One question I’m constantly asked, by both consulting clients and business school classes, is, “When should you review and possibly change your strategy?”
A second question—one that’s almost never asked—is just as important: When should you rethink the way you make strategy?
The answer to both questions, as with most others in management, is “It depends.”
There is never a “right” time to take a fresh look at your strategy. After all, strategy is a dynamic activity. You may create it at a specific moment, but you execute it over weeks, months or years—and meanwhile, things change constantly both inside and outside your organization.
Let’s say you develop a five-year plan. Let’s say, too, that you’ve laid out in great detail what you expect to happen in your world from year to year, what you must do, and what results you will get. You bind that story into a thick document, and start moving.
In no time at all, though, the assumptions you made about the future turn out to be wrong. You try to execute your plan as well as possible, but the world you designed it for is not the world you find yourself in. There are many surprises. Things don’t go as smoothly as you’d like. Problems distract you. New challenges engulf you.
Politicians fighting for voters seem intent on making life tough for business. The economy grows and slows. Regulators keep you on your toes with a string of new laws and adjustments to old ones. Machines fail. People present you with a constant flow of problems. Suppliers let you down. Competitors surprise you. Customers change their spending habits. And so on.
The result is, you spend more time fighting fires than thinking about the future. You miss some of your targets. And you realize that that you’re doing a lot of things that no longer make sense.
There’s no point in persisting with a strategy that’s out of kilter with the world. So you need to rethink what you’re doing. But it’s not enough to do it at long intervals, or as a one-off response to factors that have popped up on your radar screen.
NEW REALITIES DEMAND A NEW STRATEGIC CONVERSATION
If 2011 was a year of astonishing tumult and upheaval, 2012 is bringing even more of it. “The new normal” is defined by austerity, volatility, and surprise, and much of the world will struggle for years through “The Great Contraction.” At the same time, we face rapid and radical shifts in politics, society, the environment, regulation, and technology—and in customer and competitor behavior.
Today, virtually every market—for any product or service—is an emerging market demanding fresh insights and ideas.
To survive and thrive in this new era, companies need to take a new look at the purpose and role of business, what “value creation” means—and which stakeholders really matter. They need to out-learn and out-run the competition. They need to understand the “rules of their game” and excel at them, while simultaneously making innovation a way of life. And they need to balance long-term capability building with short term action.
Strategic thinking is a living process. Strategy is a here-and-now view of where and how you’ll compete, which will almost inevitably have to change faster than you might imagine. So you need to review it constantly, to be sure you’re dealing in the best possible way with emerging conditions.
But it’s not enough just to re-look at the assumptions you made and the decisions and choices that followed. The content of your strategy is obviously important. But equally important—and largely overlooked—is the way you got to it. In other words, the way you think about strategy.
Right now, job #1 for most executives is not only to reset their strategies, but also to rethink what strategy should do for them and how they use it. That’s job #1 for me too!