Strategy is a commonly used word, but it’s rarely defined. I’ve become concerned that we are using the term “strategy” much too loosely in our business world. We can gain considerable insight by making an effort to define the term and reflecting on what makes it so valuable in a rapidly changing world.
What does strategy mean today?
Again, business strategy is rarely defined by those using the term. When I search for a definition of the term, I get many examples like the following
- a plan of action or policy designed to achieve a major or overall aim
- a plan of actions that fit together to reach a clear destination
Stepping back, I find it hard to differentiate between this meaning of strategy and an operating plan. Is that all it is? An operating plan?
I have to say that, when I talk with leaders about their strategy, I’m often directed to their five-year plan. That’s their strategy. Yet, when I read through the five year plan, it very much seems like an operating plan. It specifies goals to be achieved and the actions that will need to be taken to achieve the goals.
This approach to strategy is very consistent with the institutional model of “scalable efficiency” that I’ve written about here. It certainly gives people a sense of direction and specifies the actions required to become more efficient at scale. But is this really a strategy?
We certainly need operating plans but, in my view, strategy provides a context for developing these operating plans – it’s not the operating plan itself.
What will strategy need to become?
We live in a world of intensifying competition and accelerating change, something that I call the Big Shift. In this kind of world, strategy needs to evolve into something very different. Strategy will be about anticipating growing unmet needs of people outside the organization and developing approaches that can deliver more and more distinctive impact over time by addressing those needs.
Successful strategies will
- Anticipate growing unmet needs of people outside the organization
- Develop rewarding approaches that
- can deliver more and more impact over time with fewer and fewer resources
- are fundamentally different from any other provider
- are very difficult to replicate
- Evolve those approaches in response to a rapidly changing environment
Anticipating growing unmet needs
In a rapidly changing world, we need to look ahead and try to anticipate emerging opportunities that can create enormous value with relatively modest effort. Rather than focusing on the five year time horizon of the five year “strategy” plans that are so prevalent today, we should seek to look ahead 10 – 20 years since that will encourage us to see the most significant changes ahead. I have called this the Zoom Out/Zoom In approach to strategy.
In looking ahead, we need to start by anticipating the growing unmet needs of the people our organization will be seeking to serve. We should start by asking whether these will be the same people we are serving today or whether there will be others that we might want to, or need to, serve 10-20 years from now.
We then need to explore how the unmet needs of these people are likely to evolve. Why are these needs evolving? What are the trends that are shaping these needs? What unmet needs are likely to be most meaningful to these people?
In this context, we need to move beyond the material world and make a concerted effort to understand the evolving emotions of the people we are seeking to serve. To what extent is fear shaping their choices and actions? What would really excite them and motivate them to achieve much greater impact? These emotions will shape how meaningful the unmet needs are.
Developing approaches that create value for the providers as well as people being served
Anticipating meaningful unmet needs of people provides an important foundation for successful strategies, but it’s just the beginning. Strategy requires developing ways of meeting those unmet needs in ways that will create growing value for the provider as well as for the people being served.
In our Big Shift world, successful strategies will focus on leveraged growth. This means discovering ways to deliver more and more value with fewer and fewer resources. It stands in sharp contrast with the approaches of large institutions today which focus on scalable efficiency – how to provide the same products and services faster and cheaper using internal resources.
Leveraged growth shifts the focus from cost to value delivered. It seeks to rapidly expand the value being delivered by orchestrating larger and larger networks of third-party providers who can help to address the unmet needs of the people being served. By doing this, the provider will restructure the broader market and industry, pursuing what I have described as a “shaping strategy.” Rather than simply taking existing industry structures for granted, shaping strategies recognize that, in a rapidly changing world, we have far greater ability to restructure entire industries to our advantage.
The value being delivered from these growing networks needs to be very different from the value that other providers are delivering. It needs to be value that is carefully tailored to meet the unmet needs of the people being served in much more effective ways than any other provider is delivering.
Equally importantly, the value needs to be very difficult for other providers to replicate. Once other providers see how powerful this value is in attracting a growing number of people to the provider offering it, they will make significant efforts to replicate it. Winning strategies deploy approaches that are very challenging, if not impossible, to replicate.
It’s important to emphasize that these approaches are not yet operating plans. They are high level efforts to frame ways of delivering more and more distinctive value. These approaches then provide a foundation for much more detailed operating plans that focus on how to deliver this value.
Rapidly evolving approaches to delivering value
In a rapidly changing world, any strategy, no matter how effective at the outset, will need to evolve quickly to anticipate changing needs and resources. That’s why successful strategies in the future will ultimately need to be learning strategies driven by leaders with a learning mindset.
Leaders need to pursue their strategies with a desire to learn on two fronts. First, what impact are they achieving with their current approach? Where are they achieving more impact than they expected and why? And where are they achieving less impact than expected and why? This is learning through action and can be very powerful especially given the increasing ability to unleash richer and more real-time feedback loops.
To pursue learning through action, leaders will need to make a fundamental shift from the current institutional models of scalable efficiency to institutional models that seek scalable learning. In this context, it’s important to emphasize that the most necessary form of learning is learning in the form of creating new knowledge, not just sharing existing knowledge. To scale this form of learning, it needs to spread beyond necessary research centers or innovation centers – it should be an imperative for all participants in the organization. It should also not be limited to participants within the provider’s organization – the provider should seek to pursue this form of learning among all participants within the growing ecosystem of providers that it orchestrates in pursuit of leveraged growth.
Second, the learning should not just be about reacting to the impact achieved from action already undertaken. The learning should also result from relentlessly tracking the trends that led the leadership to believe that specific and significant unmet needs are emerging among the people being served. Are those trends evolving as expected? Are there other trends that will also play a significant role in shaping those unmet needs? In what ways could these evolving trends help to anticipate even more significant unmet needs?
Learning in the form of creating new knowledge by acting together with others requires cultivating a set of capabilities among all participants – curiosity, connection, imagination, and creativity. That’s curiosity in exploring what’s changing, connecting with others to explore how the world is changing, imagination in seeing how the world and new opportunities are evolving, creativity in developing approaches that can deliver more and more value to the customers.
These capabilities are often highly suspect within existing organizations where the focus is on doing the assigned tasks without asking questions or deviating from the script. As a result, these capabilities, if they exist, are siloed in research labs or innovation centers.
This is one reason that successful strategies will be so difficult to replicate. They’re not a fixed target. They will be continually evolving as leaders learn how to deliver even more distinctive value.
Strategy is an evolving approach on how to achieve greater impact over time that is meaningful to the participants with the least amount of effort (and that is very difficult for other providers to replicate). It’s very difficult for existing organizations to pursue, which is why the five year plan has become the default strategy for most organizations. It may be difficult to pursue, but it will be increasingly necessary for success in a rapidly changing world.