The three key ingredients to strategy development
There seems to be a pattern of overcomplicating strategy development rather than simplifying it and this can make it feel like a daunting topic. This is not a surprising outcome when there are educational institutions, research academics, and global consulting firms issuing a continuous stream of publications dedicated to exploring the topic.
The development of strategy does not need to be a complex process – but it is a process. Like any process, the outcome is enhanced if three key ingredients are incorporated including;
- disciplined execution of structured process steps,
- actively engaging the right stakeholders in the right way in the process, and
- executing the process within a clear governance framework that ensures the strategic outcome is enabled and aligned within a defined scope.
Guberno Consulting supports many leadership teams across a diversity of sectors and businesses to navigate the strategy development process with a particular focus on ensuring these three ingredients are incorporated.
Strategy development is another business process
Guberno recommends using a simple but powerful life cycle approach to the development and execution of strategy. There is power in the discipline of working sequentially through the life cycle with a group of relevant stakeholders. Active engagement in the process helps to improve the quality of the strategy development and leadership alignment around strategy execution. Both are critical elements of a successful strategic planning outcome.
A summary of the strategy development process steps and key activities is outlined below.
- Step 1 Measure and review – The strategy development process starts with documenting and aligning key elements of the company’s current state within the relevant sector. This includes dissecting an internal context for the strategy development – current operating performance, capability platform (assets, internal expertise and external partnership), and business model. It should also give consideration to where the company sits relative to the external context for the sector including; sector demand trends (where is the market and where is it growing or shrinking), the competitive environment (who is playing currently and how does the market operate), and industry trends (what will tomorrow look like relative to today).
- Step 2 Identifying and defining – A strategy process with an unclear target for success lacks direction. Ideally this should be a range of qualitative and quantitative descriptors across areas, such as financial performance, organisational capability, organisational culture, strategic positioning in the market, customer perception, brand equity, assets, and operating capability. Steps 1 and 2 combine to define the strategic gap that the process is attempting to bridge.
- Step 3 Analysing and syndicating – This is the diverging part of the strategy development process and opens the full spectrum of opportunities where the company could decide to operate. This should involve a broad mapping of each of the industry sub-sectors to fully understand the available options. It is encouraged that teams reach out to a broad array of internal and external stakeholders to develop and refine the sector’s broad opportunity set. After defining the opportunity set, the task is to then filter and prioritise of where the company will bias its focus within the sector, and for what reasons.
- Step 4 Formulating and documenting – This is the refining and communicating part of the strategy development process where the team define what the key elements are required to deliver prioritised solutions. This will require clear definition of the target solutions and identification of the capability platform required to deliver a compelling solution in the context of a competitive environment. Identification of critical strategic customers, partnerships, and/or M&A and what the nature and credibility of the partnership become important parts of the strategic narrative.
- Step 5 Approving and endorsing – Developing alignment and buy-in to the strategy is a critical precondition to effective strategy execution. It is expected that this process step will involve a range of informal and formal syndication sessions with a range of internal and external stakeholders to test alignment and coherency of the preferred strategy. It is expected that engagement with priority strategic partners will form part of this phase to test the strategic thinking around the nature of relationships with preferred strategic partners.
- Step 6 Implementing and executing –In this final stage there is an important link between strategy development and business planning. It is expected that the strategy identifies key actions, accountabilities and milestones that are pre-conditions to effective strategy execution. These outcomes need to be interfaced with the operating business planning process to ensure alignment and mobilisation of the right resourcing to deliver against the targets.
Stakeholder engagement is core to capturing input and delivering alignment
The quality of stakeholder engagement is of equal importance to disciplined adherence to the strategy development life-cycle process. To ensure a quality engagement process, consideration should be given to the composition of the core team, access to expertise outside of the core team (and outside of the company), interaction with the broader operating business, and syndication with broader Executive Leadership. The primary objective of a successful engagement process is to bring stakeholders along the logic journey for the recommended preferred strategy relative to the range of viable alternative options, and to seek alignment around the elements of the capability platform required to deliver the strategy.
- Core strategy team – It is recommended that a small coalition of internal experts form a core strategy development team. This has multiple benefits including; increasing the diversity of thinking and input into the strategy development process, sharing the load for the tasks required to deliver the strategy, and increasing the level of alignment by broader participation in the strategy development. Having a pool of internal facilitators to lead activity workstreams is valuable.
- Sector specialists – In addition to the core strategy team, it is recommended to reach out and engage with a range of relevant internal and external stakeholders who bring potentially different insights and expertise into the strategy development. In particular, interaction with the research and development and data analytics teams can be particularly fruitful in understanding the current and emerging business.
- Operating business – Finding ways to engage the operating business is a way to garner market intelligence input, competitive activity, emerging sector trends, and insight into capability within the regional operating teams. Active engagement with the operating business should ensure ‘no surprises’ on finalisation of the strategies in the lead up to business planning.
- Executive leadership – It is recommended that Executive leadership engage through the strategy development process. A primary mechanism of engagement is through the project governance structure. This formal interaction can be supplemented by a range of informal interactions as the strategy evolves.
Governance is a structured way to influence and guide the strategy outcome
A formal and cascading governance structure is key to maintaining discipline in the strategy development process. Ideally the strategy governance team should incorporate key leaders who are integral to both the strategy approval and the strategy execution task. The governance team controls the scope, timeline, key milestones, and resource allocation to complete the strategy development. Importantly, governance provides a structured way for senior stakeholders to engage as the strategy evolves and to influence the direction and final outcome of the strategy. A successful strategy development process is when there are no surprises at the point of strategy endorsement. It is common for the core team to run a similar project management structure to ensure disciplined management of resources to meet agreed timelines and milestones.
An approach to strategy development that a business of any size or type can adopt
The strategy development process is a high leverage process for an organisation. If the process is embraced with a discipline to work through a series of process steps, in a way that engages actively key stakeholders, and delivers under the guidance of a functioning governance structure, it is a process that a business of any size or type can adopt.