Prof. Jan Bosch, 03 February 2020
During the last weeks, I’ve experienced multiple situations where an organization (industrial or academic) simply doesn’t have a business strategy or a strategy concerning a key area for their business. When probed and questioned on the strategy, I’ve observed at least three types of responses.
First, leaders in the company say that there **is** a strategy and that I’m wrong in claiming otherwise. Although I’ve been wrong many times in my life, to me a strategy should provide clear guidance on what tasks and opportunities should be prioritized over others and, above all, what we shouldn’t spend time, energy and resources on. A strategy that fails to specify what we shouldn’t do, to paraphrase Michael Porter, is no strategy.
Second, the company admits that the strategy is high-level and not operational but defends itself by claiming that its key success in the market is to be customer focused and, consequently, it needs to respond to the requests from customers rather than set its own course. Obviously, this is a fallacy as it causes companies to fall into the “make customers happy” trap. It’s impossible to satisfy everyone. Rather, you need to choose what kind of customers you want and then focus on making them happy. This, of course, is a strategic choice.
Third, especially in new areas where the company has no established business, leaders claim that it’s impossible to formulate a strategy as nobody knows how the market will unfold. This, however, causes them to become the plaything of more proactive, strategic competitors who will dictate how the market will establish itself. It’s important to avoid an Alice in Wonderland situation where by not knowing what you want, any direction is equally good.
Although these responses are understandable and human, they lead to a number of serious problems for the company. There are at least three that I’ve witnessed over the years.
First, the company acts tactically and opportunistically. Due to the lack of a clear strategy, individuals at all levels in the organization take tactical decisions that provide them with the most benefit in the short term without considering the long-term consequences. This results in an accumulation of architectural, technical and process debt in the organization, as well as in the relationships with customers and other ecosystem participants, which over time causes enormous disadvantages due to reduced business agility, unreasonable expectations by others, as well as numerous other consequences.
Second, there’s a significant risk that different teams in the company pursue opposing local strategies and consequently nullify each other’s efforts, causing the company to expend, sometimes significant, resources without any business benefit. Burning resources without generating business benefits obviously is the fastest road to bankruptcy.
'The “strategy in use” will become whatever everyone feels like'
Third, even if none of the above effects occur at your organization, all employees will, at any point in time, still have way more work than they could possibly hope to accomplish during work hours. In the absence of a clear strategy, individuals randomly prioritize tasks based on personal preferences, expediency and other factors. So, the “strategy in use” will become whatever everyone feels like. In practice, this tends to lead to people doing what they did yesterday, meaning the company gets stuck in the past and fails to evolve and respond to changes in the market.
Concluding, developing and communicating a clear and actionable strategy that represents tangible choices is a critical tool in aligning large groups of people. The alternative is to micromanage everyone, which will cause you to lose your best people as nobody likes being told how to do their job. A successful strategy defines a clear what and why and leaves it to individuals and teams to figure out how.