Building agile strategy
Building blocks for Agile strategy
This article suggests that there are a number of identifiable steps to take on the journey towards an organization being capable of an agile approach to strategy. As noted in a previous article “What the CSO can learn from the CIO”, establishing an agile approach, processes, and culture within IT is a lot simpler than doing so across the entire business. I suggest that the challenge of becoming agile for strategy is easily one of the most difficult faced by CEOs. The rewards of getting it right though lie in the ability to substantially improve competitiveness.
The i-nexus strategy execution consortia group and strategy execution hub have been proving grounds for the development and refinement of an execution maturity model – a model that will provide a clear route to agility.
This model outlines the key stages of progression to the Integrated state. Our research suggests that roughly 50% of the global 5000 companies are at the Disciplined stage, followed by 30% in stage 1 (Traditional), 15% in stage 3 (Aligned), leaving a handful at the Integrated stage. Having good insight into one’s starting point is an essential part of a journey. Each stage builds upon the previous one e.g. organizations at the aligned stage, maintain the disciplines from stage 2 and add other new capabilities. This means that it’s unlikely that an organization will successful skip a stage. Let’s look at each of these in turn.
Traditional: Organizations at this stage tend to have a traditional budgeting process in place that is distinct from the strategy process. Given this, where there are conflicts, the budget often wins. Strategy tends to focus mainly on formulation with large scale mega projects identified for financial and resource planning purposes. A cascaded approach to individual goal setting is used often with the help of a talent management or HR software solution. At best, employees have a general overview of the strategy however tend to be unclear on how to get involved.
Disciplined: In this stage, the key step forward is the introduction of disciplines around problem identification, project management and problem resolution in a team and individual setting. The establishment of a Lean, Continuous Improvement (or similar) function is a clear indicator of an organization at this stage. The investment and focus in these areas kicks off the beginnings of the cultural change required for agile. Where this succeeds, individuals at relatively junior levels become empowered with skills and space to solve their own problems. Regular reviews of progress become part of standard work. We would argue that an innovation function or program would also fit into this stage as similar disciplines and processes are required. A key additional benefit at this stage lies in the organization’s ability to cut costs and develop a cost advantage relative to competitors. What is clear in most cases is that the various improvement initiatives which can be substantial will be focused almost entirely on cost reduction and quality improvement. For other elements of the strategy, there’s an execution gap.
Aligned: Getting to the 3rd (aligned)stage normally requires the CEO or COO to take a decision that a central approach to governing the execution of strategy is required. This is not to say that everything about strategy is centralized, however there is a clear realization that without some central governance of execution, excellent execution is unlikely – particularly in complex multi – country environments. Governance is likely to take the form of a small, high level group of executives tasked with designing and implementing the processes, disciplines and reporting cadence required. Underpinning all of this is the adoption of a formal execution methodology such as Hoshin Planning or Balanced Scorecard (if used in a more modern way). Organizations at the aligned stage become adept at the distinct processes required for execution including:
- Goal Management
- Goal Deployment
- Project and Program Management
- Benefits Realization
- Performance Management
- Change Management
Key outcomes for organizations that master this stage are tight control over execution as a result of transparency and visibility as well as enhanced accountability for progress. Executives in an aligned organization will have much earlier visibility into progress against the plan when compared to organizations with lower maturity. This enables them to make faster course corrections – a critical part of the development of an agile approach.
Integrated: Our research suggests that there are fewer than 20 organizations at this stage today. This number reflects 2 things – that CEO’s have not been focused on strategy execution until recently and that getting to this stage takes time. At this stage process, capability, and culture are totally integrated to support an overarching “Business System” that balances the often conflicting demands between day to day and strategic priorities. To get to this stage, an organization will have retained the disciplines of Lean or similar, integrated these with Hoshin planning and then shaped the culture to support integration. The poster child for this stage is Danaher Corp. Danaher has consistently outperformed the market by orders of magnitude. The reason many people have not heard of them is that they are fairly secretive around and protective of their Business System – taking a different approach to Toyota’s transparency around their Lean system.
Changing the formulation process
Its one thing putting the foundations in place to move up the maturity curve, however for any strategy process to be fully agile, the content of the plan and nature of planning itself needs to change. The strategy needs to be viewed increasingly as a series of hypotheses to be tested rather than being fixed on a single direction. The well established Lean concept of Plan, Do, Check, Act could be applied here to support the notion of an incremental strategy. This new approach does need to be accompanied by a well established “sensing” capability so that an organization is very aware of what’s going on in its ecosystem. As we’ve noted, these are all significant changes to current practice. We also know though that the potential rewards are huge.