Are your strategic assumptions explicit?

The surest way for a CEO to tell if they need to course-correct their strategy is to make the assumptions underpinning the strategy explicit and track them.

Every strategy is built on assumptions about the future business environment the company will face. How will the market develop, how will competitors behave, what new technologies will appear?

The assumptions represent management’s “best guess” at that moment in time. The CEO can’t expect perfect accuracy – crystal balls are in short supply. What the CEO can expect is to track the key assumptions and to be alerted when the market environment moves in an unexpected way.

Say the strategy was to reposition the company to dominate the emerging up-market segment that is prepared to pay a brand premium. The Executive team can identify the key future assumptions this strategy rests on - the size of this segment, the companies ability to create brand equity and the resulting segment share captured.

If the Executive team have estimated a quarterly trajectory for these assumptions up-front and are tracking reality against them, the CEO can know whether the strategy is on-track or needs corrective action, or even a complete rethink:

• The premium segment is growing slower than expected? Should we ramp back our brand investment? How can we make up the future profit shortfall?
• A competitor is building brand equity faster than us? Can we overtake them and establish dominance? If not, where else should we become market leader?

Without explicit metrics to guide the decision, mid-course strategy reviews will find it much harder to make the tough calls about changing strategy.

Poor strategy or poor execution?

Due to the Yin and Yang nature of strategy and execution, it is much more likely that they both fail or both succeed, than only one of them is flawed

Turnaround CEOs and Equity Analysts are fond of declaring “the company’s strategy is right, but was executed poorly. We just need to focus on execution now.” I always wonder how do they know? If it was not executed, why are they so certain the strategy was right?

The question matters because if the cause of the poor performance is not understood, it is likely to repeat itself. Focusing on the execution of the same flawed strategy will not help the company.

In practice, it is rare for a company to execute well on a flawed strategy. Managers at all levels will see the return from the strategy fail to materialise and will tone down their commitment early. Without the “flywheel” of results to build internal momentum, execution will rapidly falter.

It is equally unlikely that a company falls down hard in execution of a well thought-through strategy. A key part of the strategic thinking process is a brutally realistic view of the execution capability of the company. The critical assumptions underpinning the strategy are made explicit and investment paced to proving them.

Far more likely is that the initial strategy roadmap was not well thought through, and therefore the company got lost trying to execute it.

The turnaround CEO at the very least needs a new strategic roadmap that avoids the execution pitfalls of last time. Not as newsworthy a sound-bite, however.

Does your agenda need a good prune?

Dedicate your next executive team meeting to creating an “inaction” list

Every meeting your organisation holds generates more and more action points to be piled on people’s heads. How about breaking the pattern, just once? The next time you get your management team together, use it to remove things from your plate.

What meetings and reports can we manage without? If we lay out and prioritise the full list of projects we are attempting, can we drop the bottom 20%? What are the top 3 misalignments that contradict our values? What processes, policies and reports can we scrap? What things are we pretending we will do, but secretly know that we won’t? What are we currently doing that, given a blank piece of paper, we would not start again? What are we spending time on that is not critical to our strategy? It may help to have this meeting facilitated to cut the deadwood systematically without pointing fingers or triggering defensiveness about pet projects.

The persistent reason that organisations make slow progress towards their strategy is that people are too busy on other things. Your people’s time is your organisation’s scarcest resource – it can’t be substituted for money.

Considering that every other meeting held adds to the agenda, surely it is worth some management time dedicated to pruning it back occasionally? Every gardener knows their rosebushes grow stronger and more vigorously after a good pruning.