In Our View …
As we witness the slow recovery of lost confidence and the return of a more sane and measured set of business practices, it affords the opportunity for us to refl ect upon what we have learned and what we can apply going forward. It is also a perfect time to ask some of the tougher questions about the shortcomings that would seem to have been endemic in the choices made by leaders in every sector of the economy.
In this paper, we will examine what we believe to be some of the lessons learned and advocate a new and better way to help guide the good ship of business forward.
We will suggest a series of approaches and mental models you can adopt and we will critique the breakdowns which have, for many years, led to disappointment, frustration and under performance. At the end of the day, we believe there has to be a better way to seize opportunities and have them materialize in a manner that is better balanced and equally profi table, sustainable and ethical.
In our view, the way in which leaders evaluate the landscape, make sense of the environment, proactively shape the opportunities they see and then decide on which course of action to take is a process that deserves more attention than it has had.
Exploitation or Exploration?
There is a rational argument to be made for seeking better balance in all things to do with business, economics and leadership. In fact, a more balanced approach can be proven to produce superior results over time, albeit maybe just not fast enough or significant enough for some. The dilemma for most executives is in fi nding the balance that is tilted towards the advantage they believe is needed to produce the economic benefit which will allow them to better control their own destiny.
In this regard, given the lessons of recent times, some guiding principles might have been useful in preventing the pendulum from swinging too far!
As we have studied the growth policies and strategic practices of some of the largest organizations in North America, we have come to believe the future is best optimized when the core strategies are framed by a mindset of “exploration”, rather than “exploitation”. In others words, we believe a strategy based on exploiting a particular product, market segment, customer group or type of technology, etc. is probably fatally fl awed. It has a half-life that is shrinking and is a sure path to finding yourself disadvantaged when events unfold in an unpredictable non-linear fashion. To put it another way, a strategic mindset that is fuelled by curiosity and discovery will produce a higher rate of opportunity creation than will ever be possible through exploitation.
Strategic Planning …
It has been said that strategy is art and execution is science. Unfortunately, in most organizations, the creeping tentacles of the science part of the equation seem to have overtaken the entire process. Once again, we fi nd another good example of balance having been destroyed by extreme over compensation.
To put a not so subtle point on it, you simply cannot plan for what you do not know, and what you do not know is a whole heck of a lot more than you do know. You simply can’t improve the outcome by trying to work harder at putting things into even tighter, smaller, more organized boxes, validated by endless over-analysis that can never actually be proven to be fact.
In other words, you can try to systematize and refi ne the analytical process if you like, but then don’t be surprised when you are caught fl at footed by events that unfold in unpredictable ways and at times that are seriously inconvenient for you.
It seems to us (and to many others including Henry Mintzberg of McGill University), that the modern organization has tried to control their destiny and their market space by applying extra logic and additional linear thinking to what is essentially an unpredictable and chaotic world.
Strategic Thinking …
We see a shift occurring and it is long overdue.
On the premise leaders can never know enough or be fast enough (even in our technologically supercharged information society) to stay ahead of the game, and that we are, therefore, just not smart enough to be genuinely wise, the traditional Strategic Planning process may have run its course. If this is true, we need to shift the balance back towards an approach that is more appropriate to the conditions we
face and more valuable under the circumstances that surround us.
We believe great strategy comes from great thinking – not more planning.
We believe the thinking part has to come first – not second.
As a result, it seems to us organizations have actually been short-changing their future, while creating an illusion of being in control, in a situation where complete control is not possible. The more balanced and sensible thing to do is to put the majority of the effort, both physical and cerebral, into improving the Strategic Thinking process, not trying to lock down the perfect Strategic Plan that, at the end of the day, will only be as good as the thinking that goes into it anyway.
Fallacies to Puncture …
Perhaps we are confused, naïve or just plain wrong in our belief about the merits and advantages of the mindset and practice of exploration over exploitation.
Perhaps we are confused, ungrounded or mistaken in our belief that true value is created through placing the emphasis on better thinking not more planning.
On the other hand – I would not bet on it!
Why don’t you put your organization to an honest, objective test? Take a minute to evaluate the three components of business strategy success that really matter. Then, having done so, sit back and ask yourself where it suggests you can get the biggest improvement going forward. In our experience, it will be at the front-end, through better thinking and the back-end through better execution. We seriously doubt it will be in the middle part of the overall formula.
Rate the quality of the following elements from …
1 – Pretty poor to 10 – Best it gets
(The Strategic Thinking Process + The Strategic Planning Process) x Execution & Implementation = Total Score
At the end of the day, we believe what we believe because we think there are at least three assumptions or fallacies imbedded in the Strategic Planning doctrine.
- The fallacy of Prediction – believing we can, in fact, predict.
- The fallacy of Formalization – believing we can better organize our logic.
- The fallacy of Detachment – believing we are totally objective.
Strategic Inflection Points …
It was almost twenty years ago now that Andy Grove of Intel wrote a controversial, but popular, book entitled “Only the Paranoid Survive”. His thesis was pretty clear, as was the mindset behind it. In the book he coined the phrase “strategic inflection points” and went on to explain how successful leaders seem to have a certain sense of timing and a knack for being able to spot just the right moment to shift position.
Needless to say – we agree!
In fact, what Grove was talking about was the willingness and courage needed of a leader to know exactly when to move on, when to leave things behind and when to take a bold step forward. He knew the advantage it creates for an enterprise when its leader has the confi dence to shift to a new frontier right at the apex of success, rather than ride the downward curve of diminishing infl uence, profi tability and relevance. In more recent times, Steve Jobs at Apple has taken this approach to new and braver heights and, in so doing, has become the poster boy for serial exploration.
In both cases, these leaders understand the benefits of exploration and the limits of exploitation. They know that planning for an unpredictable future can only ever be the second best approach to building an organization that constantly improves its ability to sense the future by doing a better job of thinking about the future.
Experience Repertoires …
We recently came across some work done by Dorothy Leonard and Walter Swap in their book “Deep Smarts”. It really helped us shape, and then crystallize, some of our own musings. It fi lled in a bit more of the emerging puzzle we were trying to solve when it comes to the question – Why do some leaders and organizations outperform others in making choices and strategic decisions?
In some ways, it’s just common sense, but the idea that a person’s strategic thinking ability is enhanced by the “experience repertoire” they bring was a revelation in clarity. Folded into the story we are trying to weave about achieving better balance and maximizing opportunity, it suggests the greater the variety of experiences (not just work experience) a leader has is directly linked to the quality of the insight and thinking they bring to the table. If the quantity, quality and variety of the experiences are high, the leader is better equipped to view each situation with heightened perspective, greater awareness and a better set of strategic lenses.
To expand on this, it would seem in a world of increasing complexity and chaos and an environment of changing social norms and ever faster exchanges of information, the coping advantage will go to the person whose strategic thinking radar and sensitivity is enhanced by varied experiences of a deep and ever compounding nature.
In simple terms – the rise of the wise and experienced generalist may be about to overtake our faith in the superior aptitudes of the über specialist.
Contextual Intelligence …
In a slower moving, less confusing and more predictable world, things don’t change too often or too dramatically. Problem is – that world does not exist anymore!
As a result, mindsets, attitudes, beliefs, processes and competencies that may have been good enough even ten years ago are not likely to be appropriate today, or in the near future. If not, it begs the question – then what?
It seems to us, if improved strategic thinking ability is the key lever to unlocking an organization’s business performance potential and, if a leader’s experience repertoire enhances that ability and sharpens it to a fi ne point, there must be a certain set of smarts that allow it to be activated. An intellectual catalyst, if you like. We would like to suggest it is something called Contextual Intelligence or CQ.
In our view, one of the things that sets the accomplished Strategic Thinker apart from the rest of us is their ability to gauge the sometimes subtle shifts in context and meaning that are the precursor to change and, therefore, emerging opportunity.
We would suggest a leader’s ability to accurately assess the context and connect the dots leads to sense-making, or contextual intelligence. This, in turn, helps the leader create the vivid image of the future that is necessary to galvanize change, overcome hurdles and shift an organization onto a new path.
Scenario Planning …
Many years ago, in a different life, but in a similar period of economic turmoil (Britain during the late 1970’s), I became exposed to The Royal Dutch Shell company and their strong belief in the benefi ts of Scenario Planning as a means to guide strategic decision making.
I remember being struck by how much sense it made to envisage multiple futures rather than just one and then think deeply about each in order to prepare for different eventualities. As it turns out, the good folks at Shell were way ahead of their time and have been using strategic thinking techniques since the mid 1960’s. They would argue it has been a major factor in helping them weather the vagaries and risks of the global energy markets.
Scenario Planning is both a process and a mental model.
It is founded on a belief there simply is no certainty and, therefore, no possible way of predicting outcomes in the future. However, by having the rigour or discipline to pursue multiple possibilities at the same time, to hold multiple futures in your mind simultaneously, you achieve perspectives or clues that would otherwise be missed. The net result is a level of preparedness that is higher and a forensic evaluation that scans a broader universe. In so doing, you are better able to identify the faint signals from the periphery that are useful in orchestrating a timely, rational and appropriate response to emerging events.
I wish we had invented the term Futurescape, but it is a word others have used before to describe a methodology of constructing a visual image of a possible future state. In essence, it is a forward focused mental model that connects an apparent series of random elements into an integrated picture, replete with all of the benefi ts that come from better understanding relationships and interdependencies.
Futurescapes appeal to that part of us that relates better to pictures than words. It has the added advantage of serving as a tangible representation of what otherwise might be an intangible story about a vague and ill defi ned tomorrow.
In the fi eld of strategy, Tim Brown of IDEO would say a Futurescape is to the business executive what a prototype is to the designer. It is a way of visualising the possibilities so you are better able to understand the shifting parts of the puzzle. In that way, it is perfectly designed for the strategic thinking and scenario planning model we support. It is based on an assumption that fl exibility, adaptability and responsiveness to opportunity are more important to the business value proposition than binders of densely fi lled projections, crafted within limited boundaries and cemented with a belief in following the plan as it was originally crafted.
Steps to Take :: Actions to Consider
In this paper, we have attempted to make a case for a major shift in the way leaders and their organizations go about the process of creating their business strategy.
We have suggested the primary and irrevocable driving force behind this need has been a quantum change in the global business environment. In our view, this requires us to develop new tools, techniques, practices and mindsets that are better suited to the world we live in – rather than the one we thought we had before we were so rudely and dramatically inconvenienced by a shock to our system.
Truth be told, if we had practiced more of what we have tried to argue for here, we would not have been so surprised and, perhaps, would have actually seen the inevitability of the need for a shift in the pendulum, before it was too late.
We believe the new conditions suggest leaders would be well advised to follow a new course, perhaps even the one we are suggesting below.
Change the Mindset
It all begins with a “call to action” and a puncturing of the old fallacies. There has to be a clear, believable message from the leadership team that the organization must and will embark on a new course of exploration.
Insist that people begin to embrace the joy of discovery.
Assemble the Thinking Team
The senior leaders must show genuine courage by pulling together the very best thinkers in the organization, regardless of level or tenure. In most cases, this means a group short on functional experts and long on pioneers.
Ensure the team has a diverse experience repertoire.
Identify the Strategic Infl ection Points
The organization must fi nd a way to embark on a serious and objective look at the macro trends impacting the current business, beginning with the customer perspective and working backwards.
Search out and listen to the faint signals from the periphery.
Shape the Context
Begin the search for a new strategic context by identifying the megatrends and seismic shifts which are impacting the market, the social environment and the way things are being done.
Insist on an outside in point of view, however uncomfortable it might be.
Develop Scenario Plans
Help the organization develop some new thinking competencies as well as an appetite for the discipline of holding multiple views in mind and not rushing to a final choice until each one has been scoped out.
Work on improving the assumptions and the supporting premise.
Build a Futurescape
Help the organization understand the new reality by first identifying the dots and then connecting them into a visual representation that assists in ensuring relationships and dependencies are clear to everyone.
Focus on the whole picture and the connections – not the individual parts.