and includes some sort of issue identification and business unit and product/ service portfolio analysis.
3. External Consideration
This phase is dynamic, adaptive and sometimes surprising, and is in constant search of a more attractive portfolio mix. This involves external stakeholder analyses; customers, competitors and suppliers.
4. Managing Strategically
This takes careful and thorough linking of strategic planning to operational decision making, thus weaving the strategic planning and everyday management into a single, seamless process that is inseparable. There are five attributes to achieve this strategic management:
- A future strategic issues framework;
- Not limited to the top echelons;
- A series of feedback loops to negotiate trade offs among competing objectives;
- A high level performance review system focusing of key opportunities and threats; and
- A system to motivate and reward strategic thinking.
The following are four rules of strategic thinking:
- Seek hard, fact-based, logical information;
- Question every unquestioned assumption;
- Look for opportunities to win at less to no cost; and
- Thinking indirectly and unexpectedly.
A Dedicated Team
Phase 4 above implies a complete and continuous cycle of execution. This is very demanding on the CEO without a dedicated resource monitoring and facilitating the links. The leading person of this resource is referred to as the Chief Strategy Officer (CSO) who is able to focus and speed up decision making. The CSO builds world-class strategy development and execution capabilities within the company creating a department specifically for this purpose, hiring people with strong strategy-related skills and competencies. In the long term the role of the CSO can also be an effective succession planning tool. Whilst not a pure strategist, the CSO handles three critical tasks, namely:
- Articulating the strategy of the organisation, explaining how everyone’s work relates to this and engendering commitment to strategic planning;
- Driving, immediately and with a sense of urgency, the changes required to execute the strategy; and
- Ensuring that decisions being made throughout the organisation are aligned with the strategy.
The following are key characteristics of a good CSO:
- Someone extremely well trusted by the CEO;
- A star player;
- A jack of all trades;
- Someone comfortable with ambiguity;
- An influencer with the ability to communicate across all levels;
- A master at multitasking; and
- A doer.
The following are high level principles employed in executing strategy:
- Mind the time horizons; defend the core in the short term, build in the medium term and create viable options for the long term;
- Balance strategy formulation and execution;
- Exert influence appropriately (having the title helps); and
- Be smart in, and develop IT and HR smarts.
Strategy may be interpreted as integrated actions that create a sustainable competitive advantage. This advantage sets the tone and thus the direction of the business. Risk is what may prevent or aid achieving the strategy. The role of the CSO and his/her team therefore is to facilitate a lifestyle that works towards a common strategy and manages the risks for the company within all the entities and across all the functions throughout the length and breadth of the business. The following philosophy of strategy is defined as an interpretation:
- Strategy is direction and direction sets objectives;
- Without objectives there are no risks;
- Strategy and thus objectives without context will be disempowering and end up being bad strategy;
- Strategy must rule in paths that fit our scope and rule out those that don’t;
- Risks can either be positive (opportunities) or negative (threats);
- Good strategy can turn into bad strategy by a change in the context and thus scenarios help explore alternative futures;
- Similarly good risk management can be turned into bad risk management by a future change in perspective;
- Bad tactics can destroy good strategy, but no tactic can remedy bad strategy;
- Good strategy and risk control has a greater chance of being converted into good results if there are a set of measurable outcomes to which people can aspire; and
- Strategy and risk control is about understanding what you do and don’t control, what is certain and uncertain about the future and knowing how to avoid unintended, and possibly tragic consequences.
The team dedicated to facilitating strategy across the company ensures that there is a unified approach, accountability and efficient implementation. We have found that the best people to paint scenarios and shape the strategic direction are those who are expected to implement the strategy. Dialogue is as much about gestures and facial expressions as it is about what people actually say and therefore it is necessary to engage in face-to-face conversations. It is also important to encourage dialogue that is as participative as possible since the best strategists in a team are often the last people who want to speak up. In order to test assumptions a method that involves questioning to stimulate the participants into a re-examination should be adopted. The tools to aid strategic decision making with regards to company scope includes components such as product range, product chain and in sourcing versus outsourcing.