Introduction
Strategy management is evolving and will continue to evolve—as will how organizations are structured, processes are optimized, and value is delivered to the customer, as well as the dynamics of the employer/employee relationship. When we passed through the technology “tipping point” and entered the unknown territory currently called the digital age (a description that will also evolve), we had no idea what would change—except one thing: everything.
If everything changes, but we’re rarely sure what, when, or how (although, as we explained in Chap. 2, approaches such as technology-based planning can help here) then organizations, in any sector or industry, have to develop, and as a core competence, build exceptional capabilities around agility and adaptiveness.
Agile and Adaptive
As we stated in the opening chapter, agile points to sudden quick changes—being “able to move quickly and easily,” whereas being adaptive is about “having the ability to change to meet different circumstances” (which does not necessarily mean quickly or easily). Both are required.
Building on the earlier work of pioneering thinkers, most notably Doctors Robert Kaplan and David Norton, in helping organizations transition into what was known in the 1990s as the knowledge age, this book has outlined a model that helps enable organizations to be more agile and adaptive in the management of strategy in today’s digitally driven, knowledge-based environment.
25 Key Strategic Questions
To aid the reader in implementing the agile and adaptive principles described in the model, we have set the following 25 questions, the answering of which should trigger thoughts regarding the challenges to be overcome and the capability developments required. Questions have been collocated according to the five stages of the model, as well as the leadership and cultural and people underpinnings.
Stage 1: How to Formulate Strategies for the Digital Age
- 1.
What does the word “strategy” mean to your organization?
Strategy has many definitions. Although there’s no perfect description to prescribe, it is important that there’s a common agreement about the term among the executive leadership team. Without agreement, little chance do they have of being certain of shaping the most appropriate objectives or initiatives. And how can buy-in possibly be achieved? If the senior team doesn’t know what strategy means to the organization, how can anyone else?
Task
Ask each member of the senior team to write down on a piece of paper what he or she understands by the term “strategy.” Then ask each to read out their definition. The difference in interpretation can be astounding. Finally debate, discuss, and agree upon what strategy means for the organization.
- 2.
To what extent is silo-based working stymieing organizational performance?
Sadly, most organizations are still structured along the lines of the strict silo-based working diktats of Frederick W. Taylor’s Principles of Scientific Management [1]. This has led to internal departmental turf-wars, and often has a detrimental effect on inter-departmental team working. This will be a major performance blocker in the fast-paced digital age.
Task
Consider designing and implementing end-to-end process management, with strategic processes led by a member of the executive team. The expert work of silos still gets done, but in the context of ultimate process outcomes, as opposed to departmental objectives.
End-to-end process management should certainly be applied to strategy. The focus should be on recasting strategy management as a single, integrated, end-to-end process rather that the siloed approach through which leaders and strategic planners create the strategic plan and then hand over to managers to execute “as is.”
- 3.
What is the “function” that the organization delivers?
As far back as the early twentieth century, pioneer thinkers such as Henry Ford recognized that customers buy a “function” that fulfils a specific need, not a product. People did not buy coaches and horses; they bought a mechanism for travelling quickly and comfortably: cars did this much better. Kodak did not sell film; they sold a way to capture images: the iPhone did this much more conveniently. The same disruption can be applied to any industry or sector and in the digital age and at alarming speed.
Task
What products or services do we sell
What do we sell?
- 4.
Is the organization clear as to its “sense of purpose?”
The mission statement defines the purpose of the organization: why it exists. A mission generally doesn’t (or at least shouldn’t) change much over time. Google’s mission “To organize the world’s information and make it universally accessible and useful” has been stable since the firm’s launch in 1998.
Task
The task here is simply to write the mission statement, ensuring it does not mention a specific product.
- 5.
Has your organization crafted a quantified vision?
The vision statement describes the desired result at the end of the strategic horizon and is the anchor to the subsequent strategy development and execution phases. Unfortunately, most vision statements are generic or vague and oftentimes little more than advertising slogans.
Task
It is time-bound (has an end date)
It is measurable (for a commercial organization, this will typically be the measures of ultimate financial success)
Captures the essence of the unique value proposition to the customer.
- 6.
Create a Strategic Change Agenda
A useful tool for transitioning from defining the quantified vision to a Strategy Map is a Strategic Change Agenda. This is a framework to identify and assess the current states and to project desired future states for strategically critical performance dimensions.
Task
Financial (profit dimension): From losing money to achieving profitability of X.
Customer (product choice dimension): From limited number of traditional products to diversified range of innovative and value-added products and services.
Internal Process (supplier dimension): From traditional “arms -length” relationship to partners in identifying and delivering customer solutions.
Learning and Growth (employee dimension): From demoralized and adversarial to highly motivated and participative.
Get the change agenda right and the objectives simply fall out.
Stage 2: How to Build an Agile and Adaptive Balanced Scorecard
- 7.
Develop objective statements
An issue with strategic objectives is that they are limited to a few words, such as “Enhance Customer Experience.” Succinct, yes, but its meaning will be interpreted in various ways as it cascades down the organization. So always write a meaningful objective statement that more fully describes the meaning of the objective.
Task
Write a “statement” for each objective within the financial and customer perspectives. This short paragraph should describe the desired strategic outcome.
For internal process and learning and growth, add a second paragraph describing how the desired outcome will be achieved.
- 8.
Has your organization identified the key strategic risks for each strategic objective?
Risks impact each objective on the Strategy Map—financial and non-financial. In implementing strategy, organizations need to “keep one eye on performance and one of risk.” This is fast becoming a pressing requirement in the digital age.
Task
For each strategic objective, identify the risk events that could lead to failure to achieve targeted performance. Then focus on shaping plans to mitigate strategic risks, or even undertaking those deemed necessary to achieve the objective.
- 9.
How does your organization select KPIs?
Organizations typically over-populate their Balanced Scorecards with KPIs. This typically due to struggles to identify the most impactful measure for a strategic objective. An unwelcome outcome being that the scorecard system becomes little more than a mechanism for capturing and reporting data—and generally disliked by the bulk of employees.
Task
Use driver-based models to identify the three or four most critical “do wells” for delivering to the objective (as described in a well-designed objective statement). Then apply Key Performance Questions (KPQs) to those drivers. KPQs highlight what the organization needs to know in terms of delivering to the drivers, enabling a focused discussion on how well it is delivering to the “do wells.”
- 10.
How well have staff that work with measures been trained in the “science of measurement?”
Most organizations are obsessed with measurement, but don’t invest the time and money into teaching those that work with measures even the basics of the underpinning science. We would expect a finance professional to understand finance and the same for an IT specialist, but not for those working with KPIs. We need to redress this odd and dangerous omission.
Task
The task here is to ensure that employees that regularly work with KPIs (and especially those that must comment on a performance results) have received at least basic training in how measures work.
- 11.
When setting KPIs and associated targets, to what extent have you considered the behaviour that will be driven?
A poor understanding of the science of measurement also means that organizations often overlook the fact that measurement does not always drive the expected behaviours.
Dysfunctional behaviours (which are simply rational responses—that is, doing what is required to hit the target) triggered by a KPI are far from uncommon. It is well known for a manufacturing plant to set a target to reduce reported injuries, and for the target to be reached simply by only reporting serious injuries (that can’t be hidden). Performance does not improve, but the target is hit.
Task
In a workshop setting, brainstorm and write down all the positive behaviours that might be encouraged and then the negatives. When done, hold a team discussion on how to best encourage the former and mitigate the latter. Sometimes, the risk of dysfunctional behaviour is so great that the KPI has to be rethought or abandoned.
- 12.
How well do you understand the meaning of strategic initiatives?
As with KPIs , there are often way too many strategic initiatives on a Balanced Scorecard. This is often due to a poor understanding of the difference between a strategic initiative and a business as usual task.
Task
Has a defined start and end date
Is a unique undertaking and a task that is repeatable
Is important enough to require sponsorship from a member of the senior leadership team
Has the required financial and human resources
Ideally, initiatives should only be directly linked to the internal process and learning and growth perspectives (as it is what gets done here that delivers the financial and customer outcomes). Ideally, initiatives should impact more than one strategic objective. Too many organizations focus on one-to-one links, which can be sub-optimal and very silo-focused.
Stage 3: Driving “Rapid” Enterprise Alignment
- 13.
How well do you ensure buy-in to the strategy through the cascade process?
The conventional approach to cascading the Balanced Scorecard system is typically a lengthy and time-consuming process, top-down driven and largely imposed. This rarely leads to buy-in and is no longer fit-for-purpose in today’s fast-moving markets.
Task
Identify the critical (and very few) objectives and KPIs to mandate in the cascade and then empower teams to build their own scorecard systems that describes what they want to achieve over the coming period.
- 14.
Do teams understand their own “sense of purpose?”
Firstly, when cascading, use the word strategy less and less as it is taken deeper into the organization. Top-level executives should make strategy their number 1 priority, and they can pull the levers to drive transformational change.
At deeper levels, such levers are not available so focus on the sense of purpose of the department or team—what they want to achieve over the coming period and then work on linking this to the strategic goals.
Task
The sense of purpose of the organization as encapsulated in the mission
How the group relates with other parts of the organization
The individual’s own sense of purpose: what they want to achieve over the short and medium terms and when, why, and how.
Stage 4: Getting Results Through Agile Strategy Execution
- 15.
To what extent are your Strategy Office (OSM) and Project Management Office (PMO) collaborating?
We have encountered some organizations in which the PMO and OSM refuse to talk to each other! As well as leading to a sub-optimized initiative management process, this invariably means that beleaguered managers in the field have to report performance on the same project/initiative through two different systems—a strategy management system and project management information system. A further dysfunctional outcome is that the PMO and the OSM interpret, and so report, the results in oftentimes very different ways, to the continued ire of the senior team.
Task
Consider merging the OSM and the PMO, as both are part of a single process that delivers strategic initiatives.
Even so, there is still the question of who does what in the initiative management process? The PMO’s expertise is around ensuring that projects are managed efficiently and to established procedures—be they strategic initiatives or large tactical or operational projects.
- 16.
To what extent are financial management processes aligned to strategy?
Professor Kaplan once said that, “One aspect of the Strategy-Focused Organization that has lagged is the integration with the budgeting system… if we don’t establish the link with budgeting, then scorecard initiatives may wither.” [2]
Quite simply, the budgeting process should support the strategy management process. Indeed, sequentially, it should be completed after the strategic plan and mid-term plan.
Task
Consider de-emphasizing the budget. Rather than a fixed performance contract, the budget should capture stake in the ground annual targets. Based on mid-term strategic goals, these should be stretching—what is possible, not most likely. A rolling forecast, looking perhaps 4–6 quarters ahead (with greater detail over earlier quarters) and based on the most up-to-date information and insights, becomes the main process for steering the organization’s finances.
- 17.
How well has your organization identified the operational drivers of strategic objectives?
Too many organizations believe that linking operations with strategy is about populating department level scorecards with operational KPIs. This is a misunderstanding, and contributes to scorecard systems being a mass of measures.
Connecting strategy and operations is done via the objectives within the internal process perspective of a Balanced Scorecard system.
Task
Use driver-based models (which asks the question “what must we excel at to deliver to this objective?”) to identify the key operational processes that support the objectives within the internal process perspective of the Strategy Map. With the drivers identified, then identify the measures for these sub-processes and monitor them through an operational dashboard.
Stage 5: Unleashing the Power of Analytics for Strategic Learning and Adapting
- 18.
How well does your organization understand “cause and effect?”
Most Strategy Maps that we review are not maps but collections of, at best, loosely related objectives arranged according to four perspectives. Useful for communication and alignment, but not exploiting the real benefits of a Strategy Map—causal analytics. Next generation maps, and overall scorecard systems, will drive performance by leveraging advanced data analytics: testing the hypotheses that inform the choice of objectives and KPIs, as well as the impact of initiatives and other improvement interventions.
David Norton refers to this as the next evolution of the Balanced Scorecard system, adding that excellent analytics capabilities are becoming a “must have” capability for strategy offices or OSMs.
- 19.
How well does your organization understand that a KPI is an indicator of performance, not the whole story?
For the term Key Performance Indicator , the word indicator is important. It is an indicator of performance, not the complete answer. When measuring strategy, we are not seeking absolute measures of performance, as we might when measuring operational processes.
Task
When reviewing KPI “scores,” always ask what is it not telling me? Also, keep in mind that the top-level score is not particularly meaningful without drilling into the supporting data.
- 20.
How well does the organization understand the monitoring performance is not just through KPI scores?
Periodically, when preparing the report for the strategy review meeting, print these words from Albert Einstein on the front cover. “Not everything that counts can be counted and not everything that can be counted counts.”
- 21.
To what extent is the annual strategy refresh still of value to your organization?
Many commentators argue that the annual strategy refresh has passed its sell-by date. That it is no longer acceptable to manage strategy through a process where it is reviewed once a year and then frozen until the next annual update.
Task
The management team should review how well the organization captures external market/customer moves and is able to synchronize the internal and external rates of change. Strategic moves should be triggered by an external event (competitor or customer move or, better still, early identification of a trend). At the same time, there has to be clarity around the firm’s strategic choices and positioning (which remain longer term).
Underpinning the Model
How to Ensure a Strategy-Aligned Leadership and Culture
- 22.
How well does your organization understand the impact of leadership behaviour on culture?
Leadership and culture are essentially indivisible. Culture is demonstrably shaped by the leadership team (for better or worse). The alignment of leadership and culture is an imperative for strategies to succeed and for organizations to be sustainable.
Task
A useful technique is to think of the shadow of the leader. This shadow casts a long way within an organization, from which employees know (and therefore do) what the leaders really want and reward—not what the leaders might say they want, and even espouse in public statements, internal communications, or even corporate values.
- 23.
Values are more than just Behaviours
Making values stick requires changes to the way the organization operates. If an organization has a value around trust, then it is inappropriate to require lower level managers to require multiple sign-offs before spending relatively small amounts of money. If no significant changes are made, the values will be no more than “nice sounding words,” that no one can argue with, but equally will take no notice of.
Task
When designing/agreeing values with the executive team, ask them how driving these behaviours will be supported by significant changes to the following: policies, procedures, processes, information flows, decision-making, metrics, and incentives. If these are not changed, then the values will remain “nice sounding words.”
- 24.
Cultural Assessment
A cultural assessment can provide early warning signs of cultural barriers to strategy execution. Culture can ultimately derail even the most beautifully crafted strategic plan.
A cultural assessment will show in which parts of the organization resistance might be fierce and which might be more accepting—and so launch appropriate and targeted initiatives or actions.
Task
A powerful way to effectively analyse culture is through an online cultural assessment tool, which will reveal the areas where improvement is needed enterprise-wide or at departmental levels. The latest generation of online tools uses advanced data analytics to more precisely assess the organizational culture and provide improvement recommendations.
Creating a Strategy-Aligned Workforce for 4th Industrial Revolution
- 25.
How well is the sense of purpose of the individual aligned with that of the organization?
For the individual employee, sense of purpose has two dimensions. The first is about what they want to achieve professionally, and while with the present organization. The second dimension, which is increasingly evident in Millennials and Generation Z, is the desire to work for an organization that shares their commitment to being better citizens.
Task
Think about how well the organization aligns the individual’s sense of purpose with that of the enterprise. This must be central to the recruiting and bringing-on-board process. Organizations must be honest and state that they expect the individual to stay for as long as s/he and the organization gain value (and ensuring there’s a strong emphasis on the individual) and that the sense of purposes remain aligned (for this, the organizational sense of purpose must be clear).
Personal development plans should start from what the individual wishes to achieve/learn over the next period (both the short and longer term) and mapping this to the goals/capability requirements of the enterprise (if there’s a poor match, then there’s a red flag to address).
Final Words
Peter Drucker once said that “the best way to predict the future is to create it”—although this is often attributed to others, including Abraham Lincoln [3]. Whoever did say it, said it many decades ago; but this is profound advice as we sequence through the early years of this the 4th industrial revolution.
However, powerful advanced data analytic tools are enabling more reliable “peering” into what the future might look like and bringing these observations into the present. To an extent, we are “co-creating” the present and future at the same time, while drawing on lessons from the past. Albert Einstein once wrote, “…the distinction between past, present and future is only a stubbornly persistent illusion” [4]. As the management of strategy continues to evolve, perhaps we can say the same about how we understand its formulation, execution, and learning.