Different organisational outcomes are not just the work of chance. The impact of digital technology on businesses has been forecast for quite some time as has the threat of global warming. Even though the precise nature of Covid-19 might not have been anticipated, a pandemic of some type was forecast well in advance.
Those organisations that recognise and anticipate both external threats and opportunities, are better able to take decisions to protect and enhance the situation of the organisation. This is the role of strategy and it therefore plays a crucial role in enabling organisations to identify future trends in order to make decisions today, that will protect and enhance its desired state.
Sometime called its competitive advantage, this improved state will better enable the organisation to fulfil its core purpose, which today may include elements of improved economic return, helping society and saving the environment.
Duncan's top five tips:
- Strategy is not for today as it is here already, but about deciding today about what to do for a desired improved future
Strategy mustn’t be too myopic and focus on just the day to day, but scan ahead to anticipate future opportunities and threats
As the world is constantly changing, organisations have to adapt to survive and prosper. There is a significant risk that organisations only make small incremental changes or refinements whilst large step changes in orientation, investment and structure are needed to keep the organisation in optimal fit with its context.
This is called strategic drift and is the organisation moving out of alignment with its context which can plunge it into crisis and even lead to its demise through failure to properly adjust. For example, historically, the large US camera company Kodak, held a monopoly position but refused to engage with the rise of digital cameras even though they invented the technology.
They continued to invest in and produce better types of photo film, as this is where the company had vast investments in terms of expertise, systems, structures and real estate. But the world wanted digital and company became irrelevant and so collapsed. Another example is the changing value of having bank branches on the High Street.
Once a key competitive advantage, the digital revolution in online banking has turned this huge investment in real estate and employees from competitive advantage to unacceptable and largely irrelevant cost, which is why so many have closed down.
Strategy must be about adjusting to fit a changing world, even though this may mean reducing emphasis on previously important aspects of the business and engaging with new initiatives
In order to seize future opportunities and defend against threats, organisations can draw on their strengths which might be a range of capabilities and resources. Often organisations will produce long lists of strengths, of things they are proud of and/or heavily invested in, but these are not necessarily real strengths.
To illustrate the point, I am a professor of strategic management and I have a very distinctive skill as a classically trained organist. Whilst I regard this as a personal strength, it is not very relevant to my role as a Dean or strategy professor and does not give me a competitive advantage in relation to other strategy professors or Deans.
Even when strengths are relevant, such as huge investments in UK steel company blast furnaces, are they really a strength if steel can be procured much more cheaply and easily from much larger international producers?
In terms of a SWOT analysis, be careful that the strengths and weakness are not ego-centric but allocentric. Strengths and weaknesses must be assessed in relation to the competition and not one’s own ego
Strategy is almost always couched in terms of well-meaning positive future intentions but runs the risk of being disconnected from real organisational challenges, and too abstract to allow stakeholders to act. Strategy is about making choices, generally hard ones, about complex challenges.
It needs to diagnose the problem(s) effectively, relate potential solutions to the organisation’s purpose and mission, and connect to practice through coherent, actionable insights that includes investment decisions and actual implementation.
A classic example of this is the world’s most expensive high speed railway, the UK’s HS2, which was intended in 2015 to run the length of the UK in order to help level up the country in terms of social and economic prosperity. Originally the costs were stated at £56bn, but by late 2021 it is estimated it would cost around £108bn, an increase of 53% over budget. This is despite reducing geographic ambitions for the North of the country, and also undermines the primary strategy of social and economic levelling up.
Good strategy connects problem diagnosis with the overriding purpose and vision of the organisation to create coherent insights that will be implemented, for strategy is nothing if it can’t be implemented.
These tips are far from being exhaustive but they do capture many important elements of strategic management. For a comprehensive coverage of strategy, and for an integrated model that details all the main components of strategy, please do refer to ‘Exploring Strategy,’ 12th edition, published by Pearson, which the Financial Times Teaching Power index has listed as the world’s leading strategy text book and is one that I co-author.