There is little evidence to suggest ‘formal strategising’ makes any significant contribution to profits. For the analysis you build your strategy on is almost guaranteed to be wrong. So, when choosing your next strategy provider don’t choose the best one - choose the cheapest, as this will make it easier for you to ignore their recommendations when unpredictable reality bites.
Formal cycles of ‘meetings, discussions, and negotiations’ build consensus about the direction the organisation should take and allocate roles and resources to realise it. But formal strategising is dogged by flawed inputs: inaccurate perceptions of the current market; unrealistic assumptions about firm capabilities; and wild guesses about the unpredictable future. So, what if it’s not a brave new world your strategy is signposting you towards, but is instead entirely the wrong direction?
Firms adopting formal strategies tend to be less profitable. Not only do they rely on analysis about the future that’s guaranteed to be wrong, but they also depend on formal reports for communication and evaluation of results. The result is a rigid organisation - too slow to respond. Crucial information gets stuck in non-dynamic feedback loops. And when the future doesn’t pan out as planned they become increasingly fragile and susceptible to implosion or collapse.
Profitable firms, on the other hand, tend to have managers that make use of informal channels of communication and evaluation. This fosters an increased awareness of the knowable present (what’s really happening now and why). Strategies built on awareness change effortlessly as new evidence and insights are discovered. For they are built on an ongoing search for the ‘truth of the position’.
Like a game of chess, the future has too many variations to viably calculate everything that might happen. So, like the chess grandmaster we must seek to make moves that improve our current position, recognise favourable patterns and deploy resources to stabilise and amplify areas of strength (and disrupt areas of weakness). For this creates openings. And one doesn’t win at chess by making moves directly aimed at mating your opponent or winning particular pieces, but by cashing on sufficient positional advantage and timely exploiting opportunities.
In a complex world we must be wary of creating arrogant strategies. Part one of this series of blogs warned against the danger of strategy being developed at the top, then passed down to ‘operationalists’ to execute. Part two explained how culture acts as a barrier to successful implementation. This final part argues for a strategic process built on awareness of what’s really happening and why. And next week’s blog will introduce a viable method for doing this.
Picture a group of monkeys in an enclosure. A researcher enters and places a ladder right in the middle of the group with fruit on the top step. The monkeys immediately go for the treat with the quickest racing to the top of the ladder. But at the moment s/he picks up the sweet-smelling fruit s/he is sprayed with freezing cold water. And so are all the other monkeys.
After loud protestations the monkeys dry themselves off and then try again: with the same result - a cold soaking. After a few further tries the monkeys make the link between picking up the fruit and everyone getting wet.
They quickly self-regulate: physically - even violently - preventing each other from climbing the ladder as none of them wants to get soaked anymore. So the researchers - belonging the crafty primate family of homo sapiens - replace one of the monkeys in the enclosure with a new one; one who hasn’t been part of the experiment until this moment. This new monkey takes a bit of time to size up his new surroundings and neighbours. Failing to understand why no-one else is going for the fruit at the top of the ladder he makes a dash for it. He's violently beaten back into a corner.
The researchers continue to introduce a new monkey - replacing one of the original group - every few days. The same routine is repeated with even the new monkeys now joining in the violent beatings, until the moment arrives where all the monkeys in the enclosure are 'new'. None have never been up the ladder, or been sprayed with cold water. And what happens …?
None of the monkeys go up the ladder to collect the fruit.
This famous thought experiment seeks to explain how deep and dominant culture runs within groups. It isn’t just current behaviour that dictates how the group acts, but the memory of previous actions - even if they happened before this group's time. The collective memory permeates new recruits, indoctrinating them stories of ‘how we do things around here’ in order to survive or thrive. And these stories are rarely challenged as the consequences for breaking them may be too high (‘we tried that before and it didn’t work’, ‘that won’t make you popular’, ’someone got scared for doing that’)
This is why changing a corporate culture can be so difficult - so much more difficult than changing the strategy if the two don’t align. Attempts to change culture must start with discovering what the culture really is - not what you think it is, or would like it to be - but the real culture that infects everyone who comes under its influence. This spreads through the organisation's stories and legends and only when you stories - not only about the present and the future, but about the collective past as well - can you nudge the culture.
Often it’s far quicker - and more profitable - to change your strategy than it is your culture.
The third and final part of this series of blogs - Arrogant Strategies - will be published next week. In the meantime, for free information about how to map your culture and discover the dominant stories driving it contact firstname.lastname@example.org
Strategies are often created with little thought about how to implement them. In dangerous times - such as those facing organisations doing business in Russia today - a smart strategy is simply not enough to survive or thrive.
Corporate strategies often look great on paper - often designed by the biggest brains for even bigger money. But these glossy visions of the future and the steps needed to exploit opportunities must do more than impress senior management. To add value, which organisations need now more than ever, strategies must be rigorously executed. But too often, too little thought is given to which obstacles the strategy will meet and how to overcome them.
Management guru Peter Drucker famously quipped that “culture eats strategy for breakfast”. Yet this simple insight hasn’t permeated the Russian business climate yet - even amongst those with international perspectives. Culture is treated as a soft factor - less important and therefore relegated to the non-strategic HR function. The right culture is a nice to have, but not a must have. Strategy on the other hand is a hard factor - critical to get right and therefore hammered out on the executive anvil by those who really matter. Get it right, the mantra goes, and the future is ours!
Yet even the best strategies (those that forsake aspirational aims for brutal truths) give little thought to how to implement the strategy so it will deliver value. This operational area is of little interest to the big brains and VIPs of the strategy team and usually extends to no more than a commitment to some face time at ‘strategic roll out sessions’.
'Roll outs’ can take a few days or a few months, depending on the size and dispersion of the organisation. Strategic C-level players will use the opportunity for an annual ‘touch base’ with the rest of the workforce to evangelise on ‘how it is’ and ‘how it’s going to be.’ But do roll outs really do anything more than tick a box? (Tip: if someone can’t repeat the strategy back to you afterwards it hasn’t been rolled out).
Six months down the line you'll usually find nothing much has changed. Most people are still operating largely as they did before. Their behaviour may appear similar (non compliance) but if you scratch below the surface you may find the reasons to be very different:
Archetype A hasn’t changed his/her behaviour because s/he didn’t listen to what was expected during roll out
Archetype B listened, but simply didn’t get it
Archetype C got it, but doesn’t know how to do what’s being asked
Archetype D gets it, can do it, but disagrees with the strategy and sets about subverting it (maliciously or otherwise)
And archetype E looks round at everyone else not implementing it and concludes they shouldn’t either.
This is culture. And this is how it eats strategy for breakfast.
Failure to address this soft factor is ensuring your strategy - no matter how smart it is - is doomed. If your organisation can afford for strategies to be ignored in these difficult times, then either stop wasting resources on creating strategies, or stop relegating the critical element of culture to non-strategic actors and learn to get to grips with the organisation's culture yourself.
The second part of this blog next week will look at how you can effectively do this. If you can't wait until then, get in touch now with email@example.com for a no obligation discussion on how we're able to support you in this challenge.
Current business conditions in Russia are highly uncertain. Will things get better, or significantly worse first? Answers are hard to find, but they do exist - if you know where to look. For, in the same way blood flows through veins and oil through pipelines, critical knowledge flows through organisations. Tapping into these flows can make known what is currently unknown.
Given enough eyeballs, all bugs are shallow.
If you knew what every person connected to your organisation knew (management, staff, customers, suppliers) in one moment, you would have a rich and accurate picture of the current reality. And like a chess grandmaster you could see the truth of your current position; enabling you to strengthen where you are weakest and capitalise where you are strongest. Such knowledge is created and transmitted daily through tightly coupled human networks. The mechanism is the act of conversation, or the sharing of thousands of open-ended narratives (micro-stories without a beginning, middle or an end). For we humans evolved socially, learning from each other networks - clans, tribes, communities and now organisations - making us hard-wired to create and share 'critical to survival knowledge' on a daily basis.
Narratives are vehicles for sharing what we know and having our assumptions or insights confirmed, challenged or augmented. This is the process by which new knowledge is created and then transmitted. We do this not to populate the knowledge management systems our organisations have invested in (!) but as part of an on-going, natural process to make sense of the uncertain world around us so we can act better in it. Narratives take many forms: from the fairy tales we share with our children to educate them about the world, to the fragmented micro-stories we share with each other around the water-cooler, coffee machine or in break-out rooms at conferences that reveal and confirm what we must do round here to survive and thrive. If you want to learn about an organisation, listen to the stories being told.
The value of narratives is they reveal the context of what is happening. Multiple narratives, properly presented, can describe the world as it currently is; with all its various opportunities and threats. So, can organisational leaders who tap into these knowledge flows find powerful, (sunken-cost) assets to navigate the uncertain environments their organisations operate in?
Making sense of the uncertain
Today's business environment is uncertain because the world is changing rapidly in unpredictable ways. We know that building on shifting sands creates a fragile structure, but it should also be self-evident that ‘engineering’ idealised outcomes in an uncertain world increases organisational fragility when the future doesn't play out the way you hoped.
Nature evolves through 'listening' intently to the signals of change, however weak, and adapting. And it is far better for leaders to manage emerging beneficial patterns in their organisations rather than attempting to engineer idealistic outcomes. This requires decision makers ‘see the world’ through the eyes of their customers, staff, or citizens to build a picture of certainty - what's happening right now - rather than what might happen - and acting on those insights. Listening intently to the narratives may be the only way leaders - especially in Russia today - can navigate uncertainty, protect against emerging threats and discover the opportunities inherent in our uncertain world.
For more information about how to tap the knowledge flows in your organisation contact firstname.lastname@example.org
Leaders have a unique challenge in the 21st century. The ecosystems (the countries, markets and industries) their organisations operate in are increasingly volatile, uncertain, complex and ambiguous. And missing critical signals amongst the increased noise risks exacerbating existing fault lines in their organisation. What should leaders do?
Subject matter experts solve complicated issues at functional levels. But complex questions (e.g. top line growth, corporate culture, change or risk management) cut across specialised silos. Complexity therefore is always escalated up; making managing complexity the key strategic challenge for executives in the 21st century.
Yet complexity remains widely misunderstood; described as something ‘very complicated’ or confused with chaos theory. Complexity science itself ascribes distinct characteristics (non-linearity, emergence, unpredictability) that render traditional 'solutions' (e.g. best practice, ideal leadership styles) entirely context dependent.
To face a complex issue means to deal with a ‘brownfield’ context - never a ‘greenfield’. Complexity is located in the system (e.g. the organisation, market, population) and always has a history, yet is constantly evolving. And as we engage with it, it changes - often in unpredictable ways. This is why answers in a complex system often appear only in hindsight - though this doesn't lead to foresight (e.g. it seems obvious now that sub-prime mortgages were a bad idea, but likewise, today's Quantitative Easing is variously described as the only thing saving the global economy or creating an even bigger future crash. Only time will tell).
In a complex world context is king.
Idealised futures are an illusion - as are strategies based on certainties designed to get you there. The collapse of Michael Porter’s Monitor Group in 2012 showed that while rigorous strategic analysis can help explain how excess profits were created in the past, it's a poor predictor of how to generate them in the future. Even the best formal strategising can trap leaders into believing the future will be an extension of the past. But if the future fails to conform to expectations we are left naked and fragile, exposed to the elements.
Like King Canut ordering back the tide, we discover powerful natural forces defy command and control.
Yet, the natural world itself - of which man is a part - has adapted wonderfully to exploit complexity. Evolution works through a process of increasing variation (of options), basing selection on what works now, and replication (or starvation) of options based on hard evidence of suitability. Can leaders learn something from nature about adopting a rigorous external focus, increasing awareness of options through rapid trial and error, and creating mechanisms to amplify or dampen options in order to thrive?
Effective horizon scanning uncovers emerging signals that signal where and what to act on before its too costly or too late. Technology is a great enabler in this, if one caveat is kept in mind: technology without human interpretation is meaningless. Google may find anything you ask, but can’t tell you what to ask for. Uncoupled from humans technology merely increases the noise surrounding the signals. Data is dumb - to become meaningful information human knowledge must be applied.
Humans should be at the front and back end of technologically-aided decision-making - defining the issues to explore and discovering its real meaning. Technology therefore must be designed to fit the human - the way we are now, rather than the way we'd like us to be. It must augment our natural sense-making abilities, which have supported human evolution through millennia (a best practice case?).
Critical knowledge flows through organisations in human networks. Navigating these flows effectively can reveal the origins and dynamics of change. And as humans share such knowledge naturally, extrinsic rewards aren’t required to tap this. Humans naturally create and share knowledge in the form of narratives - ‘micro-stories’ - that are both universal (every culture has them) and democratic (no barriers exist to sharing). These are the 'water cooler’ stories that spread insights and enable other people to make sense of the world around them so they can act better in it. Harnessing these narratives is critical to making sense of and navigating complexity.
Critical knowledge can be leveraged at little extra cost.
Leaders must create the conditions for contextually-appropriate knowledge to emerge. Managing for serendipity (‘pleasant surprises’) means seeking fresh insights, rapidly field-testing coherent ideas and replicating success. But as genuine breakthroughs don’t come from established thinking patterns. Leaders must learn how to break through the hard-wired autonomic brain we rely on - which seeks first-fit, rather than best-fit, solutions - and instead become receptive to novel ideas. Strategic leadership is less about engineering future visions than it is about increasing awareness of the critical factors in our ecosystem, 'identifying the biggest challenges in them and devising coherent approaches to overcoming them'. Real strategy is about seeking the truth of the current position.
Navigating and exploiting complexity means leaders must take multiple perspectives to discover genuine insights. Going beyond objective numbers to understand the why. Rapidly testing coherent ideas as ‘safe-to-fail’ experiments. and feeding success, whilst starving failure of resources. No-one can ‘cut through’ or ‘simplify’ complexity - nor should we want to. Complexity contains rich opportunities in a changing world. Leaders employing naturalistic approaches can exploit complexity profitably.
SenseMaker® - an innovative technology first deployed by the Singapore government to detect weak signal terrorist threats - taps into mass organisational knowledge flows and helps join up disparate information from silos to form actionable knowledge. It presents whole network perspectives leaders can rapidly see and understand, helping unlock the organisation’s present evolutionary potential.
For more information about how to make sense of, navigate and exploit complexity for organisational success contact email@example.com
Shape the Future
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