These times of global uncertainty require an adjustment to the strategic planning approach. Strategy is about making choices and building a sustainable competitive advantage to win in the marketplace. There are three main building blocks for formulating a strategy. First, understand how the external environment is evolving and how customers can be served in a differentiated manner today and in the future. Second, have crystal clarity on the company's starting position – its current advantages and the capabilities required for tomorrow. Third, set the vision, strategy, and strategic priorities, and ensure execution with clear linkage to financial and other outcome metrics.
While the building blocks of strategy remain the same, the current times call for revisiting strategic assumptions at a regular cadence, assessing capabilities and aligning priorities to changing times, as well as driving them collaboratively. Having led Strategic Planning in many companies and industries, here are a few lessons to deliver on an effective strategy and related outcomes in today's world:
1. External environment review: Explicitly revisit your assumptions with sufficient frequency
An external environment analysis evaluates the macro-environment (e.g., GDP, household formation), demand-supply drivers (car sales, home builds, for example, in insurance), consumer behavior, technology/disruption, competition, and regulation. The combination of these provides the context to set the strategy. In an assumption-based strategic planning world, study these elements closely, and monitor them to stay on course or pivot as needed. Below are a few suggestions on how the external environment assessment might adjust within the strategic planning cycle.
Incorporate structural changes: The last two years have seen several structural changes occur rapidly - accelerated consumer digital acceptance, the emergence of hybrid work, skill-set shortages, shifting populations between cities, local supply chains vs. global, etc. Take a step back to ensure the strategy is aligned with the shifting market context, adjusting priorities accordingly.
Increase frequency of macro-environment / driver reviews: In this volatile environment, revisit macro indicators and demand-supply drivers regularly (e.g., monthly). In that process, explicitly link major environmental changes to any required strategic priorities adjustments.
Create triggers and playbooks for big disruptions: Identify the top 10-15 external indicators that might impact the strategy and institute trigger points to take action. For example, increasing penetration of advanced driver assistance systems could change auto insurance's go-to-market strategy. Elevate the topic for strategic trade-off discussions when the indicators are out of range. Monitor these indicators on a quarterly or semi-annual basis.
Another approach related to the competition is to conduct competitive game boarding/ war games. Evaluate different competitive scenarios and use an "if-then" approach, which allows you to prepare pivots and responses. Conduct these exercises as needed, and document the options, thus creating the light-touch playbook.
2. Internal strategic assessment: Assess capabilities; align priorities to changing times
Ensure the company thoroughly understands its strengths and weaknesses unique to volatile times. Here are three main approaches to address this:
Explicitly apply the learning from the company's response to the crises of 2001, 2008-09, or Covid. While the current situation might be different, documenting lessons learned from past experiences will be a great starting point to address current issues. Consider whether new ways of working might impact future response plans.
Ensure that the strategic priorities align with recent structural changes in the marketplace. For example, in retail banking, customers that were digital hold-outs are now required to adopt digital banking. How does a bank strategy account for the accelerated shift away from in-person interactions and its impact on physical footprint?
Measure strategic progress through objectives and key results, making pivots as applicable. Monitor the key results quantitatively, and through progress milestones on initiatives like investments in the growth of a new business, a large tech program, and expense competitiveness. In total, monitor ~15-20 such key results at the highest level of the organization. Set a separate quarterly day to discuss progress, continuing / stopping / increasing investment options, and the length of the time to continue experiments/projects in the context of the overall portfolio.
3. Set the strategy: Be nimble and drive explicit choices collaboratively
Be bold and force more choices: Resources are always limited and particularly constrained in the current environment. Decide which initiatives will not be touched and which can be delayed or stopped altogether. Explore inorganic growth, given valuation levels of targets, and attract top-tier tech talent, given slowdown announcements by tech companies.
Build "One Plan" with early cross-functional participation. Ensure early involvement of cross-functional partners like HR, marketing, risk, and IT to allow for effective capacity planning given constrained resources. This also allows for diverse points of view, appreciation of the effort required as a team, and rallying behind a joint plan vs. a handed-down one.
Communicate more frequently and recharge the organization. Strategy used to be communicated once a year and revisited the following year. With pivots and re-allocations often occurring due to changing industry dynamics, communicate more regularly than usual. Ensure that the cascading of pivots / re-allocation decisions are happening as their execution lies with teams and front-line employees. Across the leadership levels, ensure every individual understands the change, what it means for them, and how different 'Monday morning' will be.
In one situation, we saw the changes discussed at the executive leadership level but with limited cascading and clarification to associates. This uncertainty led to higher employee turnover. With increased hybrid and remote work, employee engagement requires clear communication of purpose, big picture, and "what's in it for me."
We will see an uncertain macro environment with business model shifts continuing to accelerate. While the strategic planning building blocks remain the same, the process needs adjustments to prosper in these times. Revisit assumptions regularly, align priorities to changing times and drive explicit choices collaboratively.