Updated: Jun 5, 2022
Optimising the effectiveness of corporate strategy systems and content
Identifying a source of sustainable competitive advantage has long been the primary purpose of corporate strategy. Today, its purpose is much more than that; it is to act as a driver of organisational transformation and renewal of which, a competitive advantage is only a component. The need for organisations to engage in programs of transformation and renewal have increased dramatically in recent times. In the external environment leaders are witnessing extreme threats across the spectrum of the environment, economy, cyber space, political and societal behaviours, actions, and expectations. Internally, the 4th Industrial Revolution has experienced a new and invigorated momentum as a result of the Covid - 19 lockdowns while talent is still hard to find and customers continue to be more demanding and fickle.
In the years to come a strength in strategy will become increasingly more important. its legitimacy as the source of direction upon which leaders can maintain and mend existing business while seeking and realising new and innovative futures. Amidst an ocean of uncertainty prior to Covid -19 executives have emerged from the distraction with a new ambition to build a dynamic new future for their corporation. Buoyed by the success of new ways of working during Covid -19 the momentum for change is palpable. There is also an acknowledgement that prior to Covid - 19, corporations had been slow to react to change. The cause of that lack of momentum hasn’t gone away. It’s one thing to develop an ambition for change and a momentum for renewal. It’s another thing altogether to know exactly where that program of renewal will take you and what it will look like.
That’s why a transformation in the way leaders think and act strategically is also extremely important.
The wisdom of Harvard Business School professor Michael Porter guidance:
“For any organisation, developing a strategy is an act of leadership, and strategy represents perhaps the most powerful tool available to leaders to get all the individuals in the organisation aligned around a common sense of purpose and direction” [i]
It is our observation from our work with corporations that there is a considerable strength in leaders, their leadership capability however is encumbered by poor strategy practice. In response to this deficiency, the Strategic Management Institute (SMI) has developed an approach to strategy that will provide corporate leaders with a more appropriate approach to strategy practice than has been available in the past. Presented in the context of Third Wave Strategy, SMI’s approach is designed specifically to empower leaders to navigate increasing disruption, volatility, complexity, and uncertainty.
Third Wave Strategy looks beyond systems and process to include in its methodology an acknowledgement that strategy practice should be conducted within the context of a system, not a process. The system developed by SMI is illustrated at a high level in Figure 1. Consisting of four related elements it is depicted in the form of a construct he refers to as a fully integrated, Third Wave Strategy framework.
Figure 1: Illustration of a high level, fully integrated Third Wave Strategy framework
The Third Wave Strategy microsystem depicted in Figure 1 recognises that the driving force of the “remastered” version of strategy is the much admired Strategic Plan, but in the past, this tool has had its limitations. Most evident amongst its failings is its limited scope which is constricted to the very short term future. As demonstrated in the framework, strategic planning is not the only element that contributes to the construct of a modern day, ongoing and far sighted strategy system.
No strategy system will be viable without a commitment to a deep level of stakeholder engagement and a recognition of the need to not only proactively adapt to change, but also to invent the changes that will lead to the creation of ‘new futures’ altogether. To get to this self-defined future, Hunter (2020) reports that Third Wave Strategy is grounded in a philosophy that suggests that its content is continually, informed, reviewed, and renewed. In this way he suggests, the most effective way to lead and indeed, reset corporate health and wealth creation objectives to:
“be prepared to adapt to foreseen and unforeseen change initiated as a result of factors beyond the firm’s control and equally, be prepared to invent acts of (sometimes disruptive) deliberate change, created as a result of decisions taken within the firm’s control.”
Such a doctrine requires the strategy practitioner to think and act in a context Hunter refers to as sponsive strategic thinking. In the context of organisational renewal he suggests, this will require the adoption of a philosophy of sponsive strategic change. He defines this form of change as: “A knowledge driven change in an organisations direction that is provoked or evoked as a result of a change or new opportunity that becomes apparent within a system’s internal and/or external environment.”
A responsive strategic change is one where: “a firm adopts an approach of adaptive change as would any living organism provoked into responding to an external or internal stimulus.
A prosponsive strategic change is one where “a firm evokes an invented change, as would any living organism seeking to create a prosperous new future. This will require the design and implementation of prosponsive, sometimes deliberately disruptive change.
Illustrated below, a sponse matrix is used as a basis to determine the extent to which an organisation is prepared to embark on a responsive and/or prosponsive transformation journey. The matrix depicted in Figure 2 demonstrates the context of responsive vs. prosponsive strategic change within a domestic food retail environment.
Figure 2: The sponse matrix
2. Third Wave Strategy in practice: Introduction to the Strategy Evaluation Assessment Tool (SEAT)
SMI has developed an assessment tool to understand how effective a corporation’s strategic management system is; measured against an expected internal capability, guided by the Third Wave Strategy methodology. The format deployed to the development of the Strategy Evaluation Assessment Tool (SEAT) is a key element of the Third Wave Strategy framework illustrated in Figure 1. This is the activity that can be found in the second element of the Third Wave Strategy framework depicted there. An illustration appears below as Figure 3.
Figure 3: Strategy Evaluation Assessment Program as a system
The SMI applies the generic term ‘evaluation’ in Figure 3, it is adapted from a description provided by Flood (1999). [ii] The purpose of such a system Flood suggests is "to seek to achieve a balance between instrumental action (methods deployed) and experiential action (lessons learned)”. This depiction is highly suitable for our purpose in the development of a SEAT methodology as it enables us to allow the adoption of a systems-based approach (the basis for Flood’s work) to evaluation as contemporary strategy practice within corporations. The forms of evaluation proposed by the SMI and illustrated in Figure 3 are made up of the two elements of:
• Strategy Evaluation Shaping: Evaluation applied to define how strategy is formed (the methods deployed being the array of strategy tools available to us from second and third wave strategy practices), and
• Strategy Evaluation Reviewing: An assessment of how effective strategy is in implementation and post implementation (lessons learned). It is critical to apply this test to an analysis of ‘methods deployed’ because strategic decisions especially are usually based on decisions and assumptions about the future. These are tenuous and unreliable assessments at best and are in fact quite often nothing more than a guess. Rarely are they tested for continued validity, reliability, or relevance, as mandated in the Program of Continual Strategy Renewal, identified as the third element of the Third Wave Strategy framework in figure 1.
Strategy Evaluation, Shaping is conducted through an evaluation of outcomes from tools and techniques (e.g. scenario analysis, market share analysis) deployed to contribute to an update of Long Term Strategy and/or inform a short term Strategy Narrative. Strategy Evaluation, Reviewing on the other hand is conducted via the recording of experiential action the effectiveness of which focuses on the
outputs from strategy and its capacity to inform a program of organisational transformation and renewal;
specific systems, processes and methods deployed to update and develop strategy that is both long and short term in perspective; and
an organisational learning capability and its capacity to capture lessons learned from both Strategy Evaluation, Shaping and Reviewing activities.
In many respects the concept of Strategy Evaluation, when viewed as a micro-system in Figure 3 can be considered a form of reinvention of the process of Strategic Planning.
The objective of the Strategy Evaluation system is to:
Inform Long Term Strategy and shape the way it is implemented in the short term – through the acts of strategy formulation, implementation, and alignment.
Provide the means of reviewing the effectiveness of outputs from strategy and the systems, processes and methods deployed to derive, develop, and update strategy.
Contribute informed content of importance to strategy, ideally in conjunction with a formal organisational learning capability.
Contribute to the program of organisational transformation, renewal and regeneration that is the outcome from realisation of the firm’s Purpose, Mission, Vision and its associated strategic initiatives.
In assessing issues of Strategy evaluation shaping the SMI applies the elements of strategy practice defined by Jarzabkowski & Spee (2009), [iii] they are:
• Practitioners: those who ‘do’ the work of strategy;
• Practices: the tools and techniques that practitioners deploy in practice, and
• Praxis: the system within which the practitioners work is conducted.
To aid our understanding (also as illustrated in Figure 3) the impact of internal and external forces on strategy, the content is reviewed from two levels of analysis - Inside Out and Outside In. When combined, they become the following three components:
Level 1: Outside In, external indirect: Universally focused environmental scanning
Level 2: Outside In, external, direct environment: Industry- and market-level analysis
Level 3: Inside Out, internal environment: Resource and core competence analysis
To establish the value of strategy content and system efficiency and effectiveness a questionnaire can be developed to complete the evaluation exercise. The SMI questionnaire is based entirely on the componentry of the fully integrated, Third Wave Strategy framework depicted in Figure 1.
[i] Porter, M., On Competition, Updated and Expanded Edition, Harvard Business School Press, 2008
[ii] Flood, R.L., 1999, Rethinking the Fifth Discipline – Learning Within the Unknowable, Routledge, New York, 1999
[iii] Jarzabkowski, P., & Spee, A.P., Strategy-as-Practice: A Review and Future Directions for the Field, International Journal of Management Reviews, 11(1), 69–95, 2009