One of the most misused words in business is: strategy. In more than 90 per cent of cases when you read, or hear the word, it is referring to an operational plan. Most strategy refers to the four letter word: plan.
Nothing wrong with a plan, given the present moment, disappears in a micro second. In our grey matter, we are constantly planning, anticipating what might happen. But simply planning, is not necessarily strategic.
What is strategy?
One of the best examples of a strategy is how a 23-year old Alexander the Great, with 50,000 men beat the armies of Darius estimated at one million in 331 BC [in what is now modern day Iraq]. If Alexander simply had a plan, it would have amounted to a disaster, but he had an insight about the nature of Darius’s forces.
“Strategy” is a much abused word. Few companies and organisations truly have a strategic plan, what they have is more a wishful “to-do list” like operational plan.
“Core work of strategy is always the same: discovering the critical factors in a situation, designing a way of co-ordinating and focusing actions to deal with those factors,” notes Richard Rumelt, who McKinsey has referred to as the ‘guru of strategy’.
Good strategy has what Rumelt calls the ‘kernel’ which has three elements:
Diagnosis: including a crunching of numbers and facts, assessment and analysis of internal and external environments, and looking at the competition.
A guiding policy: which is the signposts setting the direction based on the results of the interpretation and analysis of the diagnosis phase.
Coherent action: the “nitty gritty” details of what is to be done by who, and when — which is the preparations for execution of the strategy —turning the strategy into action steps. What is left out of most imagined ‘strategy’ is the diagnosis.
“For the strategic mind to work creatively, it needs the stimulus of good insightful analysis. In order to conduct a good analysis, it takes a strategic and inquisitive mind to come up with the right questions and phrase them as solution oriented issues,” wrote Kenichi Ohmae, in his book, The Mind of the Strategist.
“Analysis done for the sake of vindicating one’s own preconceived notions does not lead to creative solutions. Intuition or gut feel does not alone ensure secure business plans. It takes a good balance between the two to come up with a successful strategy,” continues the book. Much of good strategy is based on an insight, often something very simple, that the competition did not see, or chose to ignore.
The once dominant big banks like, for instance, Barclays [who have since exited Africa] chose to ignore the ‘unbanked’ because they did not see how this segment could be profitable.
Equity Bank did not, where today roughly half of all Kenyan bank accounts are domiciled, and of course, the money transfer innovation: M-Pesa.
Why this confusion? Why do most companies call their operational plan, a strategy?
Part of the reason may be that it is easy to fall into the default position, it’s not hard doing a superficial scan of the market, throw in some collegial [gender sensitive] back patting, then create a long winded document filled with exotic adjectives, that is applauded, but is soon relegated to a dusty shelf.
Inevitably, something unexpected happens that jolts the company, forcing it to question its fundamental assumptions. When the CEO asks “What happened, this was not in the plan?” all the managers say is: “Oops, we missed this”.
It is not uncommon that a world-class strategy can be simple and elegant. But getting to that point requires insight, seeing what others don’t see. Doing all sorts of analysis, using frameworks, what do the mounds and mounds of data tell us? What is it that our customers really want?
Planning versus strategy
Quite simply, creating leverage point insightful strategy requires work, a lot of it. It’s the difference between aiming to run a four-minute mile and covering the distance in leisurely walk of 20 minutes. Quite simply: planning is easy, strategy is difficult.
We all want to be comfortable, not to be challenged, not to be forced to think that we might be wrong. Much of what has been labelled ‘strategic planning’ involves a lot of groupthink, a lot of copying, more ‘cut and paste’ and hope for the best, rather than a solid diagnosis of the business problems at hand.
This is where applying the scientific method comes in, setting out what one thinks is happening, creating a hypothesis, and then testing, running experiments to either prove or disprove it.
Anyone who thinks they can plan accurately over the next five years, might be wise to think again. The black swan like shock of the corona pandemic has shown how an [almost unimagined] invisible microbe can disrupt.
To put the strategic secret sauce in planning requires a more adaptive experimental approach. For instance: Why is just one strategy, perhaps a portfolio of strategies, required? Part of the problem is that— we have to admit — real world problems are more complex than we imagine. There is human and local dimension, plus things are constantly changing. To paraphrase what Heraclitus, a Greek philosopher said 2,500 years ago, the only constant in life is change itself.
Light at the end of the tunnel comes in the form of the ‘Palchinsky principles’: One, seek out new ideas and approaches, try new things. Two, when trying out, do it on a scale that is survivable. In other words, if it fails, the organisation can live with the impact. Three, build in feedback, and learn from the mistakes, and continually polish and adapt the approach.
The business landscape is constantly changing, shifting, so a mix of small step initiatives is not a bad approach.
It is great to create breakthroughs, but in coming up with that game-changing strategy, small daily steps add up, constantly learning from what works, and what does not. Founder of the Grameen Bank and Nobel Prize laureate put it this way: “An empiricist, I was willing to learn by my mistakes, and those of others.”
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