Adapting a business for uncertain times.

Why we need to develop adaptive strategies

Most businesses have a strategic plan, whether on paper or in someone’s head. I don’t just mean annual growth targets; I mean an idea of what our organisation will look like, what it will be delivering and achieving in, say, three, five, seven years’ time, and a bunch of stuff we think needs to happen in order to get us there.

But there is a fundamental flaw with the notion of strategic plans; one that some of us have been talking about for years but has become strikingly apparent for just about everyone in recent weeks.

Strategic plans are built on assumptions, and assumptions can be wrong.

Assumptions like: if we invest in this capability it will help improve our customer offer; if we can properly market that offer it will generate more interest in more customers; and if we can convert that interest into new business, it will be profitable and very quickly pay back the investment with interest. Hypothetically, they all sound fine. But reality might have a word or two to say about them.

Strategic plans are built on big, long chains of these hypotheses, many of which we don’t even realise we’re making. And the road to business failure is paved with these flawed assumptions.

A different approach, one that many tech business and start-ups have been using for over a decade to reduce that potential for failure, is to break the longer-term vision into individual building blocks, and to develop, test, change and test again, to prove or disprove the assumptions between them. It’s where the phrase “minimum viable product” originated, as a way to test the market for a concept long before it’s finished, to avoid the invariably overconfident assumption that “if we build it, they will come”. This is the Lean Startup model, and it’s the first step towards an adaptive strategy.

Adaptive strategy is not about building a three-year step-by-step plan with pre-defined budgets. It’s about shaping a long-term vision, pulling out the assumptions and beliefs, and creating a bunch of potential building blocks that can be rapidly refined, pretty much independently, and often in any order, with learning from real-world experience.

More importantly, it’s a strategy that constantly evolves and adjusts to the context in which the business finds itself, because it’s fundamentally driven by that feedback loop of “test and learn, test and learn”. The ability to rapidly adapt to the unexpected, to external change, is embedded within its DNA, and right now, that’s incredibly useful.

The biggest problem with traditional strategic planning is its biggest assumption: that the context doesn’t change, that the organisation will learn nothing new over the intervening period. The idea that “we will change it if have to” belies the default expectation that we won’t have to. That we have perfect foresight.

We assume the 2020 part of the plan we wrote back in 2017, will be just as good as it would have been had we created it now, in 2020. As an assumption, it’s so patently flawed that one has to wonder why we ever decided it was a sensible thing to believe.

Right now, we can’t predict with any certainty what things will be like in 2021 or 2022, any more than we can predict whether restrictions will be reintroduced this coming Winter. In fact, it’s not even clear what the economy, business, even life in general, will look like this time next month. Obviously, this is an extreme situation, a dramatic acceleration in the pace of change and the scale of unpredictability. But unpredictability and change have always been with us, they’ve been increasing and accelerating for decades, and will still be there once this has passed.

The best thing about adaptive strategies, is how fast they can be developed. Because you’re not trying to build three-years’ worth of plans and budgets, for most businesses they can be developed in two or three half-day sessions over a couple of weeks. But once you have one, it allows you to start learning, adapting and moving the ball forwards far faster than you otherwise could, and far faster than anyone who has opted to plough on with old plans, or to shelve them entirely and to “wait-and-see-what-happens”.

In every period of uncertainty and change, it’s those who adapt fastest that come out strongest. The question is, does your strategy help or hinder your ability to rapidly adapt to unexpected change?

If you want to find out or talk more about any of the above, just drop me a note.