From Strategic Planning to Strategic Discovery
by Rod Collins, Innovation Sherpa at Salt Flats
One of the most common and enduring practices of traditional management is the annual strategic planning retreat. These multi-day offsite gatherings of senior people are often the primary vehicles for charting the future course of the business. During these strategy sessions, teams will review and discuss analyses of past and emerging market trends, reflect upon the strengths, weaknesses, opportunities, and threats to the business, and outline the goals and objectives for both the short-term and long-term business cycles. This corporate ritual has become so ingrained in business culture that over the years, ‘strategy’ and ‘planning’ have become almost synonymous terms.
Planning has been a reliable foundation for strategy for many decades because of a dependable and unquestioned assumption, which until recently, has been a stable guideline: the past is a proxy for the future. When this assumption is true, business leaders can rely upon their historical knowledge and expertise to interpret current developments and make the necessary adjustments to adapt to what have been, for the most part, incremental changes.
These changes often have more to do with how things are done rather than what is to be done. For example, during the 1960’s and 1970’s, the vast majority of businesses were installing information technology to transition their basic operations from manual to computerized systems. The basic work remained the same, but the speed and the accuracy of the work was significantly improved.
Strategy in a Rapidly Changing World
When the past is a proxy for the future, business leaders can look backwards to accurately forecast the future and build a strategy to make the anticipated future a reality. But what happens when the past is no longer a proxy for the future and the pace of technological change is so rapid that disruptive innovation becomes the norm rather than the exception? If business leaders can no longer look backward to extrapolate strategy, how will they be able to deliver reliable ROI? These are the new and unprecedented challenges that senior leaders are grappling with today, and many are not quite sure what they need to do differently. They just know that they can no longer depend upon the traditional strategic planning practices that were once so reliable.
In times of great change, strategies are not planned; they’re discovered. And the activities that support discovery are substantially different from those that bolster planning. That’s because when innovation is the key core competency that businesses need to assure sustained success, then companies need to get very good at creating things that have never existed before. And looking backward is often of little use when markets demand innovation. In a rapidly changing world, planning is no longer the foundation for strategy. Today planning’s usefulness is limited to tactical execution, where it remains a vital activity.
When planning was the foundation of strategy, analytical processes were the primary tools that informed strategy. This explains why twentieth-century managers were so intensely focused on numbers. If you understood all the interrelationships and nuances of the historical numbers, you would have the insights needed to safely plot the future destiny of the business. However, when discovery is the foundation for strategy, a very different and unfamiliar set of activities — emergent processes — become the essential tools that help business leaders chart the future course of the company.
The big differences between analytical and emergent processes are in both the source and the context of their data. As noted above, the key data in analytical processes are numbers and the context for extracting information and insights from these numbers is fundamentally linear. This linear thinking is evident in the pervasive short-term biases of traditional managers who, regardless of the rapid changes happening in the world around them, often assume that the current business models of their particular company will continue for the foreseeable future.
On the other hand, the key source for data in emergent processes is people — specifically employees and customers — and the context for gleaning ideas and insights for new business models that have never existed before is holistic, which means companies need to be adept at rapidly aggregating the collective intelligence of their employees and customers.
When the world is changing fast, the most important information to guide the development of strategy is more likely to come from facilitated gatherings of experts, nonexperts, and unusual suspects than it is from the crisp clean numbers in carefully collated PowerPoint decks or from the supposed smartest person in the room. That’s because the collective intelligence that emerges from facilitated gatherings is far more likely to generate new ways for solving customer problems than linear extrapolations of historical business trends.
Collective Intelligence Workshops
One example of a strategic emergent process is the Collective Intelligence Workshop. These one to two day sessions are large gatherings of between 25 to 60 diverse individuals who represent a microcosm of the business. These holistic workshops include all levels of managers and staff as well as all disciplines who contribute to the development, sale, and delivery of the company’s products or services. Often, a few individuals whose experience is completely outside the industry are included in the session to bring in different perspectives and help accelerate the creativity of the group.
Through a series of facilitated exercises, the participants are encouraged to think boldly about the future as they rapidly generate as many as two hundred ideas and then, using the collective intelligence of the group, narrow their focus to a small manageable number of initiatives to move to action.
This process of rapid divergence and convergence tends to produce two very different sets of ideas. One set includes innovative ways that the company can incorporate new technologies to update its current products and operations. These are activities that can be accomplished within the immediate six to twelve months. The other set of ideas frequently includes dramatic — sometimes even radical — ideas that could completely transform the business. These are truly long-term activities, which while not immediately pressing, nonetheless may require development activities that begin sooner than later.
Dual Path Approach
When the past is no longer a proxy for the future, business strategy is no longer a single path. It often requires business leaders to navigate multiple paths at the same time: one that is strengthening what is done today and another that is creating a very different future.
The importance of a dual path approach was highlighted in a recent article by John Hagel and John Seely Brown where they describe the alternative approach to strategy used by many of the technology companies, which they refer to as “zoom out/zoom in.” They noted that unlike most traditional companies who focus on the one to five year horizon, this alternate approach essentially ignores this timeframe. That’s because it’s too easy for executives to fall into the trap of convincing themselves that the company and its business environment will look much as it does today. Instead, the technology companies focus on the 10 to 20 year horizon to force themselves to envision a future that will be very different from today. Hagel and Brown refer to this longer focus as ‘zooming out’.
By shifting the strategy predisposition from things will be the same to things will be different, zooming out compels leaders to learn faster. Leaders are then able to use this new knowledge to guide resource allocation in the immediate six to twelve months — zooming in — so they can both strengthen what they are doing today and begin the experimental work that is needed to start to create what is likely to be a very different future.
A well-known example of current work on designing a different future is the development of driverless cars. Even though there is no practical market for these autonomous vehicles anytime soon, these forward-thinking companies are devoting current resources to what is clearly a futuristic endeavor because they understand that they could run the risk of disaster if they were to assume they could rapidly adapt to an innovative new business model once the new model was imminent. In rapidly changing times, adjusting the business plan may not be an option when the competition has completely transformed and displaced your historical business model.
As we are learning every day in our post-digital world, change is increasingly disruptive and often discards and replaces iconic brands. If business leaders want to develop the capacity to stay ahead of disruptive change, a good place to start is by shifting their focus from strategic planning to strategic discovery.
This article and image was originally published in management-issues.com.
For more from Innovation Sherpa Rod Collins, see his white paper on The Great Promise of Digital Transformation here.