Is Your Approach to Strategizing Making Your Organization Future Fluent?

By Dr. Michael E Nagel

Is your approach to strategizing making your organization more agile and capable of executing into the future? How can leaders effectively establish strategic direction during constant change? What approach might they use? Does your strategizing approach affect the type of leadership behaviors your executives demonstrate, and if so, how?

Having a clear strategy has a multitude of organizational benefits. For starters, strategy clarifies how an organization intends to create future value, including its outcomes and drivers. A clear strategy is a filter. It serves to rationalize decisions on the allocation of scarce resources. It legitimizes what an organization and its people will and will not do.

Without clear strategic direction, efforts to achieve organizational alignment and commitment don't get off the ground. When strategy is practiced as an integrative cross-functional discipline — as it should be — it is where questions about the kind of change, culture, leadership and talent an organization needs to move into the future get answered. If an organization is challenged in these or other areas, it is often because strategic clarity is lacking.

The Center for Creative Leadership (CCL) has long recognized linkages between enterprise strategy, leadership strategy and the longer-term performance outcomes of an organization. CCL's Crucial Imperatives of an executive team explains that a primary responsibility of an executive leadership team is to produce strategic focus — spending time at the strategic level, anticipating future opportunities and needs, balancing innovation and risk, establishing a vision, working out an enterprise strategy and overseeing its execution.

Yet the designers of strategy face a formidable list of challenges: global instability, turbulent business environments, disruptive new competitors, changing ecosystems, expanding customer choices, rival business models, disruptive technologies, shrinking IP advantages. Such challenges make the task of devising a winning, long-term strategy immensely difficult. [3]

Clearly the pace of disruption happening outside the firm needs to be matched with a similar creative and learning aptitude on the inside, so firms are able to make way for more relevant models and strategies. Explanations for why organizations fail to remain relevant center around two seemingly contradictory perspectives: 1) organizational inertia and the complacency it produces, and 2) a lack of organizational discipline. [6][7]

Organizational inertia is the tendency of a mature organization to become conservative and bureaucratic as it continues on its current path, with insufficient attention given to redirecting, creating, innovating or transforming in the face of changing market conditions. Organizational discipline, from a strategizing perspective, is the ability to pair opportunism with consistent decision-making excellence — preventing what Collins describes as undisciplined overreaching in pursuit of more. Together, these perspectives point to a disciplined style of opportunity creation practiced by strategic leaders that enables their organizations to continually renew.

Organizations in most sectors — cities, manufacturers, retailers, social services, religious institutions — are wrestling with the forces of change and how to continually flourish in the midst of accelerating life cycles. Sustained performance in this environment requires a dynamic strategizing approach, one capable of executing an agile strategy. [13] In response, executives are adopting strategizing approaches which enable their organizations to be strategy-focused and increasingly fluid.

Two Approaches to Strategizing

What is less clear is the approach leaders and their organizations might adopt as a means for establishing their strategic focus. Let's look at two approaches — the independent and interdependent viewpoints — for how executives might do strategy in their organization.

The Independent View

The independent view is a conventional approach that treats strategy formulation and implementation as separate, distinct, sequenced activities that progress in linear fashion. In this paradigm, formulation is a comparatively shorter, deliberate, early-stage exercise in exploring pathways, clarifying intent and establishing strategic focus.

The process that accompanies the independent paradigm is purposely deliberate, formalized, controlled and generally limited in participation. [14] Strategy is derived through a rational/analytical thought process. Perspectives and decisions on strategy belong to and are made by the participants — usually the top executives and perhaps strategic planning advisors.

This approach results in a fully articulated strategy that has worked out the set of strategic actions the organization will implement. The independent view holds that there is a sharp point of demarcation where the cognitive attention and human energy of participants shifts from formulating to a comparatively longer period of doing. The strategy is often communicated and cascaded to the organization, with business lines, functions and staff aligned for the purpose of executing.

A criticism of the independent view is that it embeds significant lag into the strategy process. Leaders wait too long for feedback and learning, preventing them from making more rapid adjustments or investments to a strategy that may or may not be a winner. Moreover, when the independent view is adhered to as a regular course of procedure, it may lead to the curtailment of new thinking for prolonged periods, as leaders become inured to the prevailing strategy rather than external and internal realities.

The Interdependent View

In contrast, the interdependent view is an alternative approach which treats strategy formulation and implementation as connected reinforcing activities. Given realities such as complex, rapidly changing environments, dispersed knowledge bases and cognitive limitations, the task of formulating a fully articulated strategy at one point in time is seen as difficult and potentially risky. In this paradigm, strategy formulation provides deliberate direction for implementation — but implementation also provides emergent insights that further clarify or reshape strategy.

Strategy is communicated and cascaded for the purpose of alignment and execution — but with a less prescribed tone and a more adaptable mindset. Strategic intent is made clear and it is held more loosely. In addition to the informal impromptu learning that happens between forming and implementing, there are also formal deep-dive learning activities that supply causal analysis into implementation results and permit leaders to regularly reexamine underlying assumptions.

Marketplace descriptions like VUCA (Volatility, Uncertainty, Complexity and Ambiguity) and RUPT (Rapid, Unpredictable, Paradoxical, Tangled), together with the related emphasis on organizational agility, help explain why the interdependent paradigm is increasingly relevant. [15]

The Netflix Example

Consider the case of Netflix, the company that displaced the once dominant Blockbuster. [16] Founded in 1997, its original strategy was designed to drive revenue from DVD sales. Selection and implementation of that model provided insights. Leaders remained perceptive and creative. The strategy morphed into an internet selection/mail delivery model where revenue flowed from monthly rental subscriptions. Learning and further experimentation followed. The strategy morphed yet again as the firm shifted from being solely a DVD distributor to also being a streaming platform.

Poor strategy selection and implementation errors were also present. Remember the misjudged price increase strategy? Or the requirement to hold accounts for both streaming and DVD service? Both led to immediate objections from subscribers and investors. Yet its leaders continued to learn and ideate, the strategy evolved and the organization adjusted. [17]

Today its campaign for global expansion exceeds 190 countries. Its model has shifted from exclusively renting licensed content to creating original content. Along the way, Netflix has accumulated a massive amount of valuable user data — becoming a pioneer in learning technology, using it to pinpoint and present unique content suggestions based on individualized viewer preferences. [18] Just as important as the strategy shifts themselves, the metrics behind these business model changes look nothing like the metrics used when the firm began.

Participation and Leadership Behaviors

When executives are considering their strategizing approach, an important issue to resolve is participation. Traditionally, strategy formulation has been the prerogative of a comparatively small set of top executives. There is growing evidence that by inviting broader participation in formulation, organizations not only benefit from a wider range of perspective — they also make more informed and appropriate decisions. [20][21] The effort it takes to invite and consider wider perspective is often returned by gains in understanding, change readiness, commitment, speed and agility during implementation.

What the interdependent view introduces is the need for sustained receptivity. The role of executive leadership is to ensure ongoing strategic learning and decision-making discipline is taking place within management and governance routines — so existing strategic assumptions are tested, nascent strategy might emerge and deeper clarification and adaptation of strategy can take place. As such, strategy becomes a continual learning process.

Traditional implementation modalities such as confidence, control, commitment and accountability are not displaced. Rather they now live in greater balance with other behaviors such as openness, habitual scanning, creative problem solving, creative ideation, real-time learning and adaptation — behaviors that modify the default settings of the strategy and organization.

It is this duality that keeps an organization future fluent. In summary, the two key reasons organizations don't remain strategically dynamic and competitive are 1) the absence of an increasingly interdependent approach for strategizing, capable of working against organizational inertia, and 2) low proficiency at the corresponding leadership behaviors that keep the organization on the path of becoming future fluent. The future winners, who will continue to flourish in the midst of constant churn, are more likely to be those who master interdependent strategizing as a lead-the-organization capability.