There are two innovations taking place in the world of strategic planning that have the potential to transform the way that strategy is thought about, formulated and implemented.
The one approach is called open strategy and the other adaptive or agile strategy.
Open strategy is fundamentally about recognizing that no single CEO or small strategy team can know it all and that more employees need to be involved in strategy formulation.
Adaptive or agile strategy, on the other hand, is about recognizing that separating strategy formulation and implementation into two sequential phases is a bad approach in a fast-changing, complex environment and that a more dynamic, adaptive, agile approach is needed where formulation and implementation is an iterative, interactive process.
Let’s look at the two innovations in more detail:
Open Strategy is an approach to strategic planning where employees are given the opportunity to participate in the formulation and implementation of an organization’s strategy.
Traditional strategy formulation and implementation
There are many different definitions and perspectives on strategy reflected in both academic research and practice but in whatever way it is defined or executed, formulating an organizational strategy is traditionally a job reserved for the CEO, top management or a select strategy team.
In many organizations, this can be a somewhat secretive process and even the strategy itself may remain secret.
Once the strategy team has formulated the strategy, they present it as a fait accompli and go about “selling it” to lower levels of the organization.
The strategy is frequently only shared with senior management and middle management. Employees lower down the organization are not briefed at all.
They play no part in its formulation and no conscious role in its implementation.
The problems with this approach
In today’s complex, fast-changing world, it is a daunting challenge for a single CEO or small elite team to formulate a good strategy, never mind prescribe its implementation. The business environment is too complex.
Although the CEO and the senior management team may have a good understanding of the business and the business environment, they will have their blind spots.
They may be unaware of rising new competitors or emerging disruptive technologies, and even when they are aware, they may not appreciate the relevance of hem or the threat that they pose.
They may also be subject to various cognitive biases. For example, groupthink, wherein a desire for harmony or conformity they make irrational or dysfunctional decisions or group polarization where they make decisions that are more extreme than their initial inclinations.
There need to be more perspectives brought to bear. More people need to be involved. There needs to be more cognitive diversity. There needs to be more interaction – the strategy needs to be talked about.
Not involving employees is not only a waste of talent but as the people involved in implementing the strategy are not involved in its formulation, they will not have an ownership and may lack the intrinsic motivation to see it through.
And it is not just that the strategy itself may be a bad one or flawed in some way. The strategy could be a good one, but the organization may not have the capability to see it through, or internal divisions and politics may be likely to undermine it severely
You need employees not only to be involved but to be able to speak up and express their opinions and doubts without fear of retribution (to speak truth to power).
They also need to be able to convene together in such a way as to avoid group cognitive biases such as groupthink and group polarization.
The Open Approach
In a handful of organizations, the approach to strategy has been transformed.
Strategy formulation is no longer closed but open. Employees from all departments and business units have the opportunity to contribute to the organizational strategy.
In some cases, customers and partners are also invited to participate.
Not only can employees now contribute but in participating they gain a sense of ownership and are thus more motivated to make it a success.
It is, in fact, more than this – they can now contribute to its formulation and implementation on a day to day basis – they can live and breathe the strategy.
This approach to strategy is called Open Strategy.
At its heart, Open Strategy is simply about involving more people in the strategy process regardless of how it is formulated and implemented.
- To improve the strategy itself
- To improve the way that it is implemented
- To ensure ownership by the employees
Open Strategy Spectrum
In practice, the formulation and implementation of a strategy are neither totally open or closed. It lies somewhere on the spectrum between these two polarized ends – open and closed.
Where an organization chooses to sit on that spectrum is a function of its unique context, the type of business, its size and the culture of the organization but it is probably more likely to be determined by the leanings of the CEO or top management.
A large traditional industrial organization may choose to work closer to the closed end of the spectrum whereas a small, nimble startup in say the software industry may decide to work closer to the open end of the spectrum.
Top Management Responsibility
One final point. Open Strategy does not relieve senior management from their responsibility for developing and implementing a strategy. It is just that they involve more people and see it as a more dynamic process than maybe they did in the past.
Adaptive (or Agile) Strategy is an approach to strategy that is characterized by adaptive planning, early adoption, evolutionary development, continuous improvement and a rapid and flexible response to change. The formulation and implementation of strategy are not separate sequential phases but go hand in hand.
Adaptive Strategy is based on the philosophy and concepts of Agile Software Development.
Agile software development describes a set of principles for software development under which requirements and solutions evolve through the collaborative effort of self-organizing cross-functional teams.
It advocates adaptive planning, evolutionary development, early delivery, and continuous improvement, and it encourages rapid and flexible response to change.
These principles support the definition and continuing evolution of many software development methods.
Traditionally software development is a linear process. Requirements gathering and the development of the software specification are undertaken by an elite team of systems analysts who then pass the specification over to a development team for implementation. The software application is then developed before being delivered to the customer.
There are several serious problems with this traditional sequential methodology … [-expand-]
Hopefully, you are ahead of me here and can see the parallels between software development and strategy formulation and implementation.
Long-term planning is irrelevant, if not a hindrance.
Strategy should not be about the realisation of prior intent, but rather emphasis on the importance of openness to accident, coincidence and serendipity.
Strategy in this case is the emergent resultant.
Successful strategies, especially in the long term, do not result from fixing an organisational intention and mobilising around it, they emerge from complex and continuing interactions between people.
Credit: Mee-Yan Cheung-Judge
Traditionally strategy formulation and implementation are conducted as three independent, sequential phases.
- The strategy is formulated
- The strategy is “sold”
- The strategy is implemented
This is a simple linear view of strategy development that causes many problems.
The key problems of separating formulation from implementation: [-expand each of these points-]
- Separating strategy formulation and implementation kills momentum
- The implementation team fails to buy into the strategy as it is not involved in its creation
- The perfect strategy is created that in practice is unimplementable
- Internal politics kills or incapacitates the strategy
- The strategy is not easily adaptable in the face of change
Strategy formulation and strategy implementation are intimately entwined. They should not be separated.
Strategy formulation needs to continually morph and adapt in response to change, and implementation needs to follow.
Strategy development should be alive – dynamic.
Open or Adaptive or both?
Although an open approach to strategy formulation can still be traditional in the sense that implementation follows formulation and not need to be agile in the implementation phase, agile strategy pretty much demands that the strategy is also open. How else can adaptive strategy be agile, dynamic and adaptive if all employees are not involved?
Fusing these two ideas into a single open-adaptive strategy approach makes huge sense.
The Role of the Knowledge Café
With these considerations in mind, one of the best ways to make sense of the world to better formulate or implement a strategy is to bring a diversity of people together engage in open conversation.
The Knowledge Café is an ideal tool to help achieve this.
- Blog Post: Open Strategy by Prof. Kurt Matzler
- Harvard Business Review: Can You Open-Source Your Strategy?
- Research Paper: Open Strategy: Consolidated Definition and Processual Conceptualization
[Status: work in progress]
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