Redefining Strategy: Applying Innovation to Corporate Planning

Reinventing the strategy wheel

Since the inception of corporate strategy as a discipline in the 1950s with appearance of the SWOT matrix, little has changed in terms of how corporations develop their strategic plans. Despite the increasing influence of AI, automation and robotics, the way in which corporations do planning remains remarkably staid and, in some cases, almost comically rudimentary. A pretty PowerPoint presentation focused on competitor positioning, a budget review tarred by overhead allocations and a one day off-site often dominated by executive agendas. This is what often passes for a strategy development process in many supposedly sophisticated corporations. Executives then breath an audible sigh of relief as the planning process is completed and they are able to get back to more important issues piled up on their desks.

But setting the strategic direction of the company need not be formulaic nor should the result be pre-determined. Strategy setting is the only opportunity that a company has to plan the creation of genuine long-term competitive advantage.  Sun Tzu famously said “Strategy without tactics is the slowest route to victory.  Tactics without (good) strategy is the noise before defeat.”

In the same way that technology has changed the way we order a taxi, eat takeaway and write content, the strategy setting process should also evolve to incorporate new innovations in ways of thinking, interacting, and predicting the future. Based on Barcley’s recent work helping companies to improve their strategy setting, we consider that there are six key ways organisations can move their planning processes to the next level.

Unleash the data scientists

Even mid-size companies now sit on enormous amounts of data, much of it unused. Seemingly benign customer transaction and usage data is typically filled with rich veins of insights around the evolution of customer preferences and the pace of market change. The first step to unlocking such insights is giving organisational data teams free reign to look for patterns and correlations in the data. Typically tasked on structured projects like dashboard development, data scientists should be provided the intellectual headroom to scan unstructured data for proprietary intelligence capable of being the foundation for bold strategic moves.

Embracing the importance of big data interrogation, Cochlear, in the early 2000s, made a startling discovery.  By leveraging extensive device-level data, researchers found that the technical performance of implants was not so much a function of device specifications, but rather how well it could adapt to the highly varied circumstances of the wearer. Cochlear discovered that factors like a user’s age, lifestyle, type of hearing loss, and even auditory environments significantly influenced their experience with the implants. This insight led to a fundamental shift in corporate strategy towards more adaptable and customizable implants designed to be fine-tuned to each individual’s specific hearing profile and changing needs over time. This new technical focus on individualised user experience repositioned Cochlear from a medical device manufacturer to a provider of comprehensive hearing solutions.

 

Embrace new digital tools

Jack Welsh famously required his executives to handwrite their strategy on blank pieces of paper in order to cut through the distraction of templates. Today however, strategists have a wide range of advanced digital tools that make paper, templates and even powerpoint look antiquated.

Market and competitive scans can now be completed in a fraction of the time previously required. Want to know the future of an industry, which trends will playout or how customer segments will evolve? Futures Platform provides access to the thinking of the world’s leading futurists. No time to do a competitive analysis? Crayon has that available on-demand. Pecan AI will even generate predictions of your company’s future customer churn, retention and conversion rates by analysing your historical customer data.

Strategic collaboration has also been irreparably disrupted. It’s time to farewell the much-loved physical whiteboard for Lucidspark or Miro, both of which provide a virtual strategy development space where remote teams can seamlessly move between idea generation, visualisation and structuring. The tools boast an extensive library of frameworks, collaboration and voting capabilities and most importantly, unlimited electronic post-it notes! Brightidea and IdeaScale support similar functionality with a bent towards product development. These innovation management tools allow participants to submit ideas, evaluate colleagues’ contributions and track the evolution of new products ideas.

Try extreme customer empathy

Most businesses think they know what their customers want, primarily because at some point they have asked them either through either sales calls or customer surveys. As humans, when we ask a stranger “how they are?” we intrinsically know that their response is likely to a guarded, somewhat automated answer which provides little insight into their real emotional state. However, when we ask a customer “what they want?” we mistakenly believe that they are not only capable of articulating what they intrinsically value but also that they are willing to share openly such private information.

Whilst there is no way to guarantee genuine customer insight, there are some novel approaches to practicing customer empathy. One approach is asking customers why they do the things they do. Clayton Christensen recounts when he spent weeks outside a McDonald’s asking people why they bought a thickshake, or more precisely “what job they bought the thickshake to do”. After a significant number of strange looks and eye rolls, early morning customers confessed they bought the viscous drink primarily to keep them occupied on their long commute – a unique insight that was directly relevant to product strategy.

IDEO, one of the originators of design thinking, adopt a different approach to extreme customer empathy by putting themselves physically in the place of the customer during the data gathering phase of the project. Whether this is physically buying a product, spending time in a store or role playing the customer process, IDEO team members try to replicate the motivations, actions and emotions of a company’s customers.

Take a contrarian view

Developing a new and innovative strategy is particularly difficult. Organisational inertia and personal biases can often mean that a developed strategy is far less visionary and robust than originally hoped for. To address this, and to facilitate counterfactual thinking, scenario-based games can be useful. They have the singular purpose of freeing up minds to, in turn, free up strategic thinking. The Pre-emptive Postmortem game is a particularly good example of this. During the strategy setting process executives are asked to role play a scenario of where the new proposed strategy has catastrophically failed. As imaginary reporters, they must explain the reason the company has filed for bankruptcy and undertake a postmortem on what hypothetically went so horrible wrong. This exercise aims to stress test organisational strategy against possible external forces whether they be competitive actions, market movements or blackswan events.  

Consultant as devil’s advocate

The engagement of a high charging consulting firm is no guarantee of a superior strategy or indeed company out-performance. McKinsey earned tens of millions for consultancy services sold to Enron, and PWC have had to repay nearly a million dollars in fees for their involvement in the Robodebt scandal. Notwithstanding their weaknesses, consultants offer a different strategic lens on corporate challenges informed by a typically broader view on what is happening in the market. These characteristics make management consultants ideal to play the role of devil’s advocate in the corporate planning process by identifying blind spots, finding hidden sources of value, and representing the voice of the customer.

A unique way to take advantage of these strengths is by engaging management consultants as “white-hat strategy hackers”. Once the bones of the strategy are developed, a third-party consultancy can be brought in to evaluate the strategy in terms of weaknesses and unexploited opportunities, and to generate an alternate competing strategy. Somewhat akin to an architecture design competition for strategy, this changes the dynamics of corporate decision making by providing the board options between competing strategic paths.

This concept was used extensively post-2009 by General Motors who brought in BCG to explicitly question and develop alternatives to its internally developed strategies, which in turn led to changes in the GM business model, organizational structure, and strategic focus.

Test the timeframe

Companies often fall into a patter around the timeframe they use for developing strategy. Many like the tactical nature of a one-year horizon and the comfort of a budget-centric planning process. Conversely, future-centric companies like adopting long-term horizons where navel gazing can take place without fear of constraining short term KPIs.

Supercharging corporate planning can often be as simple as adjusting the timeframe for strategy development. A convenient tool for this is the McKinsey Horizon Model – a strategic framework that guides companies in balancing their focus between immediate operations and long-term growth. The framework guides organisations to explicitly plan across three “Horizons”: Horizon 1, focused on improving current products or services; Horizon 2, focused on developing emerging opportunities promising future growth; and Horizon 3, about investing in innovative and game-changing ideas. The tool allows businesses to simultaneously manage current business success while investing in future growth opportunities, ensuring a company stays relevant and competitive in the long run.

Amazon as an example, are masters of managing their strategy across the multiple timeframes. In Horizon 1, Amazon focuses on its core retail business, constantly optimizing and expanding its e-commerce platform. Horizon 2 sees Amazon growing new businesses like Amazon Web Services (AWS). And Horizon 3, has Amazon investing in futuristic and innovative projects, such as drone delivery and AI research, with the potential of opening up new markets.

Conclusion (and a look-back test)

A better strategic process should result in a better strategy, but sometimes it is hard to know if a shiny new strategy document will indeed put the organisation on the right path. Orienteers of yesteryear, armed only with a map and compass, would stop to take back bearings to check if they were on track. Strategists can apply a similar approach by asking the following questions:

  1. Does your strategy make a few big bets aimed at creating a sustainable advantage?

Strategy is ultimately about taking highly educated, carefully considered, big bets on specific parts of the market. Nothing in business is guaranteed; hence, a strategy that seems too comfortable or safe may overlook opportunities for significant differentiation and competitive advantages.

  1. Is the strategy primarily focused on the front-facing customer offering?

If the strategy is clear on the customer offering to be created, then the detailed backend requirements can be developed during a detailed design phase.

  1. Is the strategy targeted to a limited number of high priority areas?

A corporate strategy cannot be all things to all people, necessitating that some functions, geographies or products will be absent.

  1. Is the strategy clearly communicated?

It is important to articulate the strategic message so consistently and frequently that it becomes a familiar refrain. This ensures that everyone is aligned, understands the direction, and the that the strategy becomes ingrained in the team actions.

The opportunity to rejuvenate an existing strategic process with innovative methodologies is substantial and can pave the way for a more refined and thoughtful direction for your organisation.  Should you wish to evaluate the robustness of your present strategy, you can take our Strategy Maturity Self-Assessment, available here.

Meet the authors

Luke.png

Luke Ingles
Managing Partner
luke@barcley.com.au

Maria

Maria Josefa Arias
Senior Consultant
maria@barcley.com.au

About Barcley Consulting

Barcley Consulting is a boutique management consulting firm based on the Gold Coast, focused on helping corporations and government with strategy, innovation and execution. For more information on their other publications, please visit www.barcley.com.au

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