In my last blog post, I had written that a good strategy starts with a well-defined business model. Continuing the series, this post focuses on what tools and methods are recommended to create an effective strategy. This is not a recipe or a handbook to success by any means, however every strategy needs a good foundation on which thoughts are formulated into action plans.
A lot of us feel that creating a strategy is just too hard and that instead strategic experts, C-suites and senior leaders should be the ones who define strategies which roadmap the future of organisations or countries. Some of us also think that defining a strategy requires data and straining processes like SWOT (Strengths Opportunities Weakness Threats) analysis, competitor analysis, customer analysis, financial planning and models, etc. And then there are some who believe that a strategy is simply a plan to change direction, restructure, create new processes and set out ambiguous goals and targets.
Yes, a strategy is in some parts of all of the above. But one cannot create an effective strategy on the pure basis that they are an experienced CEO, or based only on the SWOT analysis, or make up a company goal on no merit/analysis, etc. It’s a combination of all these elements that have led successful organisations to constantly evolve their previous positions to where they are now.
As an example, American Express faced a situation in which some of its most senior staff were heading into their retirement stage. All their experience and knowledge would have disappeared from within the company and American Experience identified this as a risk. They defined a strategy which coupled analysis, data, responsibility and financial models to launch a transformation program in 2008, in which retiring staff were allowed to scale back their day to day tasks and instead spend more time training and mentoring their successors. Through this process, retiring staff were able to gradually step away from work eventually coming in a few days a week, still getting a portion of their previous salary and benefits, before finally retiring. This also resulted in American Express having retiring staff stay on for a year or so longer than the standard retirement age.
Before thinking about creating a strategy you need to first diagnose the current situation. This is generally done through laborious analysis and data, however it is an important factor to help define the vision of where you aspire to be. Through your aspirations you then need to understand the challenge factors that are currently prohibitive from you getting there. Creating a list of challenge factors allows you to define a strategy to solve one or more factors.
From there we can define a set of actions or strategies to eventually reach our aspirations. It is also very important to not get caught up on being too far ahead into the aspired world, in which we forget the here and now. And for each strategy that you wish to implement, you need to answer 3 questions:
- Is there a real need for it / will it solve my problem?
- Can we win / is it achievable and how long will it take?
- Is it worth doing / ROI?
A strategy decision needs to also consider 3 key factors: Time, Value and Risk. Each have their own levers that you can adjust and consider questions like:
How quickly do we want to implement something
How much value (or new opportunities) is it going to create for our customers or staff
What is the risk involved – financial, resources, loss, returns, market position etc.
Noting that each lever can have a direct impact to the other levers. E.g. getting something done immediately can increase risk but may not have an impact on value creation. This is why leaders find it challenging to define strategies that create greater value – simply because the risk can be too high or timing uncertain.
Using the above case study, American Express had identified the current situation in which they saw experienced staff retiring and business units not performing as they once did. It therefore cemented their need for a solution. They knew what the risks would have been with the extra costs and overheads to continue employing the retiring staff for a longer period and also investing the time to train successors. They were also able to manage the time factor by knowing when would have been the right time to start the program between a retiring staff member and a successor.
Measuring the success of a strategy is imperative. If American Express simply said “We will get our retiring staff to train our new staff” it would not have worked. Their measurement of the strategy success, once the new successor was fully trained and mentored, may have included measureable attributes such as:
Do we have business continuity with the new successor in place?
Is our client satisfaction level the same if not better?
Is there stable or an increase in revenue for that department?
This is where data and judgement come into play. You can start to add measurements to your strategy based on the data you have in front of you - which is also invaluable to defining your goals. Good leaders use judgement and historic data to review past performance and put in place achievable (though sometimes aggressive) goals for the future. To quote from Winston Churchill: “The farther back you can look, the farther forward you are likely to see.” Using this thinking, the more data we have in front of us, and the more experience we have had in forecasting or making judgements on decisions, gives us the ability to set challenging but achievable goals for our strategies.
Make no mistake, a strategy does not always need to consider what your organisation currently does to then improve or change. Sometimes, the best strategy is to look at what you are not doing. When Apple released its first iPhone, Microsoft’s then CEO Steve Ballmer said there was no chance the iPhone would get any significant market share given the price point ($500 a device on a plan) and that it would not appeal to business customers because it did not have a keyboard for emails (see video
). Microsoft’s strategy was to stay focused on their own Windows Mobile software and their Zune product (remember that!) which they believed would keep iPhone and iPod out of their market share. Seven years later, he regretted that decision
and wished that Microsoft was in the mobile hardware business sooner and that had they reiterated their strategy it could have had a different outcome.
Creating a strategy takes time and by no means is it easy. Sometimes some of us wish we had a crystal ball to see the future to make the process easier. But in a recent training session, I was asked “If you had that crystal ball with all the data that you could wish for, what would you do differently now?” Think about the answer to this question for a minute and you should be able to identify some opportunities that create new challenge statements to focus your strategy on.