It’s happening weekly now. Someone – a client, reader, expert I am interviewing for my next book – mentions the need for a more agile approach to strategy, an approach that allows us to react more quickly to unexpected opportunities and threats.
Last night, in Dubai, at the end of an all-day strategy workshop, I heard it twice, from our client’s CEO and their marketing firm’s director. This week we are running a workshop on the topic for one of the country’s largest banks.
Last month I heard it a shocking 42 times!
We ran a survey of our Outthinker community, to understand why, how often, and how successfully they were working on their strategies. The findings are revealing. A remarkable portion of companies are embracing a more agile strategic approach but their efforts are failing. The reason, we believe, is that companies mistake “agile” for “fast” so are hitting a speed-limit that their ability to execute cannot break through.
Here is how we think you can adopt a truly agile strategic approach, one that will enable you to move faster on opportunity, respond more timely to threat, and move you with each cycle further ahead of your competition.
First, our findings.
Successful companies focus on growth, not planning
Strategic planning was born out of the 1950s when single-business companies evolved into multi-business corporations and owners like the Rockefellers had to learn to harmonize their enterprises’ disparate parts. Strategic planning was born to create order and predictability. But our survey indicates that only one quarter of our “Outthinkers” are using strategy for planning purposes. Instead, nearly twice as many, half of those surveyed, are using strategy-making to drive profitable growth.
We have always felt that traditional strategic “planning”, while good for coordinating your business and critical for running a business well, is simply not well suited for helping you drive growth. And the numbers bear this out.
- Only 39% of planning-focused companies were meeting their business goals.
- This compares to 58% for profitable-growth-focused companies and 48% of breakthrough-idea-focused ones.
Our conclusion: Push strategy efforts beyond traditional planning into a bigger goal of driving profit growth.
Companies do about as well on their own as with consulting support
Most of the companies we interact with lean on strategy consulting firms to help them with their strategy-making efforts. As a consulting firm we are, naturally, seeing a biased sample in our work so we were surprised to find that more than 60% of those surveyed make strategy without any outside consulting support!
We were hoping to show that companies that work with consulting firms are more successful than those that do not. Alas the numbers indicate that companies that go it alone produce success rates similar to those who work with boutique firms (57% of firms who go it alone are hitting their business goals compared to 53% for those using boutique firms). We do not have enough data to draw a meaningful conclusion for those using large multinational firms but the early indicators do not look promising (a 33% success rate).
Our clients typically enjoy a 100% to 120% acceleration in growth rate after going through our Outthinker process. We like to think, and are tracking the data to measure, that we do positively impact our clients’ performance. But on average, across lots of firms, and only one respondent reported to have worked with us, using outside consulting firms does not seem to promise a greater success rate.
Speed helps if you can align quickly
What is most interesting to us is that companies are embracing more agile, rapid, iterative strategic approaches at a far faster rate than we expected. We first proposed an agile strategy approach in 2008 with our paper, “A Manual for Outthinking the Competition”. Since then we have found companies painfully slow in their embrace of what we think is inevitable: strategy making will evolve from an annual top-town ritual into an agile, ongoing, company-wide conversation.
Now our sample may be biased because anyone who subscribes to our Outthinker newsletter and is part of our community is likely to be forward thinking and subscribe to our view, but we were nevertheless shocked to see the speed at which companies today are reviewing their strategies. Forty percent of survey respondents refine their strategies every week or month!
I was with a Fortune 100 electronics company last week at a workshop for business unit heads in London, and participants shared that their strategies are set once a year and rarely referred to for the following 12 months. This “annual ritual” routine, we have found, is remarkably common. But it appears the pace of strategy is finally accelerating in a meaningful way.
But, unfortunately, going faster does not seem to work. Companies that refine their strategy monthly have a lower success rate than those who refine it annually (37% versus 57%). Why is this?
To see what is happening, let’s breakdown your strategy effort into three phases:
- Monitor performance and the environment to surface issues and opportunities
- Design a new strategy
- Align to and execute the strategy
After you have designed a new strategy, you have a moment of strategic clarity. You know where you want to go and how to get there. You know, because you just sat down, thought about it and wrote it down.
But then you must communicate the strategy throughout your organization to gain buy-in and support. Such an effort can take months, even longer if you lack a good performance management system, have a complex organization, or are making significant strategic changes.
So, the gap between “design” and “align and execute” can be, say, three months.
Now, in a world in which you design your strategy once a year, you could afford to wait three months to execute. In a faster-paced world, in which you adjust your strategy every month, a three-month lag time is not only too long, it will force you into a disruptive time-delayed feedback loop.
If you have ever used a shower in which the temperature adjusts slowly, you have experienced this phenomenon. Turn the knob toward hot, wait. It’s not hot enough, so you turn it further. Still too cold, so you turn it again. Then the water reacts. You burn yourself! So you overcorrect and turn the knob all the way to cold. A few minutes later, arctic water is crashing over you.
Monthly reviews are good, critical even, in fast-paced environments, but if you cannot align quickly, you are better off sticking with the old, annual cycle.
The numbers prove this out. Forty percent of companies that use annual cycles are clear about their strategy. Not one single company that refines its strategy weekly or monthly reports having strategic clarity!
If we lower the bar and look at companies that are clear about their strategy but have not effectively aligned their businesses behind it, we will find another 40% of annual companies find themselves here and about 35% of companies who adjust their strategy more often.
The challenge of adopting an agile strategy is one of alignment. You are trying to pivot faster than your organizational structure, culture, and systems will allow.
The answer: be agile, not just faster
There is a way out of this dilemma. We will break it down in our next blog post. But here is our top-line summary, based on interviews with numerous agile/scrum/lean experts and strategists in companies who have succeeded in driving their companies toward agility: You cannot just refine your strategy faster. You must shift from a parallel approach (in which you solve all the major issues at once) into a sequential approach (in which you continually work down an evolving backlog of your top strategic opportunities and problems).
We’ll show you how next.