Monday, June 14, 2010
Purpose driven “Systemic Strategic Planning” Process
Sure enough, even the most talented leaders today, keep tossing and turning over with a dilemma, when it comes to “Purpose First or Profit First” discussions –as I had alluded in one of my previous blogs. Part of the reason - most of the strategy development approaches, in its current form, do not inherently help you to develop the purpose driven strategy you are hoping for – more specifically, the strategic positioning (SP) approach, commonly used for choosing the market entry options and the resource based view (RBV) approach, commonly used for effectively optimizing the resources within a market – are predominantly focused on developing the profit focused strategies only. The need of the hour is a new systemic approach – supporting both the purpose and profit goals - that is measured, iterated and continuously improved based on the organizational learning and environmental changes. Like the original Leavitt Diamond, this purpose driven systemic approach” recognizes the interdependent nature of various portfolio elements of an organization and the need for solving the individual problems within each of the portfolios with a systemic mindset. “Portfolios” in this context include, but not limited to, markets, assets, purposes, product, experiences, processes, core competencies and risks - that help you to assess the current state of affairs within your organization (situation analysis) whereas “themes” are the answers to the key strategy questions that help you to interpret the portfolio analysis outputs within the context of the strategic direction.
The purpose focused opportunities (or problems for that matter) within an organization are deemed systemic when the solution to an opportunity within a certain portfolio is dependent on the solution to the opportunity within other portfolios. For example, the solution to address a product category gap within the product portfolio -by and large - will have a direct dependency on the asset, purpose, capability and investment portfolios - and so it is important to take a holistic view while solving these types of systemic problems. In other words, systemic problems need systemic solutions whereas a local problem (e.g. fixing machinery) needs a local solution.
PURPOSE DRIVEN STRATEGY IS ALL ABOUT ASKING THE RIGHT QUESTIONS
Purpose driven Strategy, in its essence is coming up with the right set of those interlinked questions as I had outlined in one of my Academy of Business Strategy blogs (http://theacademyofbusinessstrategy-businessanalytics.com/2010/05/15/02/) - first for developing the 10 year strategy within the context of the purpose statements and then solving for the near term profit challenges in the form of an annual strategy, and finally connecting those planning processes (10 year strategy & the annual strategy) with an iterative measurable end-to-end strategic planning process. At the end of the day - it all boils down to coming up with the right set of purpose/profit balanced questions.
The logical questions for the10 year strategy are -
1. What do you aspire to be? (vision/mission focused)
2. What are your values?
3. What are your 10 year Big Hairy Audacious Goals (BHAG)?
4. What are your core portfolios & competencies?
5. How do you sustain, transform (repurpose, reinvent & rediscover) and out-grow your competition as per the aspiration? ( Purpose model and Purpose Portfolios focused)
Similarly, the logical questions for the annual strategy are -
1. How do you keep the current operations going in the best optimal fashion?
2. Where do you compete?
3. Why and When do you compete?
4. How do you stack up (in terms of cost structures, waste and idle capacity) compared to your competitors?
5. How do we win? ( i.e. ideas in the form of capabilities, competencies and cost savings)
Interestingly enough, the 10 year strategy is more purpose focused and the annual strategy is heavily profit focused, but they are all iterated on a continual basis as outlined in the “Purpose-Profit balanced iterative strategic planning process” diagram at the top of the page. The trick is to have these ten answers that are consistent with one another and actually reinforce and feed from one another. So where do you start? Most organizations start at the top with some kind of purpose workshops to finalize their purpose statements. While, it is a good place to start – in most cases, the conversations go in circle and do not produce actionable results – as most organizations do not have a clear idea of what purpose means within the current context of their daily operations. Granted, most of the senior leaders can verbalize it – but, in most cases, it is a lip service and so it is difficult to create a meaningful purpose driven 10 year strategic plan. That said, most of you immediately jump in to the annual strategic plan (Where to play and How to win) - but end up with a strategy that might be effective but it might not be the direction you would actually want to go. The best answer is the balanced iterative approach — think a little bit about purpose focused 10 year strategy, then a little bit about the profit focused near term strategy (Where to Play and How to Win), then back to the long term plan to check and modify, then down to the portfolios of capabilities, competencies and management systems to check whether it is really doable, then back up again to modify accordingly.
Bottom line: While it may sound a bit difficult to comprehend this process in the beginning- iterating between purpose and profit actually makes the strategy development process much easier and practical. Developing your strategy in relatively smaller and iterative chunks and improvising the answers to these ten questions will get you the purpose driven profitable strategy. In addition, regular refinement of this iterative process with standardized templates and knowledge management best practices will make your organization to move from good to great.