How to approach strategy in turbulent times
- Published: Wednesday, 02 December 2020 10:11
Traditional approaches to strategy development can be slow and cumbersome says James Graham. In this article he explains what ‘emergent strategy’ is and how it can help with an agile response when survival threatening situations develop.
Ask a typical business manager about strategy and you will often receive a view that it is built around a process of yearly planning, where objectives are sought from the business unit functions, challenged, modified, re-submitted, accepted, and then converted into detailed budgets and execution plans. This laborious process can easily consume 3-6 months, from end to end. This is all well and good in a stable and predictable business environment, where the strategic horizon is 3-5 years and competitor activity predictable, but potentially deadly in a fast-evolving situation.
So, what can be done to act strategically in turbulent times?
Re-visiting first principles is a good start – what is strategy and how can we do it in fast-moving times?
Strategy can be defined as the path that takes us from our current position to our desired future state. This is achieved by deriving objectives from your vision and mission, then analysing the internal and external environments for challenges and making choices to work around them.
At the heart of good strategies there are policies that guide employees in implementing the choices, and these policies must align to the challenges the organization is facing. For example, if business survival is threatened by reduced incomes and cash flows, then the main policies must focus on surviving and moving to a better position. Cutting costs and collecting cash may not be as exciting as launching a new product in Monte Carlo, but future prosperity will be built on current austerity.
Tools and techniques must also be congruous with the situation. Strategic planning, as described in the opening paragraph, is useful to scale capacity in times of predictable expansion, but struggles to deal with turbulent times, where assumptions about growth and related matters change frequently. It is the equivalent of trying to use a hammer to carve wood. An alternative is required, and it is known as emergent strategy.
Emergent strategy is not a knee jerk reaction to unexpected change, but a way of working around problems with the end in mind. If you were driving down the highway and found yourself in a long queue of vehicles behind a crash, would you sit there and listen to the radio or consult a navigation tool to seek an alternative route to your destination? Congratulations, you just invoked an emergent strategy caused by the road blockage. The point to note is that you were still thinking about reaching your objective and using learning, via your tool, to deal with the change in conditions.
Learning is very important when dealing with turbulent changes. The measure of success is not how much you learn, but your rate of learning relative to your competition; the bigger the gap, the more advantage you have over your less agile competitors.
A problem for many larger companies is the time it takes for newly acquired knowledge from the market to get to the executives who make decisions. In fact, sometimes middle management filter the messages because they do not understand them or because it does not fit the corporate narrative.
In conclusion, in changing times, focus on reducing the communication time from the coal face to the executive suite and take on board the messages, however unpalatable they may seem. You should also develop agility in responding with new policies and initiatives to lead ahead your competitors and put a premium on learning in the way you reward your people.
Thriving in a hard market is challenging, but in every tough time there are also opportunities waiting for the quick and the brave to exploit them.
James Graham has been a senior associate of London School of Business and Finance (LSBF) Executive Education since 2017, focusing on business strategy, strategic brand management and operations management. He has designed and delivered several hundred short courses for a variety of clients in 38 countries across Africa, Asia, Europe, the Middle East and North America.