#12 Planning a strategy process correctly
For the first time in the new "Strategy Knowledge" format, Christian Underwood explains how to set up a strategy process correctly, which factors need to be considered and which questions should be answered before starting the process.
Essentially, there are 12 key questions:
For which part of the company is the strategy intended? Situation analysis: What is the overarching objective of the strategy and what type of strategy is it? What is the common language in the strategy process? Time aspect in the strategy process: What half-life should the strategy have? On what basis (mission statement, BHAG, etc.) is the strategy aligned? What is the time horizon of the strategy process itself? What strategic framework (methodology) does the process follow and what is the common understanding of the strategy? Who is the sponsor of the strategy process? Who acts as the operational strategy process or project manager? Who needs to be involved in the strategy process and actively shape it?
Do you need an external strategy consultant or strategy coach? And if so, which one and when? How will the strategy process be communicated?
You can find out exactly what the answers to these questions are and what tips, tricks and hacks there are even before planning a strategy process in the new episode #12 "Strategy knowledge: Planning the strategy process correctly" or in the detailed show notes.
Detailed episode description:
For many people, strategy is an overpowering word that they find very difficult to deal with. At the start of a strategy process, the child is therefore often not called by its name. There are often good reasons for this. The term is misunderstood or has already been used for so many things within the company that it has become a bit of a dirty word. There is talk of repositioning, realignment, new focus or even strategic journey.
It is therefore important to answer the key questions for the process in the initial meeting and to minimize potential risks due to misunderstandings. Otherwise, you will end up with a result that nobody wanted at the beginning, as the use of different terminology and language has not provided the necessary clarity.
In this episode, Christian has brought along 12 questions to which you should already have a clear answer before the strategy process:
For which part of the company is the strategy intended? The first area concerns the entire company or group of companies and results in the corporate strategy or group strategy. The focus here is on which markets and sectors you want to be active in and which synergies arise beyond the portfolio.
Christian defines the second area as a business unit or division in which a business segment strategy is developed. This deals with the question of how a company can compete in a specific business area and which opportunities can be used to build competitive advantages.
The third area, the functional area, contains the company's functional strategy. The main focus here is on how individual functional areas should work.
It is helpful when creating the above-mentioned strategies if an overall corporate strategy exists and all corresponding business field strategies are aligned with it. In practice, however, one often encounters the absence of a strategy at corporate or company level. It is nevertheless important to know where and how you should deploy your resources for your own area. This can be achieved, for example, through a suitable situation analysis. You should also consider whether the strategy is applicable to different countries and regions, as not every market behaves in the same way. In order to clarify the scope, Christian always recommends the perspective from the overall view of the company, as this question should already be answered at this level.
Situation analysis: What is the overarching objective of the strategy and what type of strategy is it?
At the outset, you should be clear about the type of strategy you are pursuing - after all, different approaches also entail different risks and opportunities.
For example, if you focus everything on growth, then this is a growth strategy. If you are thinking more in terms of the future and future viability of the company, then you are developing a future strategy. Examples of sub-strategies would be a sustainability strategy, a digital strategy or an innovation strategy. A wide variety of factors can form the basis for the decision.
In this context, the link to the overall strategy is often not clear. This is why many strategies exist side by side. However, it is then important to precisely define the scope of these individual strategies in order to fully exploit their strengths. However, this can also be essential when it comes to clarifying what should and may really be called into question.
Does the strategy process focus on the goal of realigning the core business? Should new innovative business areas/business models be developed? Or should a dual approach that combines both and drives them forward in parallel be focused and planning integrated?
This raises key questions about the management team's method. Is a brownfield or greenfield approach being pursued? What can we really question as a management team? It becomes awkward when the boss talks about greenfield, but has actually already planned the new factory for the existing product portfolio and no experiments are needed now.
It is therefore a matter of clearly managing the expectations of those involved. There is hardly anything worse than when the top management of a company sits down together, develops innovations and new business models that are ultimately not in demand or implemented. This leads to incorrect information, unfulfilled expectations and ultimately to great disappointment on all sides. Accordingly, situation analyses are crucial for targeted preparation.
What is the common language in the strategy process?
The common language refers to various topics in the process: on the one hand to the name of the strategy process, but also to the name of the strategy and the actual language of the strategy process.
The name of the strategy can be considered even before the strategy trip begins. Although this is a very early stage, the name is nevertheless crucial. Giving the strategy a name helps to actively determine how it will be perceived and received in the end. Gathering information in this regard and developing the corresponding knowledge are part of this. This should therefore definitely be included in the implementation.
Strategy is often given a pragmatic name. In everyday corporate life, strategies and strategy processes are referred to as "Strategy 2025", "Strategy 2030", etc. This naturally arouses little emotion among all employees and stakeholders. This naturally arouses little emotion among all employees and stakeholders. One tip would be to intervene here and give the strategy a programmatic name, as it needs a strong message internally or externally.
However, language is not only decisive for the overall name, which is why this question is asked very deliberately at the beginning of the process, as it is also closely linked to the objectives of the strategy. Should the strategy process be carried out in German or English? Many clients are German companies or global players, often with German top management. A linguistic balancing act is performed here, as it can be difficult not to operate in one's own native language. Words and letters can make a decisive difference in terms of strategic orientation, as they ultimately pass on crucial information and knowledge. This is a major issue even in top international teams at corporate level. When colleagues who are themselves native English speakers join the team, the balance of power in the strategy workshop, the strategy process, the strategic direction and the overall formulation can shift. This is why Christian always attaches great importance to having clarity beforehand and paying particular attention to this during implementation. There are always ways to resolve these problems, for example through translations and adaptations. This is because it is often not a question of 1:1 translations, but of suitable adaptations.
Time aspect in the strategy process: What half-life should the strategy have?
Christian's experience shows: Over the last ten years, a corridor has developed that often specifies three to five years as the half-life. The strategies that are developed with customers today operate in this environment. Parts of the strategy process, such as some considerations and situation analyses, must nevertheless be reviewed at least once a year. The environment changes quickly, information expires or knowledge becomes outdated. Nevertheless, three to five years is a good order of magnitude to ensure that the strategy can be tracked during implementation and realization. After all, strategy takes time to achieve the desired effect, reach the goal and become visible.
On what basis (mission statement, BHAG, etc.) is the strategy aligned?
The first thing to check here is whether there is a corporate mission statement with a vision, mission, values, a BHAG (Big Hairy Audacious Goal), a WHY statement or a defined purpose. All of these things can serve as a guiding or north star for the strategy. If none of these exist, then a strategic foundation is needed. Ideally, one of these should be defined before the strategy process begins. Of course, vision, mission and BHAG are generally more suitable. The time horizon of validity here is more likely to be between ten and thirty years. Under no circumstances should this be drafted on the side in a strategy process; rather, clear objectives should be set from the outset. Even if a mission statement exists, it cannot always be used 1:1 for the new strategy. Christian then uses the impact proposition method. It describes a target state or impact that the company wants to create. This can be a mixture of many things. However, it is important to have these anchored in the target image in order to provide an anchor for topics such as value proposition, clear objectives and competitive focus. This can further strengthen a good strategy.
What is the time horizon of the strategy process itself?
Above all, this also has a dramaturgical component. Christian also receives requests at short notice for the strategy to be finalized after just two weeks. He categorically rejects such requests. Important steps, such as a sufficient situation analysis, cannot be carried out in two weeks; even the most sophisticated methods would fail here.
To be able to guarantee a reasonable quality of an analysis, you should allow four to six weeks. With a lot of strategic effort, this can be achieved in as little as four weeks, but if information or data of a qualitative and quantitative nature is still missing, it can take up to three months to carry out a substantial analysis.
After the analysis, time is needed for at least two workshops. The first workshop is held with top management on the subject of a shared understanding of the situation analysis and the target vision. The second workshop takes place with the extended management circle in order to translate the target image into concrete fields of action with measures. A recognized method is to leave at least two to four weeks between the workshops so that the workshop content can mature in the mind.
The entire strategy process, on the other hand, takes around three to twelve months. Implementation should not take longer than this, as otherwise so much would have changed within the time horizon that the strategy would have to be revised again before the objectives could be formulated.
Internal and external factors that determine the publication of the strategy are an important indicator of the timing. These can be, for example, major industry trade fairs at which the new strategy is to be presented or the influence of the advisory board or supervisory board. This also regularly leads to an increase in knowledge, which can help to strengthen the strategy. Such events have a significant influence on the strategy process, set a time horizon and clarify the objectives of the strategy(ies) at all levels.
What strategic framework (methodology) does the process follow and what is the common understanding of strategy?
It is important to clarify in advance which methodological framework you want to use. This not only analyzes, controls and aligns the entire strategy process, it also helps to ensure that nothing is forgotten along the way and that the common understanding of the strategy is defined. Various well-known models and methods can be used here. Christian works with his own StrategyFrame, which he will explain in detail elsewhere. He briefly explains that this consists of 3 pillars - the situation analysis, the target image and the specific fields of action. Only with all these elements can there be a complete strategy that exploits specific strengths in order to bear fruit in implementation.
Who is the sponsor of the strategy process?
Classic sponsors for the corporate strategy are the CEO or managing director. In practice, a team approach has often been asked for recently. However, Christian has a clear opinion on this: the management or the board should be the sponsor for the strategy process. Responsibility cannot be shared and ultimately there can only be one person with overall responsibility, even if in the end several people have to support the implementation of the selected strategy. Otherwise, there are too many vested interests of individual players, which weaken the process and cause it to stall. Concentrating on one person with overall responsibility helps to create clarity and to be able to make clear announcements in necessary situations. This should always be kept in mind when planning.
Who acts as the operational strategy process or project manager?
The most experienced colleague is not necessarily always required here. Young, fresh minds with an initial stable network within the company are just as suitable. However, if they are too new and do not yet have a network, this can have a negative impact on the timing and content of the strategy process - which is why planning and selection is everything here.
There are a lot of design options here and Christian reports that he has already seen many young colleagues who have delivered their first small masterpieces, implemented strategic methods flawlessly and ultimately made a decisive contribution to achieving their goals.
Who needs to be involved in the strategy and help shape it?
Everyone is talking about co-creation and it means more than just involvement. Co-creation creates the feeling of having worked together on the new strategy and the implementation experiences a much higher level of acceptance. But here, too, it is important to keep a sense of proportion.
There are different elements in the process with different levels of involvement - not everyone needs to be in the big first strategy workshop. Here Christian recommends only the top management team. Anything more than twelve people is only of limited value, as otherwise there will be a lack of clarity in terms of responsibility. In the second workshop, the extended management team can also be invited.
However, there are also opportunities to involve different groups of people during the process. For example, qualitative interviews in the analysis phase can be used to gather the views and expectations of internal and external stakeholders. This method offers a particularly differentiated insight into the structures and divisions of the company. It also provides information about interpersonal factors among employees.
Christian is often asked whether employees who are not part of the management team can also be involved. The answer is: it depends. A decision like this sends a symbolic signal to the existing management team and raises expectations among the invited protagonists. The team dynamics of individual employees change massively as a result. If these expectations are not fulfilled afterwards or were clearly outlined in advance, he advises against it. However, if this is done well and communicated clearly, it can provide valuable impetus for the process and later also for the dissemination and acceptance of the strategy. There is no clear answer, but this decision should be considered carefully in the planning process.
There is a fresh article on this topic from the MIT Sloanreview on the subject of "Amazon Raised Its Minimum Wage - Will Its Rivals Do The Same?", which deals in particular with the advantages of a more open process in times of disruption. A clear reading recommendation for all those who want to deepen their knowledge even further.
Do you need an external strategy consultant or strategy coach? And if so, which one and when?
Christian believes that companies can manage a large part of the strategy process themselves. It is YOUR strategy and not that of a consultant. The role of consultants in such strategy processes is changing more and more. The legions of young consultants who develop new strategies far removed from corporate reality still exist, but there are fewer and fewer of them. Today, it is common to find highly specialized, small consulting firms and colleagues with in-depth expertise who accompany the strategic process and its implementation as facilitators or moderators. Nevertheless, many medium-sized companies find it difficult to work with consultants. There are prejudices here and these need to be clearly addressed and resolved. Good experienced consultant colleagues are familiar with this situation and can often resolve it well. What you should look out for is a healthy mix of what the company needs.
Nevertheless, there are areas in which consultants and coaches can be helpful and play an important role with their professional knowledge and expertise. You need someone who can hold up a mirror and speak truths that you don't dare to say internally. It also helps if new impulses are really needed and you have the feeling that you are just swimming in your own juice. If there is also a lack of resources within the company in terms of time, skills and know-how (e.g. about markets, market potential, etc.) - especially if there are many projects pending that cannot be managed internally in this form. An in-depth situation analysis at the beginning of the company's strategy process can speak volumes here and, above all, create clarity.
How is the strategy process communicated?
The days of secret projects are over. Christian recommends that teams and managers embark on the strategy journey as early as possible. Exchanging information behind closed doors and having top management set up the new strategy is no longer the last word in wisdom and is only possible to a very limited extent. You can use the entire process - from the analysis to the formulation of objectives - to involve everyone (to a certain extent) and report that you are thinking about it. You can then take a look at the current company situation and choose strategic communication of content and channels very wisely. However, this does not have to be completely transparent - as is often promised and desired. The smartest method here is much more to convey a perception of success and progress of such a process.
Following the planning stage, the focus is then on communicating the roadmap to the top management team. This team must critically scrutinize the approach, make targeted use of strengths and make a joint commitment in terms of time and resources for this process.
Contact: Do you need help planning your strategy process? Feel free to send an e-mail to christian@underwood.de.
Thank you for your interest and until the next episode...
...because HOPE IS NOT A STRATEGY.