Insight Article: Strategy Series Question 2 – Where do we want to go?
Continuing The 5KQ Approach
In the previous article we looked at the first of the Five Key Questions (5KQ) for Strategy Development, namely ‘Where are we now?’. The second Question in the 5KQ series builds on the insights gathered in Question 1 to define a direction of travel for the organization. This is where the strategy team can start to get creative about the future… especially as they evaluate possible alternative scenarios.
Question 2, ‘Where do we want to go?’ should encourage people to think about the ‘big picture’ and it will, hopefully, conjure up ideas of possibilities for high(er) growth and how the business could be disruptive within its market.
This question leads to a discussion on the organization’s fundamental Purpose, including its Mission, Vision and Values. Recent research in this area (including the Harvard Business Review article ‘Put Purpose at the Core of Your Strategy’) has identified that having a clear and meaningful purpose is a fourth driver of growth (alongside the generally accepted growth drivers of creating new markets, serving wider customer needs, and disrupting the market).
Why Is It Important to Ask This Question?
“Big thinking precedes great achievement.”
Whilst it may seem obvious why this question is important, it never ceases to surprise how many organizations fail to address it properly. Instead they operate using short term tactical goals supplemented by an annual financial budget. This approach may work well in a stable market, however it’s unlikely to deliver the best results when the world is changing rapidly.
To be of real use, the answers to the question ‘Where do we want to go?’ need to be documented in a way that can be readily communicated to the relevant stakeholders. This is typically expressed in the form of Mission, Vision and Goals (though other terms and formats can be used). Whilst there are many variations on these terms, at SKCI we generally define them as follows:
|Mission||A generalised statement of fundamental purpose of the organisation. A simple way to describe to stakeholders (staff, customers, investors, etc.) what the business stands for (its ‘raison d’etre’). The purpose of the mission statement is to engage people and explain why the business is important.|
Unlike the Mission Statement, which describes what we do now, the Vision Statement should be future based and is meant to inspire and give direction to employees of the company.
“The Vision is about your goals for the future and how you will get there whereas the mission is about where you are now and why you exist” Paige Arnof-Fenn, CEO of Mavens & Moguls.
The best Vision Statements generally start with a brief summary of where the organisation wants to go (sometimes called a ‘mantra’) followed by a few key points to describe how this will look to the key stakeholders.
|Values||Values are the operating philosophies or principles that guide an organisation’s conduct. The core values can be summarised in the Mission Statement or in a separate document. In day-to-day use, they should provide a guide for management and staff on how the company should be run.|
|Goals||General statements of what the organisation wants to achieve in a period, typically defined for a number of categories (e.g. Finance, People, Customers and Products). A typical financial goal might be to “Increase revenue”.|
|Objectives||Quantification of the Goals, generally using the SMART (Specific, Measurable, Achievable, Relevant, Time-bound) format.
An objective linked to the goal above might be to “Increase revenues for Product X by Y % within 12 months”.
|Strategies||High level descriptions of the activities that will be used to achieve the Goals and Objectives.
A Strategy to support the Objective defined above might be to “Increase marketing expenditure for Product X by Z% and develop a software framework to allow bundling of Product X with other products”.
An Iterative Approach
It is important to remember that answering the Question ‘Where do we want to go?’ will require an iterative approach. Initial ideas of the direction the business should go (for example “develop a new product line”) will often have to be modified as they are evaluated against the market needs and the organisation’s competencies and resources.
So, it is quite common for the strategy development to move back and forth between Question 2 (‘Where do we want to go?‘) and Question 3 (‘What are we going to do differently?‘) as different scenarios are evaluated.
Creating The Time And Space For Creativity
One of the problems in answering this question is that it can be a challenge for business leaders to lift up their head up from the day-to-day challenges of managing the business and create the time and head space to answer the big questions properly.
When developing strategy, it is almost always worth spending time off-site, with the other members of the strategy team. An experienced facilitator or strategy consultant can also help with creative thinking techniques and keep the discussions focussed on the strategic (rather than dropping back into day-to-day tactics). This also a great opportunity for people who are more instinctively entrepreneurial to help their colleagues to become more creative and innovative.
A great example of creativity in strategy development is Twitter, which was born from a big-picture brainstorming day at a podcast company, and now has 336 million users worldwide and a valuation of over $20 billion.
Tools and Discussion Topics to Help Answer Question 2
As with other aspects of strategy development, the exact topics to be covered will vary for each organization, and its state of development.
Some of the questions that are most often helpful include:
What is our Mission and Vision?
These are two of the most important questions to be answered in any strategy discussion. In essence, they should encapsulate:
- What are we trying to do? (the Mission)
- Where do we want to get to in the medium to long term? (the Vision)
The most powerful statements of Mission and Vision are those that are simple and resonate with the management and staff of the business. In an ideal world, every member of staff should aim to remember the Mission and Vision… that way, they can use them as frames of reference for the decisions they make on a day-to-day basis.
Sometimes it is hard for business leaders to get to the essence of their Mission or Purpose, in which case the process articulated by Simon Sinek is his book ‘Start With Why’ can be helpful. In essence, this involves a three-stage questioning process:
- Why are doing what we’re doing?
- How are we doing it?
- What is it that we are doing?’
The process of digging into the ‘Why’ and the ‘How’ will inevitably throw new light on the ‘What’.
NewTechNow’s Mission is to transform the way businesses solve a XYZ problem.
We develop software and hardware technology that enables businesses to solve XYZ problem faster / quicker / cheaper / etc.
This benefits our customers by allowing them to focus on their core business and become more profitable / grow faster / etc., and our focus on sustainability means they can be confident in working with us.
Our disruptive technology and IP allow us to grow rapidly, which benefits our staff as it means we can provide them with high value, stimulating jobs; and benefits our investors by providing them with a good return.
Applying Technology to Solve Emerging Business Challenges
Our Vision is for our technology to have established a new market niche, in which we will be one of the major players, having developed our technology so that it is addressing the emerging challenges of our customers.
We will be a truly international business and the majority of our revenue will come from outside Europe.
Our investment in people means we will regularly be voted a “top employer”, and the depth of skills in our management team will allow us to address new opportunities faster than our competitors.
Sustainability will continue to be a core focus of our business; the overall group activities will be carbon-negative, and we will be acknowledged as a leader in environmental and social responsibility.
You will hopefully notice how the statements embrace NewTechNow’s strengths and opportunities whilst the Vision confronts some of its major challenges. All successful businesses need to think about how to convert weakness and threats into strengths and opportunities; and we will explore this further in Question 3. ‘What are we going to do (differently)?’
Getting the Mission and Vision right can be time-consuming, which is one of the reasons why companies often accept second-rate statements… but it has been shown that the benefits can also be dramatic!
Looking forwards and outwards, where COULD we go in the future?
Looking forwards (into the future for trends, changes and opportunities) and outwards (outside your company, industry and country) gives you the opportunity to be disruptive and innovative with your ideas, perhaps leading you to courses of action you hadn’t previously considered.
“The people who get on in this world are those who get up and look for the circumstances they want, and if they can’t find them, they make them“
One of the best ways of doing this is to go back to the SWOT and PEST analyses from Question 1, look for Opportunities and compare them to your Core Competences. This should generate a list of opportunities which the business could consider exploiting; these can then be analysed further to assess their commercial feasibility, etc.
How ambitious are we? How big do we want to grow?
This is a really important question – and one that, in our experience, is often not explicitly addressed. It’s important firstly because ambition, management efforts and financing are inextricably linked and also because there is a relationship between ambition and risk… be insufficiently ambitious and you may get overtaken by faster growing competitors, but push too hard and you risk overreach.
The challenge is to use the information gathered when answering the first question (especially data on the growth rate of competitors and the overall market) to assess the ‘right’ level of growth to target for the business. This is especially important when markets are changing rapidly because businesses can sometimes achieve a relatively high growth, whilst still losing market share.
Short Term versus Long Term Ambition
A common pitfall in strategy development to be too ambitious in the short term but insufficiently ambitious about the long term. In the excitement of developing a new vision for the future of the business it is very easy for leaders to convince themselves that they can change everything at once whilst continuing to handle all their day to day activities. This then leads to disappointment when strategic changes deadlines are missed and the whole process falls into disrepute.
At the other extreme organizations are often insufficiently ambitious in the longer term, forgetting that small changes made will often have a cumulative effect over time.
What organizations do we aspire to be like?
Asking the question “What brands or organizations inspire us?” can be a really powerful tool. And it’s often most effective if you pick two or three that are outside of your own direct industry, look at what you admire about them, what makes them successful and the work out how you apply this learning to your own business.
This is also a great opportunity to introduce the concept of best-practice benchmarking. Often the best benchmarking exercises occur when an organisation benchmarks itself against an entity that is NOT a direct competitor, as it is easier to share sensitive information with a non-competitor, and you are more likely to get genuinely new ideas by looking outside your own industry vertical.
How Can We Evolve Our Value Proposition to Drive Growth?
Whilst product development is typically considered in-depth under Question 3 ‘What are we going to do (differently)?‘, it still has relevance here since the potential to evolve the product (or not) will have a significant effect on the Goals that can realistically be set.
The Value Proposition Canvas strategy tool is often a good place to start this discussion as it clarifies what value current customers get from the products and services. If the Value Proposition Canvas is then reworked for potential new types of customer, it can then be extended to clarify the extent to which the product or service is relevant to these new market segments.
In parallel with this, it’s also important to consider how the product or service could be enhanced and the Core Competence Analysis tool can be a useful way of establishing to what extent the organisation has the capability to do this, or whether the skills will need to be brought in from outside (with the likely increase in risk and potential for delays).
In all but the simplest of organizations, it is likely that further analysis will be needed to really understand ‘Where do we want to go?’. Some of the tools that can be helpful are listed in: SKCI Recommended Strategy Tools and we will discuss the detailed application of more of these tools in other articles in this series.
Defining Goals – SMART versus FAST
“Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world.”
Most managers will be familiar with the concept of goals being SMART (Specific, Measurable, Attainable, Relevant and Time-based). However, research published in the MIT Sloan Management Review has questioned whether this is optimal in today’s fast-moving environment (‘With Goals, FAST Beats SMART’).
FAST stands for ‘Frequently Discussed, Ambitious, Specific and Transparent’. The key differences between FAST and SMART are the introduction in FAST of transparency, or openness, as a key criteria in defining goals (so that each team can better understand what other teams are doing) and the change from Achievable to Ambitious.
Whilst most organizations will continue to set SMART goals, it is important to remember the significance of the ‘Ambitious’ criteria… especially as research indicates that employees pursuing ambitious goals significantly outperform colleagues with less challenging objectives.
Communicating This Information
The amount of information in the Mission, Vision, Values and Goals can make communication of the strategy difficult. Some organizations find that a more visual approach such as the House of Strategy tool can help with this.
Communication of the strategy will be discussed in more detail under Question 4. ‘How will we change?’ and Question 5. ‘How will we manage progress?’.
Answering the ‘Where do we want to go?’ question is a fundamental step in strategy development. As mentioned above, strategy is an iterative process and the answers to this question may need to be developed in parallel with the Question 3. ‘What are we going to do (differently)?’.
We hope this information supports you on your Strategy Development journey however, in the vast majority of cases, engaging an experienced Strategy Consultant, with a proven track record of business success, will help speed up your process as well as delivering excellent quality outcomes. Wherever you and your company are in your Strategy Development & Deployment process, SKCI can help.
Published Oct 8th 2019
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