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Friday, July 19, 2019

Strategy Core Components: D3

Much has been written about strategy in business, from Micheal Porter's 1996 essay, "What is Strategy," to Richard Rumelt's more recent "Good Strategy/Bad Strategy."  Reading these and others still leaves one with questions.  
What is a viable strategy for my business?  
What should I do to create a strategy?  
Are my actions aligned within my strategy?
Does my business need a strategy? 
What is strategy? 

The central elements to strategy can be condensed into three main activities:
Diagnosing (of a challenge)
Defining (of policy)
Doing (of coherent actions prescribed by policy to overcome the diagnosed challenge)

Diagnosis.
Every strategy requires the identification and acknowledgement of a critical challenge.  Leaders must be aware of what is happening internally within their own operations, more broadly with the competitive landscape, and in the world at large, to recognize threats and opportunities.  These must be constantly considered.  The impact of a threat or opportunity must be analyzed and major threats and opportunities must be acknowledged.  Identification is not sufficient, the impact analysis gives us the "why."  Yes, my competitor is leveraging their excess infrastructure but why does this matter to my business?  
Moreover, the diagnostic process should begin to set a scope of time.  Acknowledgment that the competition has a 6 month lead and projections indicate that they will have 60% market share in two years sets a scope of time in which my business must respond.  This begins to answer the question of "when".  
Finally, the diagnostic process is ongoing.  Challenges may change over time, or need to be redefined as new information or techniques are learned.  A continuous focus on diagnosis is probably not sustainable, but periodically revisiting the diagnostics is highly recommended.

Definition.
Defining policy sounds dreadfully boring, but it need not be, and is fundamental to making strategy work.  In fact, it is so central to operations, that policy defines itself if left ignored.  The classic whipping boy for proponents of innovation, "we've always done it this way," is an example of self-defined policy.  
Much better outcomes result from a considered and analyzed policy definition.  A well-considered policy should set goals, in the form of desired end-states.  These give us the "what."  
Policy also helps to limit the scope, in time, geography, and domain that we are targeting.  Thus, policy completes the "when" picture and tells us "where" we will focus.  Geographically, in the sense of markets, but also in terms of domain.  We may have occasional opportunities outside of our domain, but unless these support the larger strategy they are outside of our "where".
Finally, policy must tell us "how."  Policy need not be detailed, but it must provide guidance on the sorts of actions we should be taking and how to decide between alternatives.

Do.
Policy in hand, we may begin to execute the strategy.  However, vigilance in execution is required as well.  Policies are often "handed down from on high" and not understood as strategic tools.  The strategy, in terms of why, what, when, where, and how must be communicated, again and again so that the personnel executing on it understand their role, what is expected of them, the support they can expect, and what forces and criteria should guide their decisions.  As the wheels of the organization begin to turn, managers must be alert for distractions, unforeseen obstacles, and changes to the landscape and competitive environment.  
Strategic distractions may occur on any level of the organization, from the CEO on down, and can be equally dangerous.    While operational distractions such as email, or non-work activities, are certainly an issue, what we refer to hear are strategic distractions.  Strategic distractions involve activities which appear to be productive but do not further, or actively hinder, strategic activities.  Classic examples include expending resources on sales which are not strategic or will never close, and building capabilities which aren’t necessary or relevant.  Executives and managers must be alert in themselves and others for strategic distractions. 
Unforeseen obstacles are common, and should be expected, but can become problems in executing on strategy.  Obstacles may be a simple as the need for a part which through no easily foreseeable circumstance (plant breakdown, for example), is suddenly scarce or temporarily unobtainable.  Executives can prepare for these by building policies which address priorities and acceptable methods for dealing with delays.  Monitoring of supply chains, holiday timing, and even weather in some circumstances can help with preparing for the unforeseen.
Changes to landscape and competitive environment involve shifts in the common business landscape, such as legislation and global markets, or changes to competitor strategy and delivery.  Regulatory changes can cripple a strategy.  CEO’s should be aware, and cultivate managers and relationships which will keep them tuned to potential shifts in regulation and legislation.  Global markets are ever changing and can be unpredictable.  Shifting global markets may present unexpected opportunities - or close off planned supply or delivery channels.  Finally, wise executives always keep an eye on the competition, whatever form that competition takes.  Bellwether competitors, large or prominent, may be obvious and necessary to watch, but keep an eye out for startups and unexpected competition as well.  

Summary
Strategy begins with the diagnosis and acknowledgement of a critical challenge.  Policies must be developed with guidance and goals/milestones.  These provide direction and reference points for the actions and decisions involved in the execution of strategy.  Executing on strategy requires communication and vigilance, both inward and outward.  

Strategy is an ongoing, cyclic, learning process. It requires effort and attention.  You can make good strategy a habit though.