Developing strategies that are fit for purpose
Virtually everything we get taught about strategy today evolved out of the work of legendary management thinker Peter Drucker, whose most influential theories emerged in the fifties and sixties and have dominated strategic thinking ever since.
Drucker practiced in multi-billion-dollar businesses that could afford the time and resource to build big, analytical plans, to attack the competition in one highly stable, highly predictable market after another.
That was then; this is now. There are few, if any businesses these days, who fit that description. Most of us are not giant multinationals competing in stable, predictable markets. We are far, far more likely to be comparatively small, agile, perhaps mission-led organisations, operating in a shifting landscape of competition and collaboration, at a time of rapid change, constant innovation and extreme uncertainty.
We are about as far away from Drucker's milieu as we could be, and yet year after year, businesses continue to try and wrestle strategies from those big, complex, analytical processes, that shed virtually no light on the one or two meaningful conversations they actually need to have.
Now, more than ever, we need sophisticated, flexible, fit-for-purpose strategies, and there are far, far better ways to develop them.
The first step in that journey is to ditch that old chestnut: the five-year strategic plan.
If you’ve ever reviewed one, you’ll know in its final three years it will have influenced precisely zero major decisions. The realistic planning horizon for most organisations is two years at the very most. Any plans beyond that point will never see the light of day.
Yet fixing the aims and direction of the organisation to a longer-term “North Star” is more important now than ever – it’s the only thing that will stop you being dragged off course by the winds of change buffeting us all.
And so, a strategy needs two distinct timeframes: a long-term view defining direction and aims, and a short-term one defining the space for plans and initiatives. The consequence being that your strategy will need to be revisited and refreshed before the end of the planning horizon.
And yes. That really does mean that your five-year strategy will expire after about eighteen months, and that's as it should be.
The reason strategies become irrelevant is because stuff changes. After the first year or so, we end up replanning it at budget time anyway because we know a hell of a lot more now than we did back then. So why don’t we use that knowledge to refresh the strategy rather than embarking on three years of strategic drift and seat-of-the-pants decision-making?
For one reason: because we spent months creating it and can’t face explaining to the Board we need to do it all over again. But here’s the thing, Boards only expect a five-year cycle because that’s what we’ve always given them. This is a corner we are choosing to paint ourselves into again and again.
To break out, we just need to shorten the cycle, and we can, because we all know there’s no actual value in most of the stuff we do around strategy time – the SWOT analysis, the extensive data gathering, the endless rounds of engagement and research.
None of them ever made a meaningful difference to a strategy. If you’re gathering insights, watching the competition, listening to your customers, suppliers and people throughout the year, like you should, you will already know what the data will say.
Cut all that out, trust your judgement, and start instead with the big questions your strategy needs to answer.
What are the critical challenges it needs to solve? What is the potential you hope it can unlock? What is the change you want to bring about, in your industry and in the wider world?
Start with those questions, decide how you could set about answering them, then spend your time creating and exploring options, and on gathering only the information that will help you decide between them. That’s 90% of your strategy done.
I’ve developed more strategies than anyone I know, and there are very few businesses for whom a strategy can’t be developed in three or four half-day sessions, spread over a few weeks, if you simply cut to the chase.
It won’t be perfect, no strategy ever is, but in 18 months’ time you’ll know if you’re heading in the right direction, and you can course-correct then. Ditching the five-year plan and switching to an agile model might sound radical, but there’s nothing I’ve just told you that you didn’t already know. This is simply common sense.
Over the last sixty years, the concept of strategy has gone from a revolutionary idea to an industry of its own, to a vastly over-engineered artefact of a bygone age. It’s long past time we remade the concept of strategy to actually suit our purpose.