Strategy is not Linear
Strategy only looks clean and neat after it has proven successful. The strategy diagrams show all the components fitting neatly together like a puzzle and all moving towards the desired outcome. In hindsight, all the decisions look obvious. Actually, it may be difficult from looking at a series of neat diagrams to know which ones resulted in success and which ones were huge failures. The diagrams are the product of tools like SWOT and scenario planning that guide strategist to make sense of their environments and identify competitive positions. Such tools may give the impression that strategy can be boiled down to answering a series of questions in a step by step fashion and then after answering the last question all the puzzle pieces come together.
Roger Martin and AG Lafley provide the right questions strategist need to answer in their book, Playing to Win. However, they emphasize that strategy is not linear. First let’s look at their 5 questions.
- What is our winning aspiration?
- Where should we play?
- How will we win?
- What capabilities do we need to have?
- What management systems are needed?
The first question is really the vision and purpose question. It provides direction and inspiration. This is often the fun part of forming a company. Envisioning enormous success is common to high school indie bands, IT start ups and initiatives to land on Mars. Without the fuel of a great dream, many entrepreneurs would never launch their companies in the face of statistics that say failure is much more likely than success. However, without answering the other questions, you really don’t know if you have simply identified a wonderful daydream.
“Where should we play” is a classic strategy question that forces decision makers to say “no” to many opportunities and focus on the ones that offer the best opportunity for sustained success. Typically, in answering this question, decision makers are determining what market segments and the scope of geographical and product offerings. If your winning aspiration is global dominance then you are trying to answer this question in a way that allows you to play in lots of places.
However, looking at the third question, “How will we win?” forces the strategist to move closer to reality. In order to win in the places that we want to play, we have to attract customers which often means beating the competition. What kind of product or service will make that happen? Strategy is about a clear point of view about what customers need and or willing to pay for. And, as many companies have discovered simply having the best product doesn’t always lead to winning. The “how we will” question often requires an effective method for creating awareness of your product and a way to close the deal.
The strategist having answered the first three questions has the foundation of a strategy – a clear and consistent statement of why the organization exist, where or who the company services and how it serves them .
The fourth question, “What capabilities do we need to have?” provides the next check in the strategy process. From answering the first three questions, we may have a perfectly logical strategy and, yet, be completely unequipped to execute it. Like a coach drawing up the perfect play only to discover he doesn’t have the players who have the ability to execute it. Entrepreneurs often struggle in answering this question because they want to believe they have the capabilities. Especially after drawing up such a perfect plan. While it is difficult to remain objective, the strategist is really asking what are the needed capabilities for any organization to do this. Once that list is determined, he can go back and make the self assessment of his organization.
It is in answering the fourth question that the strategy process becomes more iterative. The strategist has to determine if the needed resources can be developed or acquired. If so, that becomes the focus on the strategy implementation plan. If the capabilities are not present in the desired amounts it may affect the speed and scale of the company’s expansion.
However, the strategist may also realize a need to revisit his responses to the earlier questions. In assessing current and future capabilities, the strategist is also likely to see that the desired markets and product offerings may not be the best fit. Hopefully, in overlaying the response to question number four on top of the others, the strategist will see those opportunities that will allow for a competitive advantage. This is especially true in marketplaces where companies must differentiate themselves to remain relevant.
The final question, ”What management systems are needed?” is less about strategy formulation and more about strategy implementation. If the answers to the first four questions are aligned, the organization should be able to develop or acquire the needed management systems. Though many organizations have looked back to discover they had the right strategy but failed to execute properly.
The “Playing to Win” approach highlights the interplay of elements of strategy. The temptation is to anchor the strategic process around previous decisions such as the first three questions. The result is that strategists can end up painting themselves into a corner. By keeping the strategic questions open and in play, the decision makers provide open pathways as new insights emerge.
Equally important, Martin and Lafley encourage strategist to identify key assumptions and to test those as rigorously as possible. A key assumption is one in which if it turns out to be false, the whole strategy in in peril. Key assumptions can relate to customer behavior, competitor reaction, and organizational capabilities. For example, a key assumption could be that customers are deeply dissatisfied with a current product because it lacks a certain feature and will easily shift to a product that does have that feature. Martin and Lafley encourage discussions around the question, “what would have to be true for this possibility to be the winning choice.” This helps everyone determine what key assumptions are driving the strategic decision.
Strategy is always about dealing with unknowns because of the complexity involved and our inability to predict the future. Asking the right questions and holding the answers loosely, at least for a time, allows the best thinking to emerge.