An Alternative Strategy-Making Process

Continuing from my previous post, I would like to share some ideas on how strategies not necessarily have be the result of deliberate planning processes, but rather how they can blossom and emerge from every corner of the organization.

As far as I’m concerned, the concept of emerging strategies was first suggested by Henry Mintzberg in the 1980s. Since then, the concept has gained support both among researchers and business leaders who successfully have built their organizations around elements such as involvement, consistency, and adaptability.

Imagine a salesman visiting a customer. The product is not quite right, but together they work out some modifications to suit the customers’ needs. The salesman returns back to his office and puts the changes through. After a couple of more rounds with modification, they finally get it right; a new product emerges. This new product eventually opens up a new market. The company has changed strategic course. Is this event highly unlikely? Not if you ask those over at SAS Institute. Having appeared in the top 20 of Fortune’s 100 Best Companies to Work For list every year it’s been published, and with a turnover rate around 4 % compared to industry average of 20 %, and with a subscription renewal rate for their products on astonishing 98 %, SAS Institute should be a company to take notice of.

In short, SAS has learned to exploit the creative energies of all its stakeholders; managers, software developers as well as their customers! Their principles are driven by assumption that creative capital is not just a collection of individuals’ ideas, but a product of interaction. Their view is supported by Ronald Burt at University of Chicago who has shown that long-term relationships between employers and customers add to a company’s bottom line by increasing the likelihood of “productive accidents”.

In my opinion, the associations connected with the strategist have to change. The association of a senior manager sitting in an office formulating courses of actions for everyone else to implement went out of the door with the “great man” theory as far as I am concerned.

This is also supported by an experiment by Google who decided to track the development of the ideas generated by their management compared to the ideas generated by employees in lower levels in the organizations. Surprisingly (or maybe not) they found that the ideas generated by the latter category had a higher success ratio than the former one. The reason: Those working further down in the hierarchy were more frequent in touch with the market and are therefore better suited to predict future trends.

There are numerous of other examples of how strategies have emerged and how successful strategies can stem from other members of the organization than those sitting at the top. The question should be asked: Is it time to drop the traditional hierarchy of experience for a hierarchy of innovators? After all, those who are on top of the hierarchy of experience can only predict the future if the future mirrors the past. How likely is that?

How can we distinguish between good and poor strategy?

This question was raised on LinkedIn a while ago and received massive feedback from professionals from a wide variety of industries.

One of the respondents answered the question by referring to a blog by Roger Martin for Harvard Business Review and argues that a good strategy “provides the road map to future with data driven sign posts. It tells you what to do and which way to move forward depending upon key big events (e.g. if Event A occurs we will move to doing this and if Event B occurs then we will move to doing that)”.

This view gained a fair share of support in the discussion and other participants provided their insights by claiming that the major difference between a “good” and a “poor” strategy comes from the execution of the strategy. “An excellent strategy (on paper) which is poorly executed is always worse than a fair strategy which is exceptionally executed”, a participant claimed.

Another participant stressed the importance of building the strategy upon the company’s existing capabilities and resources and the opportunities and threats posed by the environment.

The reason why I found this discussion interesting is that, although strategy making goes thousands of years back, we are still struggling in defining the term – let alone distinguishing between a good and a poor strategy.

Furthermore, most of the answers on LinkedIn seemed to be made on the following two assumptions:

•         Strategy is prescriptive.
•         Strategies are developed at the top of the organization

Therefore, in my next posts I will challenge these two assumptions and come up with alternative strategy development processes.