It seems every CEO I speak with knows that company strategy is important and it is their job to ensure a successful one is in place. But developing the optimal strategy appears to be elusive for many. Sometimes this lack of success occurs because companies have not established a strategy formation process. If this sounds like your company, follow these 7 steps as a springboard to a more effective business strategy.
- Make sure you have defined your strategic issue.
Although this may seem obvious, often executives become so worried over a negative environmental or competitive change that they forget to rationally lay out the problem. They shoot first and ask questions later. But if you don’t understand the problem, you can’t develop the solution. Let cooler heads prevail by identifying how the change impacts the company. Then develop a written description so that the entire management team has the same understanding of the issue.
- Search for several approaches to resolve your strategy issue
In the fast-pace world of business, we executives are always looking for the quick solution – the easiest answer. Who has time to do otherwise? So, when we need a new corporate strategy, we often grab hold of the first approach that comes to mind. That is a mistake. The reason is that the quickly-identified strategy is usually one that has been used before. But implementing a past strategy is unlikely to work, because undoubtedly the milieu is different now. Strategies that are more relevant to the current environment usually take longer to surface. Don’t just settle for one potential solution to your strategic issue. Spend time developing more than one strategy. Multiple alternatives stimulate greater dialogue during your strategy meetings and these discussions can lead to better decisions.
- Identify the factors you think will be important to evaluate your strategy
Although every businessperson knows that managers need to incorporate and analyze the relevant facts to make informed decisions, most try to limit the amount analyzed. Arbitrarily limiting the decision factors under consideration opens executives to the “blind-quadrant” conundrum. It creates a situation where we don’t know what we don’t know. And if what we don’t know is really important, it can harm the company. Therefore, it makes sense to incorporate as many factors into the decision process as warranted. Shoot for more than 10 factors.
- Utilize a pre-defined strategy analysis approach
When my Fortune 500 company approached an important strategic decision, we did not have a process for analyzing our strategic alternatives. As a result, the executive team spouted off opinions, which were treated as importantly as facts. In the absence of facts, dialogue deteriorated, suspicions turned into mistrust; the entire team became polarized. This drove us to make a poor strategic decision. Executives that fail to establish the rules of engagement open themselves to an inefficient and ineffective strategy forming exercise. If a company has a pre-defined approach for analyzing the strategic issue, the leadership team is better able to evaluate the issue confronting it; decisions will have improved outcomes.
- Develop simple metrics to evaluate your strategic solutions
Executives often mistakenly believe that because strategy decisions are so important to the company the analysis needs to be extremely detailed. But unlike an expense budget, strategy is directional; not absolute. For example, if a strategic option is expected to deliver $100M in revenue, do we care if it delivers $106 MM or $92MM? Therefore, it is not important that the metric used to evaluate strategic options require accuracy to the sixth significant digit. A simple, even a non-numeric, metric is sufficient.
- Force the decision-makers to perform their own independent analysis
Usually, strategies are formed by multidisciplinary teams because a wide range of experience and expertise is necessary to fully understand such complex business problems. Often, executives only cursorily review the material or delay any personal analysis of the business issue until they attend the strategy meeting. This is a mistake because they leave themselves open to misunderstandings, or worse, manipulation away from fact-based decision making. However, when each team member performs an independent analysis, they arrive to meetings better able to vigorously defend their perspective. This leads to better discussion, greater diversity of thought and ultimately better strategies.
- Allow conflict to occur in business discussions
Research has shown that conflict avoidance leads to poorer decisions. The reason is that constructive conflict forces executives to examine the situation more deeply and challenge their pre-conceived notions. The debate fostered by conflict results in greater understanding among the team. Constructive conflict is a particularly useful tool when a team is trying to identify business strategy. Assertive defense of one’s perspective positions the team to develop a more effective strategy.
Do any of the difficulties explained here occur in your company? Are you hampered in your attempts to develop a winning strategy? If you would like to learn how to implement an approach that incorporates these steps to deliver winning strategies, contact me: steve@foresight-consultinginc.com.