...may be the only sustainable competitive advantage.”
It is the time of year where many organizations are starting to plan for the continued success of their business. Whether for-profit or non-profit, large national corporation or small local business, the challenges of maintaining a sustainable and successful strategy continue to challenge leaders at all levels. Leaders continue to navigate a VUCA (Volatile, Uncertain, Complex, Ambiguous) business environment laced with supply chain issues, employee retention, political unrest, and economic inflation to name a few.
The inspiration for the framework of this month’s discussion is an article in the most recent issue of Harvard Business Review titled “Strategy-Making in Turbulent Times – a Dynamic New Model” by Michael Mankins and Mark Gottfredson. Right up front I’ll argue whether their model is new or not, a point the authors even acknowledge as true for parts of their recommendations. However, the five elements of the structure are valid in the context of today’s challenges for business leaders to effectively compete in their markets, the very core of strategy!
- Define extreme but plausible scenarios ~ Scenario planning is one of the ideas that is not new. However, think scenario planning on steroids based on the VUCA conditions. Regardless of the tools used to conduct environmental scans such as a PESTEL (Political, Economic, Socio-Cultural, Technology, Environment, Legal/Regulatory) Analysis, the contextual understanding of the scan must be viewed and analyzed through an extreme, but plausible lens. These are not times to shy away from the true market conditions of the new reality!
- Identify strategic hedges and options ~ Strategies are only as good as the assumptions they are built on. Creating the right strategic options is about identifying the best possible options as well as the right time to exercise those options. This is playing out in real time in the real estate market with interest rates climbing. Many options for growth are now being put on hold for better timing to exercise them. Leaders who effectively exercise this strategic flexibility will have their organizations in the best position to adapt in this new reality!
- Experiment before investing ~ Experimentation is an activity all businesses must get comfortable with. In our experience in variety of leadership roles, it was continuous experimentation that enabled our organizations to continuously evolve and grow. A friend recently shared a speech by Peter Kaufman titled, “The Multidisciplinary Approach to Thinking”. One of the key tenets of the article is the idea he called, Dogged Incremental Progress, an approach used by Berkshire Hathaway. Experimentation helps fight complacency and gives business leaders a flow of new ideas to continuously evolve in this new reality!
- Identify trigger points, signposts, and metrics ~ One of the flaws in looking ahead at future events is thinking along timelines. A great example from our coaching practice is around succession planning. Typically, the discussion begins with a transition that will happen in X years. However, without knowing the future, we quickly turn the conversation to defining the conditions that need to exist for the transition to happen successfully. Without realistic conditions defined quantitatively, business assumptions about the strategy may not be valid!
- Provide prescriptive surveillance ~ One of the biggest challenges, especially for small business leaders and non-profit leaders is keeping a pulse on all the changes happening outside the walls of their business. A key value of association membership must be regular updates on key markets and industry trends. Industry publications also provide valuable insights to support strategic thinking. Regardless of what resources are available, effective leaders constantly leverage their resources to understand the contextual impact the new reality has on their business!
It is important to note that each of the five dimensions are strongly linked to the others. Effective strategic making is creating a strategy using all five dimensions to learn quicker than the competition as the title quote from Arie de Geus suggests. Finally, strategic thinking is a continuous process not defined by the calendar. Rather it is defined by the conditions and cadence that helps business leaders achieve desired results and sustainable success!
How is your business strategy creating a sustainable competitive advantage and how do you know? If you’re not sure, we can help.