Managers and executives misunderstand strategy all the time.
At a CEO retreat, I asked the group to take five minutes to draw an illustration of their organization’s strategy. The challenge was to create an easy to share model or flowchart to illustrate their strategy on one page.
The group was initially taken aback by the exercise. This was a CEO peer group that met monthly, and they talked about strategy regularly. One participant said, “Five minutes? Seriously? I can have it done in 30 seconds.” I reassured the group that the exercise had a point, and set the clock.
The strategies they created divided into three predictable buckets:
- Goals: Achieve a revenue, profit, or market share target. For example, grow to $25 million in sales by 2020.
- Actions: Complete a task or project that is perceived important for the business. For instance, open a new office or launch a new product.
- Priorities: Define areas of investment for time, resources, or capital to advance the company, such as increase brand awareness in digital channels.
Goals, Actions, and Priorities are not strategies. They may help inform the creation of a strategy, but they’re not your strategy.
Richard Rumelt writes in Good Strategy / Bad Strategy, “Strategy is about how an organization will move forward. Doing strategy is figuring out how to advance the organization’s interests.”
“How” is the critical component. You create and implement a strategy to effectively achieve a goal.
Goal setting is essential to defining a good strategy. “What do you want?” is the first question I ask when kicking off the strategic planning process, because if you don’t know what you want it’s really hard to craft a clear, concise strategy.
With a clearly defined objective you can plot the steps to get there.
Roger Martin and A.G. Lafley provide an excellent framework in Playing To Win to define the “how.” They define a strategy through five big questions:
- What is our winning aspiration?
- Where will we play?
- How will we win?
- What capabilities must be in place?
- What management systems are required?
Your strategy is defined by how you answer the questions. The ideal is to make your strategy simple, clear, and concise. If done well, it should fit on a page or two.
When everyone on your team clearly knows where they are going and how they’ll get there, you’ve got a strategy.
The process of developing a clear and concise strategy is deceptively hard. It often takes iterations and experimentation to clarify your thinking and prove that you’re on the right track. But the rigor is what generates your desired results.
Try the exercise for yourself. Sketch out your organization’s strategy on a blank piece of paper. Can you describe how you will move your organization from Point A to B?