Misunderstandings about the nature and purpose of a strategy abound. Some business people confuse the analysis of competitive forces with the strategy itself. Others equate strategy with their annual budgeting plan. For many strategy remains a vague concept that does not apply to them. Often it is enshrined in a document that the C-suite has blessed but few have seen, and even fewer can relate to.
At its purest, a strategy is what you want to accomplish as an organization and the steps you need to take to accomplish it. Strategy, therefore, is important to all organizations because it gives them a context for everyday decisions to move the organization in the desired direction. In the words of Michael Porter, the Harvard University strategy professor: '…strategy is completely useless unless the result of the strategy process […] is understood broadly. The #1 purpose of strategy is alignment. It is really getting all the people in the organization making good choices, reinforcing each other's choices because everyone is pursuing the common value proposition, the common way…'
To be an effective tool, a strategy must address how its concepts will be brought forward to be understood and embodied by the individuals in the organization. The question for leaders is how to move from concepts to action by creating the needed alignment in the organization so that its members can follow the blueprint encoded in the strategy. If the conception of a strategy is one side of the coin, its implementation is the other side. One side is the rational process of creating the right strategy, the other side is about creating the right culture in which to achieve it. Not surprisingly this second element is the variable that is commonly dropped from the equation.
Requirements for a Successful Strategy
Strategy must fulfill the organization's major objective of remaining relevant and valuable to its stakeholders over the long run. What it comes down to is whether the combined efforts of leadership and staff can create sustainable economic value, that is to say, generate outputs that are greater than its inputs.
So how does a strategy help an organization create and sustain economic value? First it clarifies for everyone how the organization is going to deploy its resources to fulfill its mission, i.e., the strategy conception. Second, it describes how the strategy is to be implemented; it also must tackle two of the most challenging questions an organization can ask:
- How effectively does it currently operate?
- How well does it adapt to changing conditions?
At the end of the day, organizations are economically sustainable when they can integrate and manage the complexity of their own system while managing change in their environment in a timely manner. A fast changing world requires organizations to operate holistically both internally and externally. Strategy needs to have a feedback loop between concept and implementation in order to quickly respond to change instead of the traditional top-down model. In order for the feedback loop to work, there must be an open and proactive culture. Leaders are called to consider strategy and culture as one continuum.
The Strategic Drift
Without a deliberate strategy organizations drift away from economic sustainability. Often it is easy to miss the signs, and even easier to avoid looking at them — until it is too late. In family businesses, the drift shows up in the deteriorating financial performance that often ensues as the business moves from first to second, then third generation. In the world of agencies and NGOs that are not performing up to par, the shock takes the form of sudden funding cut backs imposed by dissatisfied funding institutions. In the world of business, we are all familiar with corporations that spiral down for decades, periodically down-sizing as they try to rebrand or reposition themselves while displaying little conviction about their own story.
The Search for Performance
The dilemma for most organizations, whether business, NGO, or government agency, is that although many actually work very hard, their performance does not improve in proportion with their efforts. They are unable to reach a level where they deliver increasing value with greater ease and have sufficient excess resources to adapt and innovate. Many function in a permanent state of overwhelm.
For many organizations strategic objectives remain mostly unmet. “New” initiatives are introduced at regular intervals, only to promptly fade away before they can generate the expected results. Unfortunately these aborted initiatives reinforce a culture of numbness where the dominant attitude is to wait for management’s latest fad to pass. The inability to get to a place of sustainable performance where success breeds success is what I call the Performance Threshold. The Performance Threshold is as tangible as it is elusive to the frustrated leaders that try to break through it — tangible in its direct impact on financial results and elusive as it arises from hundreds, no, thousands, of individual behaviors that are near impossible to identify.
Poor Strategy or Poor Implementation?
Although failure to break through can sometimes be traced to an inadequate strategy, it is more often due to implementation issues. A deeper analysis almost always reveals that the performance breakdown had its roots in a lack of engagement of individuals and poor group dynamics.
Why is a lack of engagement the underlying cause of strategic failure? The answer is simple. Although managing complexity and adapting to change drive long-term success, they are not the levers for action. During the long strategic cycle, from conception to implementation, it is in the human interactions where most breakdowns appear when a complex system is in flux.
As simplistic as it may seem at first, the only mechanism that can repair these tears in the organizational fabric is open and effective conversations. In fact, meaningful dialogue is the only way to ensure that everyone involved understands and agrees with the desired outcomes. Conversations create alignment and engagement.
In situations of rapid change, it is critical that people understand their roles, feel safe enough to contribute to the whole picture, and take on assignments from a place of knowing and sincere commitment. It is in the quality of the daily interaction of people, in how they show up and how they behave with each other that change and complexity are mastered and performance improved.
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