14/7/2020 How to Breathe New Life into Strategy | Bain & Company

Brief

How to Breathe New Life into

Strategy
Fixed-cycle is out. Dynamic, adaptive and connective is ( inally) in.

By Herman Spruit and James Dixon

July 09, 2020 • 10 min read

At a Glance

 The rigid, conventional process for developing strategy hinders rapid

responses to insurgent competitors and crises—a harsh reality made
even more acute by the Covid-19 pandemic.

 Some leading companies split their planning into two discrete agendas,
based on the current and future business, resulting in a more dynamic
strategy.

 Organizations can continuously reinvent themselves with a living

strategy to meet changing customer behaviors and navigate a world of
routine disruption.

Incumbents have long recognized the need for strategy to become faster
and more flexible. Nimbler, customer-focused digital insurgents have been
carving out parts of incumbents’ market share and producing a stream of
new challenges. Investors have been pushing for more influence—and
loudly when they feel their concerns are going unaddressed.

Most CEOs realize the brittle, fixed-cycle approach to strategic planning

isn’t working anymore. For decades, they’ve made future-altering decisions
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according to quarterly and annual deadlines, rather than rapidly changing

customer behaviors, technology trends and competitor moves. They’ve
been flexing old muscles on new issues.

The Covid-19 pandemic puts this problem in sharp relief—and helps CEOs
to cross the chasm. By taking advantage of this abrupt disruption, they can
make their companies more adaptable and resilient for the future.

How? It starts with a fresh approach to strategy that splits the planning
process into two distinct agendas. The delivery agenda focuses on the firm’s
essential purpose: how best to fulfill its promises to customers and
stakeholders consistently and systematically, every single day. The
development agenda reckons with the strategic choices of the company and
determines how to build the next generation of businesses that will serve
changing customer needs.

It sounds simple. Yet experienced leaders recognize the change in approach

is profound. This isn’t how most companies think about strategy today.
Rather, leadership teams often produce documents full of generic initiative
headings, such as “win in China,” which don’t specify the issue at hand, the
expected outcome, the timetable or the resources required.

The delivery and development agendas reach far beyond creating two
separate lists. They constitute radically different activities and require
different ways of working. While they work in concert, they run with
different meetings, different information, different cadences and different
mindsets.

The result is a vibrant, living strategy. It’s dynamic; it doesn’t become

irrelevant before the ink is dry, because it’s composed of a series of
decisions over time. It’s also adaptive, as leaders constantly evaluate the
shifting business environment across forward-looking opportunities,
threats and lessons. And it’s connective. Strategic decisions quickly and
directly gain traction through resource allocation and performance

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management processes, ensuring everyone—from the front line to

investors—is on the same page.

The delivery agenda

This element of strategic planning focuses on fulfilling the promises of the
existing business, on time and on budget. Objectives and playbooks clearly
define what people need to do and how they need to do it.

A key principle of the delivery agenda is empowering teams to execute

those known playbooks. The guidelines are nonnegotiable, the decision
rights are unambiguous, and thus, the outcomes are predictable.

What does the delivery agenda look like on the ground? Teams don’t waste
their time and energy worrying about strategic issues. By eliminating any
confusion around expectations and motivations, they focus on
continuously and consistently meeting immediate customer and
stakeholder needs. At the same time, executive leaders concentrate on
accelerating the delivery of successful initiatives or rapidly course-
correcting and removing roadblocks where needed. They repeatedly ask,
“What’s off-track, and how can we intervene? Have we identified the root
cause of the problem? Who has the opportunity to accelerate ahead of
schedule, and how can we help?”

Delivery leaders also empower the front line and other execution roles to
evaluate data and quickly change customer offerings or respond to
customer needs. Some executive teams establish several leading indicators
in each business unit—for market growth, customer reactions, competitor
moves, major disruptions and more. With hard data on hand, delivery
teams are alert and responsive to shifting landscapes and promising
opportunities.

When they find the firm does need to change its playbooks and routines,
leading delivery teams employ a “pit-stop approach.” Working like a
Formula One crew, they efficiently apply known and practiced solutions.

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They don’t engage in spontaneous, drawn-out experiments or invent new

ways of working. They need the car back on track as soon as possible, in
order to win the race. By enabling delivery teams to operate on real-time
analytics and swift reaction, winning companies build greater adaptability,
more customer relevance and a learning culture.

Many CEOs have experienced this in recent months. The pandemic

temporarily cleared up the delivery agenda. Leaders got back to basics,
telling their teams, “We have to do X now, and this is how we’ll do it.”
Because executives couldn’t afford the time to debate, the firm moved fast.
CEOs ignored the organization’s layers and went directly to the people who
could make things happen quickly. Through these new activities and ways
of working, they realized how the delivery agenda should be.

To lock in their new pace and vigor, CEOs can start by removing all of the
“unknowns”―things that still require experimenting, iterating and
adapting—from the delivery agenda. The delivery organization becomes a
lean, mean machine. It needs much less management, which is a great
thing, because the firm needs those freed-up leaders elsewhere, namely, on
development teams.

The development agenda

This element tackles the ambiguities in the strategy, where leaders need to
test and learn their way to the right solutions. A major part of the agenda
involves adapting the existing business for the new world. The teams are
searching for the next big idea that will regenerate the firm. They’re making
strategic choices and often building new businesses.

Development teams systematically eliminate uncertainty. They protect

difficult issues from the rushed, deadline-driven solutions that so often
result from calendar-based planning. Instead, teams have the time and
space needed to constructively debate alternatives and narrow the
possibilities down to an inspiring answer. They can’t always commit to
numbers right away, because too much is unknown. That’s acceptable—it’s

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even celebrated on some of the most advanced leadership teams. With each
iteration, development teams try to solve the “failure point,” or the next big
potential problem threatening to derail them. And they might fail. But
they’re given the freedom to eventually reach a winning solution.

At one bank, the development agenda includes an initiative to build up

wealth management services in Europe. While it may take two or three
years to reach their desired end state, leadership will know in six months
which solutions to continue pursuing and which to throw out. They can
secure a sense of certainty for an uncertain future.

Although separate, the delivery and development agendas speak to and

depend on each other. For example, at one leading enterprise software
company, the delivery agenda included an initiative to improve the day-to-
day productivity of the salesforce. At the same time, the development team
was working on shifting the business to a cloud-first, software-as-a-service
model. As they refined the transformation plan, executives realized that
they needed a full overhaul of the sales model to deliver the new strategic
goals. Connecting with the delivery teams, they quickly reframed the sales
productivity initiative as a vital element of the e-commerce transformation
and moved it to the development agenda. The effect was liberating. The
organization was able to think much more broadly and disruptively about
its sales approach. The development team discovered ways to build a better
customer experience, strengthen client relationships and speed up sales
cycles. With the new model in place, sales quickly grew.

As the organization develops a new rhythm by shuffling initiatives between

the two agendas, it begins to move at an upbeat tempo. Whether their job is
to think about the vital activities of today or discover new growth and
renewal for tomorrow, delivery and development team members both
become faster, more effective decision makers and executors.

The human side of strategy

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In order to pull off this drastic departure from traditional strategic

planning, leadership teams need to be committed to changing some crucial
behaviors.

Static strategy expects the delivery and development discussions to occur

with the same teams, in the same rooms, during the same meetings. At one
moment, the CEO is castigating a leader over poor performance on critical
financial targets. She’s pounding the table, arguing that the organization
has to simplify and home in on its core. She wants the team to renew its
commitment to avoid distractions and get the job done.

In the next moment, she’s asking the same leader to suggest partnerships
for the digital strategy. She wants her team to look around corners and
debate various options. The situation requires the leader to dramatically
shift from a defensive mindset (“I’m sorry, but let me explain”) to a growth
mindset (“Here are innovative new possibilities”) in the span of five
minutes. That’s impossible. It defies human nature.

With a living strategy, the delivery and development agendas use different
meetings to sort out different behaviors. In delivery meetings, team
members solve problems and deliver results. In development meetings,
team members come to the table with an open and innovative mindset for
making strategic decisions, experimenting, testing and learning. CEOs can
cultivate the environments for each of these dialogues and manage them
accordingly, rather than delegating it as a staff activity.

When they hold delivery meetings, for instance, leading CEOs abandon
backward-looking dashboard reviews in favor of constructive dialogues
aimed at accelerating results. About 20% of meetings are short performance
reviews that examine business and financial performance, pinpoint the
root cause of any issues and predict future performance. But 80% of
discussions are debates that identify and explore issues. By course-
correcting where needed and revving up on-track initiatives, team
members sharpen the strategy and gain momentum. These discussions also

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serve as coaching and experience-sharing sessions that foster talent and

bolster capabilities.

A more connected organization

The distinct separation of the delivery and development agendas cascades
behavior change throughout the organization. However, real acceleration
won’t happen without tying the agendas to budgets and performance
management processes.

In traditional strategic planning, all too often, the firm’s various systems
lack cohesion and integrity. For example, the head of China operations
might argue that he can’t meet the strategic goal of “winning in China”
based on current investments. During the financial review, the organization
cuts the commitment to make the budget work. But there’s no
reconciliation with the strategy. No one revises it to acknowledge that the
firm has decided not to win in China, at least not this year.

Some CEOs tightly weave the strategy throughout the organization by

negotiating performance contracts for resources with executive leaders. In
the delivery agenda, leaders understand that resource allocation is based
on achieving specific outcomes. In the development agenda, where the
outcomes are unclear, CEOs distribute resources based on the ability to
eliminate uncertainty through experimentation. Performance contracts
aren’t siloed or business-unit specific; they acknowledge the
interdependencies of the entire organization. They align executives to
deliver on strategic promises cohesively and effectively, working as a
harmonious unit.

Propelled by this strongly linked strategy, leaders set the cadence of the
delivery and development agendas. They assemble and disassemble cross-
functional teams according to firm priorities. Executives design career
paths and help individuals rotate through roles in both agendas. They
provide regular encouragement to help teams overcome the inevitable
bumps in the road. They create communities of experts who share lessons

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with their peers. They track promises to stakeholders and communicate

progress. This isn’t conventional, stale management; leaders act as coaches
and mobilizers.

As leaders nurture the independent delivery and development agendas,

clarity permeates the organization. Pragmatic priorities and objectives can
mobilize, inspire and align people. Delivery teams know the issues, the
options and the people working on each solution, and can ruthlessly focus
on that agenda. Development teams experience a similar clarity, ensuring
the strategy has long-range headlights illuminating the obstacles ahead as
well as opportunities to accelerate. And both teams cultivate a stronger
sense of purpose and identification with the customer mission. CEOs who
have adopted this approach note that these teams aren’t debating each
other’s alternatives or fighting over resources. Instead, they’re advancing
toward clear objectives and pulling together.

Distinct, well-defined strategic agendas also reassure boards. Board

members want to know that executives are addressing their concerns, and
the development agenda provides assurance. CEOs can map quarterly
meetings and messages to investors 12 to 18 months out, providing updates
on progress. Investor relations similarly become strategy-led, rather than
strategy becoming investor-led.

By orienting the strategic approach to real ways of working, executive

teams can make a living strategy the singular, steady heartbeat of the
organization. Now more than ever, CEOs have a chance to implement this
real, enduring change. While no one has all of the right answers yet, it’s
imperative to get started before the moment passes. After all, the need for
flexibility and responsiveness will extend far beyond the current crisis.
With a dynamic, adaptive and connective strategy, CEOs can build a faster,
more resilient firm in the short and long term.

TAGS

Business Strategy Coronavirus Strategy

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