One question I’ve often been asked, by both consulting clients and business school classes, is, “When should you review and possibly change your strategy?”
But there’s a second question that seldom arises, and even when it does, gets little thought. One that’s every bit as important as the first, and maybe even more so in these testing times.
“When should you rethink your strategy approach?”
By this I mean your basic beliefs about the purpose and process of strategy. Why you need it, who’s responsibility it should be, who should be involved in it, and how to get the most from it.
The answer to both questions, as with most others in management, is “It depends.” But let’s consider why every manager needs to give urgent attention to both.
There is never a “right” time to take a fresh look at your strategy. 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. So to stay relevant, you have to treat strategy as a dynamic process, and keep updating it.
Let’s say you develop a five-year plan. That you lay out in great detail what you expect to happen in your world from year to year, how you’ll respond, and what results you’ll get. You bind that story into a thick document, announce it to your people, and start moving.
In no time at all, though, the assumptions you made about the future turn out to be wrong. Your PESTEL and SWOT analyses, your carefully concocted scenarios, and the expert forecasts you relied on all have an alarmingly short shelf life. Nothing seems to go as you’d anticipated. The world you planned for is not the world you find yourself in. There’s a blizzard of surprises as you move forward, and some really nasty shocks. New challenges engulf you. A growing list of problems keeps you distracted, off balance.
Take what’s happening around us right now:
- Toxic new political currents are sweeping the world, destroying trust and fracturing old alliances and the rules-based order.
- There are warning signs about the state of the global economy, and trade wars have brought a dangerous new dimension to international competition.
- Climate change is an existential threat that’s forcing countries, companies, and individuals to radically alter their behaviour.
- Conflict, drought, poverty, and a lack of opportunity are causing waves of migration and massive demographic dislocations and social shifts.
- Regulators keep you on your toes with sweeping new laws and amendments to old ones.
- New technologies emerge and virtually overnight change the way we live and work.
- Cyber-crime and -warfare are growing threats.
- Yesterday’s jobs are being culled, and new skills are required in most industries.
- The people you employ demand new work conditions, and bring a constant flow of hassles.
- Supply chains are increasingly complex and vulnerable to disruption.
- Competitors fight tooth and nail for every sale, every cent of profit.
- Customers change their spending habits, shop around, demand new value, and force prices and margins down.
- And now, of course, there’s the wildly spreading—and extremely disruptive coronavirus….
The result is, that like most executives, you spend more time fighting fires than thinking about the future. You set ambitious goals, but miss them by a country mile. You agonise over resource investments, but they become millstones around your neck. You dream of great things, but quickly find yourself in a place you never imagined and don’t want to be. And as you weigh up what’s happening, you realise you’re doing a lot of things that no longer make sense.
There’s clearly no point in persisting with a strategy that’s out of kilter with the world. So you need to rethink what you’re up to. 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. You need to do it fast to get back on track, but you also need to keep doing it, so you can survive and thrive in the testing times ahead.
And this brings us to that second question: When to change your strategy approach?
NEW REALITIES DEMAND NEW THINKING
If 2019 was a year of astonishing tumult and upheaval, 2020 is bringing even more of it. “The new normal” is highly abnormal and in constant flux.
Today, virtually every market—for any product or service—is an emerging market demanding new attitudes, new energy, new insights and ideas, and new ways of working.
To compete and win in this new era, companies need to take a fresh look at the role of business altogether, and of their own purpose in particular. So they must be clear about which stakeholders they serve, what value they deliver, and how they will do it. And they must engage more actively, creatively, ethically, and sincerely in environmental, social, and governance (ESG) matters.
At the same time, they must:
- Commit to diversity, inclusion, and equality; attract and develop people with new skills, while also valuing older people whose wisdom (knowledge, experience, judgment) is a key asset; and enable all employees to find meaning in their work.
- See what’s coming ahead of rivals, and out-learn, out-innovate, out-run, and out-run them.
- Understand the rules of whatever game they play, and excel in the basics, while simultaneously making innovation a way of life and striving to change both the game and the rules.
- Balance short-term action with long-term capability building.
- Contain—and drive down—costs.
This is by no means a complete list. But it does highlight the magnitude of the task ahead. And why radical shifts in your strategy beliefs and behaviours are not an optional extra that can safely be left for another time.
Strategy provides a here-and-now view of where and how you’ll compete. And given how quickly things have changed in just the past few months, it’s a no-brainer that you should reassess your strategy and probably re-set it in a hurry. But it’s not enough just to look anew at the assumptions you made and the decisions and choices, goals and actions that followed. The content of your strategy is obviously important. But perhaps even more necessary right now is the way you got to it and the way you’ll take your business forward.
In other words, what you believe about strategy and how you “do it.”
This is no time for business as usual. So it’s certainly no time to risk strategy as usual. It’s time for a double reset!
Let’s talk about it.
(I wrote the original version of this article in 2013. Much has changed since then, and the need to reset both your strategy and the way you use strategy is now more urgent than ever.)