Insight Article: Strategy Series Question 3 – What are we going to do (differently?)
Stage 3 of the 5KQ Approach
In the previous articles we looked at the first two of the Five Key Questions (5KQ) for Strategy Development, namely ‘Where are we now?’ and ‘Where do we want to go?’.
The third question in the 5KQ series builds on the insights gathered in question 1 and the decisions from question 2 to decide the high-level activities (or Strategies) that the organization needs to do if it is to achieve its Goals.
The question ‘What are we going to do (differently)?’ should encourage people to think about the alternative strategies that could be implemented, as well as forcing a discussion on priorities and what is feasible in the light of resource limitations and management bandwidth.
Whilst answering this question, it may well be that decisions made in the previous question (e.g. the Vision or the agreed Goals) are not realistic, and it is quite common for there to be an iterative process around this.
What Are We Trying To Achieve With This Question?
The underlying objective of question 3 ‘What are we going to do (differently)?’ is to establish a prioritized list of the key things the organization needs to do (the Strategies). Each of the Strategies will typically include a number of actions and can often be viewed as a project in its own right. It is also important to remember that the Strategies are about changing things so should not generally be part of ‘business as usual’.
Taking the example of a person, the act of breathing is not a strategy, it’s just one of the things the person needs to do to stay alive. However, if one of the person’s Goal was to be able to breathe more easily, they might decide that stopping smoking or going on an exercise regime could be Strategies that would help achieve that Goal.
Identify A ‘Long List’ Of Things We Could Do
Often the best way of answering the question ‘What are we going to do (differently)?’ is to produce a ‘long list’ of things that could be done to address the business challenges. A typical process for doing this might be as follows:
- Review the outputs from question 1, ‘Where are we now?’, with particular reference to the weaknesses and threats identified in the SWOT and PEST analyses, and any threats emerging from market research done as part of answering question 1 (e.g. product developments from competitors, new entrants to the market).
- Review the outputs from question 2, ‘Where do we want to go?’, and identify the changes the organization has to make if it is to achieve these objectives.
- Consider the implications of the Mission and Vision (identified in question 2) and identify any further strategies that may be required to maintain alignment with the Mission and keep it moving in the right direction to achieve the Vision.
This first pass at the ‘long list’ will typically contain a number of overlapping strategies, as well as some that are really just ‘business as usual’. In order to make the process manageable it’s quite common to simplify the ‘long list’ at this stage, by consolidating the overlapping Strategies and eliminating those which are ‘business as usual’. If we look at NewTechNow, the imaginary company we used in the first two questions, the ‘long list’ might contain ideas such as:
Being Creative – What If We Don’t Know How to Achieve One Of Our Goals?
It is quite likely that the Strategies identified so far will not, by themselves, enable the business to achieve all its Goals; and this is an opportunity for the strategy team to be creative and think laterally.
But creative thinking is hard, especially for people who are deeply involved in the day-to-day management of the business. Fortunately, there are number of techniques that can help people to be more creative. Most people will be familiar with brainstorming – which can be really effective if managed properly. At SKCI, we have also found the techniques identified by Edward de Bono in his book ‘Lateral Thinking’ to be really helpful.
– Turning Weaknesses Into Strengths
It is also important to look at how to turn weaknesses into strengths…
For example, with NewTechNow in 5KQ Question 2, we identified a link between having a Visionary CEO, the CEO’s ill health, weak business controls and a lack of depth in the management team. These problems are not unusual in a fast-growing scale-up business and could be addressed in a number of ways (e.g. appointing a Chief Operating officer to take on the day-to-day or contracting out parts of the business activity).
Whatever approach is taken, finding ways to turn weaknesses into strengths is a very important part of any strategy development process.
“In preparing for battle, I have always found that plans are useless, but planning is indispensable”
At this stage, it can also be helpful to conduct an initial risk assessment. Whilst it may seem early in the process to do this, one of the benefits of a high-level risk assessment at this stage is that it can tease out issues that might not otherwise be identified until it is too late.
For instance, with NewTechNow, the innovative nature of their product means a risk might be that they grow too fast and get overwhelmed by the growth – thereby causing quality to suffer and damaging their reputation. A possible strategy to overcome this might be use price to manage demand (and thereby restrict volume to manageable levels), though it will obviously be important to assess the price elasticity before doing this.
Even if this strategy is not implemented immediately, the very act of considering it means that possible increase can be planned in advance, so it is ready to be used if needed.
Deciding Between Competing Strategies
“The essence of strategy is deciding what not to do.”
At this point the list will very likely contain a number of Strategies which are either mutually exclusive or will be difficult to implement at the same time (because of resource or other constraints). There are a number of tools that can be used to help make these decisions, particularly when deciding which areas of the business to invest in.
– Treacy & Wiersema Value Discipline Model
The Value Discipline Model developed by Treacy & Wiersema is an effective tool for assessing competing strategies for a business. This model is analogous to Porter’s Generic Strategies in identifying a limited number of underlying Value Disciplines (or commercial Strategies) that a company can apply. These are defined as Operational Excellence, Customer Intimacy and Product Leadership.
In order to have a strong value proposition, the authors recommend four rules that a company should apply when using this model:
- Rule no. 1: Aim to excel in one of the value disciplines.
- Rule no. 2: Maintain threshold standards on other value disciplines.
- Rule no. 3: Control the market by continually improving value.
- Rule no. 4: Support the chosen value discipline with an effective and appropriate organizational and operating model.
In the example of NewTechNow, their primary Value Discipline has clearly been Product Leadership and they will need to assess whether this is still appropriate for the current market conditions. In particular, they will want to look at whether their weak systems and poor control of Sales and Marketing mean that their Operational Excellence and Customer Intimacy have dropped below the required Threshold Value.
– Ansoff’s Matrix
For example, NewTechNow might need to make a decision on which products to develop and how to market them and they might decide to use Ansoff’s matrix to help prioritize.
Market Penetration is normally the lowest risk option. However, in this example, we can see that their sales growth could be limited.
Typically, companies will then look at Market Development and Product Development. In this example, NewTechNow might want to consider Market Development by ramping up sales activities outside Europe (the Euro-focus was identified as a weakness in the SWOT analysis performed for question 1), as well as looking at other niches where the product could be sold.
Given the company’s strong IP, Product Development would seem to be the “default option”. But the higher revenue potential from Market Development will encourage the company to focus on this in the short term. The challenge will be to maintain the underlying long-term commitment to Product Leadership whilst management attention is distracted by moving into new markets.
The final option of Diversification is often superficially attractive (so much potential in so many markets), however it is also by far the riskiest. In this example, the risk is compounded by the relatively low revenue potential for the product and market that NewTechNow has identified.
– Combing Insights From Multiple Models
It is important to realize that no one tool can provide all the answers so it will almost always be necessary to use multiple tools. Deciding which tools to use, and how to combine the outputs, is as much of an art as a science.
For NewTechNow, by combining the insights from the Value Discipline Model with those from Ansoff’s Matrix we can see the company will probably want to keep Product Leadership as its underlying long-term differentiator. But, in the short term, it needs to invest more in Sales and Marketing so it can better exploit its existing Product Leadership and ensure that Customer Intimacy is above the required Threshold Level.
Review This List And Prioritise
For any organization, it is important to keep the number of strategic initiatives to a reasonable level (typically in single figures). So the next challenge is to whittle down the list of possible strategies to a number that the management can really focus on…
An effective way of prioritizing Strategies is to borrow from Agile Development and use a variant of MoSCoW method, categorising the possible Strategies under three headings: ‘Must Do’, ‘Could Do’ and ‘Should Do’.
– Establish The ‘Must Do’
Typically, the ‘Must Do’ Strategies relate to fixing deficiencies in the business which will prevent growth. Examples include the Threats and Weaknesses identified in question 1, ‘Where are we now?’, as well as issues from direct customer feedback.
It’s also useful to ask at this point “What if we change nothing?” as this will tend to highlight the changes that are absolutely essential.
– Move On To the ‘Should Do’
The next step is to consider which possible Strategies fall under the heading of ‘Should Do’. The most common error at this point is for people to fool themselves about how much they can actually do. This creates a long list of activities, most of which are not done on time, if at all.
We recommend that people be ruthless with the ‘Should Do’ list… It’s almost always better to implement a smaller number of Strategies successfully, then to revisit the ‘Should Do’ items, than to kid yourself about the bandwidth available and fail to implement most of the planned changes.
– What About The ‘Could Do’
If the list of possible Strategies has been assessed properly, the ‘Could Do’ items can normally be put to one side. In practice, they will only get done if they are picked up as part of implementing another Strategy.
Looking At The Details
As the priority list of Strategies emerges, the strategy development team will need to look into each of them in more detail. Typical decisions will include completion dates, whether any of them are dependent on other initiatives; whether the cost / benefit and the affordability are acceptable.
Review Feasibility and Alignment
The final step in this question is to stand back from the list of Strategies and assess them in totality for Feasibility and Alignment with the overall Vision.
One of the primary questions at this stage is whether the organization has the resources and management bandwidth to address everything at once and, if not, what can be done about it? Options might include: Raising new money, strengthening the management team or staggering implementation.
Whatever is decided, it’s important to document this and ensure there is alignment with the management team.
Other Tools That Could Be Used
As well as the Ansoff Matrix and the Value Discipline model, there are a number of other tools that could be used in addressing the ‘What are we going to do (differently)?’ question, including:
- Porters Generic Strategies
- Porters Value Chain
- Structured Market Research
- Value Proposition Canvas
Please SKCI’s Recommended Strategy Tools for more details and we will discuss some of these tools in future articles.
As with the previous questions, answering the ‘What are we going to do (differently)?’ question is an iterative process. Getting to the right answers may involve revisiting some of the points from questions 1 and 2; this is fine provided it doesn’t become an excuse for inaction!
The Strategies developed in this stage will be inputs in to the fourth question ‘How are we going to change?’ where we will look at how to address some of the internal and external constraints on implementing these Strategies.
If you have an immediate strategy challenge or would like to know more about how SKCI can help you develop your strategy, please contact us.
Published Nov 13th 2019
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