I appreciate – and totally disagree with – The Economist’s legendary observation that “Nobody really knows what strategy is.” Although I acknowledge the challenge of defining Strategy’s role in corporate governance, I also embrace the wisdom of Supreme Court Justice Potter Stewart’s declaration (his was about obscenity): “I know it when I see it.”
Strategy is knowable through practice. Leaders and leadership teams who
- embrace the opportunity to design a practice of strategy, and
- develop the discipline to follow it…
put their organizations at a significant advantage in three ways. First, they create clarity throughout their organization, empowering employees to act with confidence. Second, they readily sense and adapt to both internal and external factors affecting their success. Third, they have a keen understanding of organizational capabilities and limitations, and how these must evolve in relation to their ability to create value for customers.
Given the extraordinary value of these three advantages – as well as the risks associated with their absence – it seems worthwhile to entertain the question: what would practicing strategy intentionally look like at our company? Although the particulars are always company- and even team-specific, there are some foundational principles.The practice is collaborative.
First, the practice is collaborative.
It is crucial to bring a variety of perspectives to the process, and that all participants value the diversity of viewpoints. Participants must balance their individual subject matter expertise with an appreciation for the need for a broader perspective. Leadership and facilitation of the process are crucial in this regard, guarding against – for example – a “CEO is always right” approach to decision making.
Frequently the team is made up of the CEO and senior-most leaders from functional departments. This makes sense from a “collective wisdom” standpoint, but there are good reasons to consider including others in the process, including particular skills, succession planning, political considerations, etc. Over time, it’s important to have confidence that the most capable group of employees are involved in the practice of strategy, and that the practice is sustainable beyond the contributions of any individual, including the CEO.
2. The practice generates a core set of hypotheses/assumptions about the future of the business.
These form the basis for “downstream” expressions of strategy, including the Strategic Narrative – see below for more on documentation of strategy. These statements must be specific enough to have strategic implications, and there may be several tens of them in the final working document. There is a process for creating, considering, agreeing on, refining, and “approving” these foundational hypotheses, including reviewing and updating them periodically once they are formalized.
3. Building on these foundational hypotheses/assumptions, the practice generates documentation of its strategy in order to provide multi-year guidance to its board, employees, and appropriate external stakeholders.
The specificity of the documentation varies by stakeholder group; the objective is to build clarity and credibility in the strategy. For instance, strategy must provide sufficient direction to drive the annual planning and budgeting process, particularly resource allocation decisions across organizational priorities. One way to gauge the maturity of this work is to assess both the Substance of the Strategy and its Ubiquity in the organization.
4. The practice dedicates considerable time to assessing progress toward its multi-year strategy and organizational mission above and beyond current year performance.
This work often happens in conjunction with reviewing and adjusting the foundational hypotheses described above. This effort requires a transformational view of the organization – that is, an appreciation for the change required in order to pursue its strategy and fulfill its mission. We have all heard that “what made us successful in the past is not what will make us successful in the future.” Your practice will understand both of these in great detail, and will drive the organizational journey to its destination, factoring in the appropriate constraints.
5. The practice tests its assumptions about the external environment, monitoring developments and assessing the need to alter strategy.
In addition to well-known short-term factors (e.g. competitive activity, customer retention, talent acquisition, etc.), it asks, “What could be happening that isn’t yet clear to us? What do we not know that would be important to understand?” Exercises such as Scenario Planning are extremely valuable in checking assumptions about the future being like the past. Often this work leads to experiments, seed investment, or new partnerships to capitalize on emerging opportunities or mitigate risks. This work in particular requires the ability to think broadly and imaginatively about the external environment and emerging trends and uncertainties. Outside expertise and facilitation are often valuable, in addition to ensuring that participating team members can contribute meaningfully to the exercise.
Designing Your Practice
Putting all of this together in order to practice strategy requires intentional design and team-wide discipline to execute. It involves a balance of intensive team time and outreach to stakeholders to create greater understanding and clarity, bleeding into the functional roles of team members and making the CEO a full-time champion. I believe it’s crucial to explicitly include participation in the practice of strategy in job descriptions, roles and responsibilities, and compensation systems. In particular, it needs to be someone’s job to design and lead the practice itself.
Building a practice such as this is extraordinarily powerful for a company. Strategy need not be mysterious or abstract or disconnected from daily business. Once you’re practicing, as Justice Stewart suggested, you’ll know it when you see it.
What does practicing strategy look like to you?
Strategy, Creativity, and Leadership 
Excellent summary of the reasons to do strategy right. I would add that increasing participation has the added benefit that leads to development of a process of governance enabling the organization to evolve or pivot on its strategies in a fast changing ecosystem.
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