Business Strategy Formulation - Strategy Stretching
Business Strategy Formulation - Strategy Stretching
How are Top Companies Adjusting Their Business Strategies?
How are top companies adapting their strategic planning processes to address today’s competitive reality? This was the questions that lead to this report by Boston Consulting Group (BCS). The study involved in-depth interviews with executives from leading companies, secondary research, and tapping into the experience of many of BCS’s partners.
Business leaders are struggling between whether or not they should put the primary focus on strategic speed or foresight. Speed offers compelling advantages in today’s changing world. However, BCS suggests that a focus solely on speed implies more reacting and less innovation. Foresight enables you to become more innovative and to differentiate yourself. While developing foresight is more challenging today, the rewards are potentially much greater.
The important question today is, “How do you adjust your strategic planning process to develop more foresight and to improve your speed?” The keys include stretching:
- your time horizons,
- your thinking,
- and, your engagement model.
Stretch Time Horizons
A focus on the both the long and short-term is needed. BCS recommends that organizations focus on three time horizons: long-term (5+ years); medium-term (3-5 years); and short-term (1-3 years). Companies focused just on the short term risk myopia. Companies that are continuously too farsighted often struggle reaching the destination.
“When an organization looks at the long-term, they analyze megatrends, consider various scenarios, and develop a strategic vision. BCS states that “visioning demands imagination but is based on reality.” Some organizations put in place a “sensing process to detect weak signals and new trends that could challenge the company’s assumptions.”
“The objective of business planning, a medium term focus, is to determine how to reach the vision. The organization looks 3-5 years into the future, they identify the best competitive opportunities, and they identify the top initiatives (e.g., product plans) they believe will best help them to achieve their vision.
“This is an annually 1-3 year planning exercise that involves prioritization and alignment of initiatives and plans.” An annual plan should translate the strategic vision into concrete initiatives and measurements
Typically when a firm develops its strategy, it conducts an external and internal analysis. Simply, an external analysis includes look at markets, competitors, channels and economics. The internal assessment looks at the resources of the firm. Looking at these factors is obviously needed, however, strategic creativity is vital. To this end, BCS offers three approaches: Business Strategy Formulation - Strategy Stretching
1. Ask Questions
- “Asking the right type of questions is important to generate productive dialogue. As a leader, avoid becoming an advocate early on for a certain line of thinking. Develop questions that focus in the essential strategic issues. Ask questions that move people out of the current business model. Ask questions to help you to understand cause and effect. Pretend you are the competition. How could you put your firm out of business?
2. Get Multiple Perspectives
Companies easily fall into the trap of believing that what has made them successful will continue to do so. Too often, empires get blind-sided. BCS offers six approaches to generate various perspectives:
- Look at other industries
- While industries are different in many ways there may be much to learn. Evolving products, business models, channels, etc., may offer insights
- Use metaphor
- Focus on your issues through the eyes of different disciplines.
- Deconstruct the business
- Look at your business as a value chain. Determine what activities are core to producing a competitive advantage, what can be outsourced, etc.
- Consider the impact of mega trends
- Determine how social, economic, political, technologic, legal and environment trends will impact your business
- Look at various viewpoints (e.g., stakeholder, competitors, supplier, consumer, investor)
- Build on undervalued assets
- Identify your assets as being core, non-core, tangible and intangible. “Ask whether they are fully leveraged and whether additional businesses could be built around them.”
3. Building Scenarios
- Envision possible futures and determine how to succeed in each. The scenarios should be “plausible and mutually exclusive to be useful.” Business Strategy Formulation – Does Your Strategy Need Stretching
Stretch the Engagement Model Business Strategy Formulation - Strategy Stretching
“Those who believe that strategy is the exclusive preserve of a corporate brain trust are increasingly in the minority.”
Too often strategy development is too data collection focused and not enough thinking and dialogue. Generally in organizations there is a distinction between the “thinkers” and the “doers.” This distinction proves to unproductive for everyone.
The “most effective strategies are the result of co-creation at multiple levels.” Everyone’s best thinking is needed. Helping everyone to develop strong strategic thinking skills is vital.
Successful companies are moving away from strategy simply constituting monologue Powerpoint presentations provided once a year in an “all-hands” meetings. The Powerpoint presentations focus more on sharing facts and metrics and occur before the dialogue begins.
Top firms are moving to more frequent, forum based, collegial dialogues focused on strategy. The dialogues are not held to simply “foster buy-in.” They are held to come up with the best strategies that can succeed, and so that the execution time is reduced. Firms are fostering smart dialogue by “going deeper are few topics.” The key is to ask key strategic questions that focus on those key drivers that help the organization to develop a competitive advantage.
Companies are also moving towards “most frequent discussions of strategy focused on nurturing strategists, pinpointing unexpected changes, and working through critical strategic uncertainties.” Some companies hold regular strategy discussions throughout the year.
To help develop strategic thinking skills and to enhance the quality of dialogue, firms are creating more mentoring opportunities, tapping into a broader experience base,” providing access to timely market data, and giving people at all levels the opportunity to develop strategy.
Links to highlights from other Boston Consulting Group articles: