All strategy is a guess
The title of this article is the opening line from a note sent by John Spence to the co-author of their new book.
He’s right. No matter how much input from people, the data analysed, or how well thought out a strategy is, it’s an educated guess. You’re trying to solve a puzzle with the potential for many outcomes.
Strategy is a puzzle…
It reminds me of The Rubik’s Cube. Watching geeky characters twisting cubes of colourful blocks left to right, right to left, up and down, and back again…. trying to find a solution.
Like the manipulators of those cubes, good strategists look for an acceptable solution. Then they look for another solution. And another. Ultimately, combining multiple solutions helps them arrive at the optimal solution.
The fastest way to match the colours on all six sides.
But in business, there’s no one outcome or guaranteed solution…
I might be able to predict my total sales for the year with some degree of accuracy, but it’s impossible to predict what might happen in the macroeconomic environment. Supply chains are disrupted, new legislation comes into play, technology disrupts, and new entrants emerge – any of which might invalidate my predictions and my assumptions.
What has to prove true for this to work?
In his book, How Will You Measure Your Life, Clayton Christensen recommends identifying the most important assumptions you have to prove correct for your projections to work and figuring out how to track them.
We don’t know how many customers will respond to our new product, if our marketing will resonate, or what the true cost will be, and so on.
So, we make assumptions.
But our strategic plan is only as strong as the assumptions it is based upon…
For example, when Disneyland launched in Paris, the project relied on assumptions about the total number of visitors and how long they’d stay. The projections were based on data that considered population, weather patterns, income levels, and many other factors. The strategic plan projected 11 million visitors per year. And because data from other parks showed that people spent an average of three days at a park, the model predicted 33 million “guest days” per year.
The only problem, in other parks, Disney had built forty-five rides - keeping visitors occupied for three days. Disney Paris only had fifteen rides. And you could do everything in a day.
“Some person way down in the organisation had made an unconscious assumption about Disneyland Paris being the same size as all other parks.” - Clayton Christensen.
Assumption…the mother of all strategic f^ck-ups…
Assumptions are one of the biggest causes of failure. When you hammer out a strategic plan with your team, it’s easy to get caught up in the excitement of projections. But even with all the data and agreement, your initial projections are rough and based on assumptions.
A seasoned leadership team will ask: “Which of these assumptions need to prove true for us to realistically expect these numbers to materialise?”
Christensen suggests ranking your assumptions on a list by importance and uncertainty. Then finding ways to quickly and with as little expense as possible, validate them.
According to Spence, one of the most important things a strategic thinker can learn is to say “NO”. Regardless of the size of the business, particularly in small businesses, allocating resources correctly is critical.
Entrepreneurs are easily distracted by new opportunities, the latest marketing tactics or the next big thing. But with limited resources, pursuing these distractions detracts from our strategic plan.
In my career, I’ve seen numerous business owners (myself included) pursue opportunistic endeavours with little consideration for their effect on the execution of their strategic plans.
Making difficult or unpopular decisions about what ideas not to invest in, what markets not to pursue, which customers to turn away and which projects to walk away from, even when there is a large sunk cost, is the mark of a good strategic leader.
Because when you’re pursuing too many markets, juggling too many projects and running multiple strategies… nothing gets done. Your business loses traction and begins to slip steadily downhill.
Saying NO and sticking to your strategic plan helps you decide how to allocate resources to give you the best possible success.
The best strategy in the world is useless without disciplined execution and a culture of accountability.
Most of us (CEOs + Leadership Teams) love to do strategic planning – a couple of days outside of the office to work on your business. Time away from day-to-day distractions to focus on the future. But few of us enjoy the work required for strategic execution.
It’s fun to do strategy work, but execution is extremely hard.
Spence offers this equation, strategy = valued differentiation X disciplined execution. The reason he puts ‘disciplined execution’ at the end is that even if you have tens everywhere else, anything X Zero = 0.
Translating strategy into clear goals and actions is tough work. But executing those actions is even tougher. And that’s why so many strategic plans never deliver results. CEOs and their Leadership teams fail to execute.
The Glue That Binds…
The 3-Year Highly Achievable Goal (3HAG) framework is the glue that holds your strategy and execution together. The 3HAG flows through every system in your company, keeping them all connected and it’s where strategy, execution, and cash stay aligned and relevant.
Shannon Susko and her team at Paradata developed the 3HAG framework, drawing from the wisdom of business thought leaders. The model has helped hundreds of businesses, from start-ups to multinationals, visibly map their success and realise it while reducing risk.
Your 3HAG serves as a twelve-quarter-by-quarter framework for the next 36 months of forward movement toward your strategic goals. Three years, 36 months, or 12-quarters. However you look at it, the 3HAG framework helps you get into the nitty-gritty details of strategic execution with your leadership team.
Revisit your strategy regularly
Strategies are not evergreen. They need to be revisited and revised regularly. Getting where you’re going is never a straight line in business–teams change, pandemics take hold, market downturns hit, and sometimes you slide backwards.
“Real strategy–in companies and our lives–is created through hundreds of everyday decisions about where we spend our resources.” - Clayton Christensen.
Keep your long-term goal visible and aligned with your execution map. Adjust, pivot, and stay aligned with your goals - despite market forces, new opportunities, and new challenges.
Following the 3HAG framework will help you move forward with increasing ease, speed and confidence.
In most companies, meetings are viewed as a waste of time. However, when systems like the 3HAG framework and Metronomics are used, meetings become the key to saving team members’ time - ensuring that your strategic execution plan is focussed on and achieved.
The best companies in the world create a reliable rhythm of carefully structured meetings with standing agendas.
Accountability - holding people accountable to deliver their KPIs
Here’s a typical meeting rhythm adapted from Mastering the Rockefeller Habits:
Why Strategy Fails…
- Very little time is spent on figuring out how to execute the strategy.
- The plan never gets traction because it's forever changing.
- No follow-up occurs after the strategic retreat.
- Top heavy - the plan is created at the top without much input from the people charged with executing the plan.
- Resistance to change in the business.
- Too many strategies and goals. People get overwhelmed. The leadership team keeps adding new things and not removing them from the list.
- Poor communication. Leaders throughout the organisation must focus on regularly communicating.
I’ll leave you with this final word from the remarkable Clayton Christensen:
“What we can learn from how companies develop a strategy is that although it is hard to get it right at first, success doesn’t rely on this. Instead, it hinges on continuing to experiment until you do find an approach that works.”
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