Adaptive Strategy Management in the Age of Uncertainty

Introduction

While here zoning in on Strategy Management, we must challenge and change the very essence of how we think about organizations – structure, culture, internal and external working patters and relationships, technological underpinnings, etc. At heart, it is about transforming, and synchronizing, the organizational ecosystem. Hence the need to think holistically across the organization and externally is why the Five Components of the Adaptive Strategy Management in the Age of Uncertainty Framework is supported by Three Underpinning Capabilities.

Not Just about Strategy

A safe place to work is number 1 precondition – the foundation if you like – of building a high performing team. A team that feel safe will be able to perform at their best with innovation and creativity without feeling threatened or fearing being caught out by management. From a neuroscience perspective, job #1 for leaders consists of making sure that people feel safe on a deep level. But how is this achieved? In my experience, there is something about providing a clear direction and a deliver your messages in a consistent and clear manner, setting clear expectations. It is also about encouraging the team to take risks and to provide a safety net for them in case of failure, and to act with empathy and compassion…and a good dose of forgiveness.

The Five Components of the Adaptive Strategy Management in the Age of Uncertainty Framework

1. Strategy Formulation.
2. Adaptive Balanced Scorecard System.
3. Adaptive Enterprise Alignment.
4. Adaptive Strategy Execution.
5. Strategy Reformulation and Update.

The ‘Three Underpinning Organizational Capabilities

1. Strategy-Aligned Structure and Working Relationships
2. Strategy-Aligned & Adaptive Employee and Technological Capabilities
3. Advanced-Data Analytics for Strategic Learning

Adaptive Strategy Management in the Age of Uncertainty:

A Definition

I will explain each Component and Underpinning capability in turn, but first a broad explanation of the term Adaptive Strategy Management In the Age of Uncertainty.

Adaptive

Organizations need the competencies (and willing mindset) to adapt Strategies as they are being implemented. This requires an understanding that adapting Strategies also means adapting organizational structures, processes, culture, etc.

Strategy Management

Organizations must stop viewing Strategy as a linear, sequential process of formulating the Strategy, executing, and doing an annual refresh based on the previous year’s learning.
Strategy must be viewed as holistic and dynamic. Strategies can be formulated and reformulated at any time, and the execution requirements and plans must be an integral part of formulation (not an afterthought).
Strategic Learning must be an ongoing process with quarterly reviews held to analyse the findings and respond appropriately.

Age of Uncertainty

In this globalized, fully connected world, we cannot predict with a high degree of certainty what next year looks like – never mind over the timeframe of a, say, five-year strategy. Economic shocks will be regular and the threat of another Pandemic or other catastrophic event should be ever-present in our thoughts: and we need to build the capabilities to calmly navigate through stormy waters. What we once considered abnormal events will be the new norm.
Detailed long-term Strategic Plans make zero sense these days and will become increasingly obsolete.

The Five Components Described

Strategy Formulation

This might sound like a contradiction, but although I do not see the point of a detailed long-term Strategic Plan, we still need a plan. This provides a broad overview of the where and why we wish to compete, the ultimate destination over, say, a five-year horizon, and the organizational capabilities we need to build or strengthen.
But the plan should be a short document and not the product of a painstaking process to develop a detailed Strategic Plan. The emphasis should switch to shorter-term horizons and with the full knowledge that Strategy is a set of assumptions that must be verified in execution. The assumptions might be correct, partly correct, incorrect, or simply rendered obsolete by external events (a regular experience these days). As General Eisenhower said, “The plan is nothing. Planning is everything.” He also said, “No plan survives first contact with the enemy.”

This Component has five sub-components.

External and Internal Stakeholder Assessment
Select Strategic Choices and set of Assumptions
Complete a Strategic Risk Assessment, and build resilience plans
Create a Strategic Ambition
Build a Strategic Change Agenda

I will elaborate on the sub-components of this Component and the others (as well as the underpinning capabilities) in subsequent articles.

Adaptive Balanced Scorecard System

Despite being 30 years old (in various iterations) Dr. Kaplan and Norton’s Balanced Scorecard System is still the most powerful framework for translating the Corporate Strategy into a concrete set of Strategic Objectives, Key Performance Indicators (KPIs), Performance Targets and Strategic Initiatives (Programs/Projects).

In addition to the conventional Balanced Scorecard approach, I also recommend the identification of Strategic Risks and the building of a Strategic Risk Dashboard.

By Adaptive I mean that, as with the Strategy itself, the objectives, etc., are a set of assumptions, so can be modified at any time.
The four sub-components are:

Map the enterprise strategy and the causal hypothesis
Identify KPIs and Targets
Identify breakthrough strategic initiatives.
Identify strategic risks, KRIs, and mitigations, for each Strategic Objective

Adaptive Enterprise Alignment

For Strategy to be implemented effectively, all devolved units of the organization must be aligned to the Corporate Strategy. This requires organizational functions, teams, etc., to clearly understand how the organization defines Strategy (rarely clear within the Executive Leadership Team) and why it is has chosen this particular Strategy.

For this, cascade the Corporate Balanced Scorecard System to devolved units and align across the enterprise to ensure that each cog is part is spinning on the same wheel.

But keep in mind that the deeper into an organization a Strategy is devolved, the less meaning it has, so build in the sense of purpose of the function etc. and the capabilities it needs to develop.

It is important to understand that people will be looking to develop their own capabilities, so facilitate a process so that employees have a strong say in the objectives, etc., chosen, while ensuring a good Governance system to ensure alignment with the organizational Strategy.

Also important is for cross-enterprise collaboration to deliver mutual Strategic Objectives.

The four sub-components are:

Vertical enterprise alignment
Horizontal enterprise alignment
Devolve ownership and responsibility
Cross-enterprise collaboration

Adaptive Strategy Execution

However well-formulated the Strategic Plan and Balanced Scorecard System, they do not in themselves execute anything. This takes place at this Component.

Here we need to ensure that the annual budgeting process is aligned to the Strategy, and that investments into multi-year Strategic Initiatives are secured (Kaplan and Norton’s concept of StratEx works well here).

Better still is to move to a Rolling Financial Forecasting approach. Updated quarterly, the forecast is for, say, six quarters in advance. Greater precision is expected over the first two cycles. And for those who refuse to let go of the target-setting in the annual budgeting process, there is always a forecast until the end of the financial year.

We must also link operations with the Strategy. Kaplan and Norton posed the question, “What business process improvements are most critical for executing the strategy?”

Note the words “most critical.”

This Component is not about linking all operations with the Strategy, but those operational processes that have a significant impact on the Strategic Processes, as identified in the Internal Process layer of the Strategy Map.

The criticality of improving Strategic Processes is precisely why Kaplan and Norton recommended that about 40% of objectives on the Strategy Map should be within the Internal Process layer. This is where all customer-facing work gets done (work within the Learning & Growth Perspective is to enable the work within Internal Processes) and is the conduit to aligning operations.

Strategy Execution also required excellent Project Management capabilities. Indeed, I recommend merging a Project Management Office with the Strategy Office and calling it a Transformation Office.

We must also ensure that we are effectively implementing the Strategic Risk Dashboard.

The five sub-components are:

Align financial planning systems with the strategy
Identify key operational drivers of strategic goals
Strategy-aligned process improvement
Strategy-aligned project management
Strategy-aligned risk management

Strategy Reformulation and Update

In the Age of Uncertainty, we must develop the mindset that enables organizations to update, or fundamentally overhaul Strategies at the appropriate time (which can be any time).

Indeed, we might consider moving to a Rolling Strategic Planning process, akin to Rolling Financial Forecasts. Update the Strategy on, say, a quarterly basis with the focus over perhaps a six-quarter horizon, with a greater emphasis on the interventions required over the shorter-term (or required timelines), while always keeping the longer-term destination firmly in mind.

The three sub-components are:

Schedule regular Strategy Reviews and amend as required, based on learning
Formulate fundamentally new strategies, when required, not to set 3–5-year cycles
Adopt the concept of Rolling Strategic Planning

The Three Underpinning Organizational Capabilities, Strategy-Aligned Structure and Working Relationships

Strategies will flounder if the Organizational Structure hinders implementation.

Here we need to fundamentally overhaul the conventional, and performance-enervating silo-based working and thinking popularized by Frederick W. Taylor and others.

We must think more about seamless and collaborative end-to-end process management, rather than passing work through functions and the fiefdom protections that often take place.

A Strategy based on customer-intimacy requires a very different structure than one based on operational excellence. A Strategy based on innovation requires a very different structure than one based on steady-state competition.

In a similar vein, how organizations conduct themselves in their dealings with external stakeholders, can be a Strategy showstopper.

Culture (I previously named this capability Strategy-Aligned Structure and Culture) applies to how organizations conduct themselves internally and externally.

Internally, a Strategy-Aligned Culture means alignment with the type of Strategy being implemented – Product Leadership, Customer Intimacy, Cost Leadership, whatever. All values, promotion/reward systems, decision-rights, policies, processes, and procedures must support the Strategic choices.

Externally, it is also about applying the values, decision-rights, procedure etc. Working relationships with external stakeholders are very different for Cost Leadership and Customer Intimacy, for instance. Front-line staff cannot spend an inordinate amount of times in conversations with individual customers (of which there might be millions, and where the margins are razon thin) than for s Strategy based on Customer Intimacy (for example, if the product is an expensively tailored suit, the customer will expect the supplier to know them personally and spend a lot of time understanding their requirements).

Product Leadership and Innovation will require much more collaborative relations with partners and suppliers.

Strategy-Aligned & Adaptive Employee and Technological Capabilities

Employees require the skills to execute Strategy, and those skills will differ according to the Strategic Goals. Organizations should quit their obsession with employee retention and focus on ensuring the right employee capabilities are in place, encouraged and developed.

Leaders are simply employees, so developing leadership capabilities is appropriate here.

In the Age of Uncertainty, there’s a critical leadership balancing act between having a strong Strategic Vision for the organization, while accepting that there might be a need to commit to a new course of action when the situation warrants it.

Furthermore, leaders can excel in one context and fail in another. Winston Churchill was an outstanding war-time Prime Minister, but ineffective in peacetime. Steve Jobs excelled leading an organization focused on disruptive innovation but was once forced out of Apple, at a time the board was looking for steady-state leadership.

Note too that great operational managers do not automatically make for great strategic leaders. Strategic leadership skills should be taught from the moment an employee assumes their first junior management role.

Technology now underpins just about everything an Organization does, so ensure that the technological systems are also appropriate for the Strategy and not an annoying performance-blocker. I am increasing drawn to Enterprise Architecture as an overall underpinning set of technologies.

Advanced Data Analytics for Strategic Learning

Advanced Data Analytics is enabling organizations to convert their performance data into relevant information and knowledge, allowing management teams to hold richer and more informed performance conversations and make more evidence-based decisions.

Organizations can pinpoint the specific components of a KPI that really make a difference to an objective and ensure that actions and initiatives are driving performance improvement against that element. Of course, advanced analytics also enables a better understanding of whether the assumptions that underpin the selected Strategic Objectives are being verified in execution.

For Advanced Data Analytics to be effective, organization must build the mechanisms and capabilities to continually communicate externally with customers and other stakeholders and monitor changes in the competitive, geopolitical landscape, etc. and translate the findings into internal capabilities.

Strategic Learning must be an ongoing process with Quarterly Strategy Reviews held to analyze the findings and respond appropriately.

Parting Words

Note that is the current, and updated version of my framework for Adaptive Strategy Management In the Age of Uncertainty. In keeping with my theories the framework, and supporting methodology, will be Adaptive and will evolve – and certainly will not be prescriptive or positioned as “the answer” to all your Strategy needs. There is no such answer and certainly no one-size-fits-all solution.

Ends

James Creelman Is Strategy Management Practice Lead for the Qatar-headquartered Impact Consulting. He is also Director of the UK-headquartered Cardinal Management Consulting and an Associate Director of the UK-headquartered Strategia Worldwide. His available for consulting, training, or research support in Adaptive Strategy Management in the Age of Uncertainty.

If interested in these concepts and want to discuss ways in which we can help your organization develop and implement Strategy in an Age of Uncertainty, please contact us at: info@impact.com.qa