Mapping a Winning Strategy

Developing and Executing a Successful Strategy in Turbulent Markets

Marc Baaij, Patrick Reinmoeller

• Publisher: Emerald Publishing Limited
• Year: 2018
• Print ISBN: 9781787561304
• eBook ISBN: 9781787561311
• Topic: Negocios y empresa
• Subtopic: Estrategia empresarial

In an increasingly connected world experiencing accelerating levels of technological disruption, the strategic challenges for business leaders are greater than ever before, and conventional approaches to strategy are unable to contend with today's VUCA (volatile, uncertain, complex and ambiguous) business environment. A new approach to strategic decision-making is required to motivate and mobilize stakeholders to achieve the business's overarching goals, such as making a profit and delivering on people- and planet-related objectives.

Mapping a Winning Strategy introduces a new mapping method for creating and executing an effective business strategy. This method uses visual maps to engage colleagues throughout the organization, ensuring that every stakeholder's voice is considered by avoiding a top-down approach. It also enables business leaders to identify the strategic issues they face without distraction, so that a clear path is formed towards the best strategic plan. By mapping out the most effective strategy, organizations can anticipate and manage roadblocks to strategic change and make winning and well-executed operational choices.

1

OVERCOMING THE CHALLENGES OF STRATEGY WITH THE MAPPING METHOD

PhoneCo Part 1

PhoneCo is a leading high-technology firm offering smart mobile phones. In the early twenty-first century the company became very successful in the mobile phone industry with the launch of a highly competitive smartphone. The product’s success was mainly attributed to its superior ease of use and an attractive product design. Over time, PhoneCo’s increasingly powerful brand and the loyalty of its growing customer base enhanced its success even further. Its smartphone was a powerful growth engine for the firm, and because of its premium prices, PhoneCo also became very profitable.

However, after a long period of uninterrupted profit growth, PhoneCo’s growth engine started to sputter. For the second year in a row, the firm’s profit diminished. Although the profit was still high, financial analysts and journalists fell over each other to predict the end of PhoneCo. The firm was supposed to be over its peak…

INTRODUCTION

The chapter attempts to elaborate on the reasons why the Mapping Method exists. We discuss the challenges of the strategy in more detail, and we also consider the limitations of conventional strategic planning as well as some popular approaches to strategy, such as experimentation and agility. Next, we introduce the Mapping Method and illustrate it with PhoneCo: a ‘faction’ case.¹ Subsequently, we briefly outline the advantages of the method and uncover its foundations.

Chapter Objectives

• Understand the challenges of strategy for business leaders
• Understand the limitations of popular approaches
• Understand the advantages and foundations of the Mapping Method

Chapter Overview

• Challenges and stress factors of strategy
• Limitations of popular approaches to strategy
• The Mapping Method at a glance
• Summary

CHALLENGES AND STRESS FACTORS OF STRATEGY

Strategy is probably the greatest and most difficult responsibility for business leaders, especially in a world of high levels of volatility, uncertainty, complexity and ambiguity (‘VUCA’ hereafter). Leaders may face potential traps when developing and executing a strategy. Leaders may confront the trap of ‘boiling the ocean’ with exhaustive analyses, instead of focusing on the really strategic issues. Another trap is the black box of developing strategic options. How to do it? Is it an art? Ignoring the trade-offs between strategic options and not making real choices are also traps of strategy. The tendency to give strategy up and focus on organizational agility instead is another trap for leaders. Agility can be valuable and support strategy development and execution but it cannot replace strategy.

The main challenges of strategy development and execution for business leaders are to:

• Develop a superior insight into the real strategic issues of the business. These issues are the big problems and opportunities that structurally and substantially, respectively, reduce or raise the overarching performance of the business (typically profit as well as people- and planet-related objectives). You must explore these strategic issues before you can develop effective strategic options to deal with these issues. You should not get stuck at the level of symptoms of issues, such as ‘we cannot retain our top talent.’ You need to develop a deep and preferably superior (to the competition) understanding of the root causes of strategic issues.
• Make a winning strategic choice to address, or even better, anticipate the real issues. Strategy is your best answer to such issues. It is based on deep, and preferably superior, insights into the issues.
• Convince the relevant stakeholders to accept the strategic choice and support its execution. Strategic choices have by definition performance trade-offs. You must choose what to do and what not to do. It is impossible to please all stakeholders inside and outside your firm because of the trade-offs. Hence, you must explain your choices and use arguments to persuade relevant stakeholders.

Some of the main stress factors of strategy development and execution for business leaders are:

• Complexity and volatility of the situation: There are too many moving parts in strategy, and, to complicate things further, there are too many interdependencies among these parts. In the twentieth century, attempts were made to use complexity theory to model strategy development. A popular metaphor for strategy development then was the search for peaks on a landscape of potential strategies, a so-called ‘fitness landscape.’ However, that landscape proved to be too large for any computer algorithm to calculate an optimum (at least, within a reasonable timeframe). To make things worse, uncertainty about the future impedes the definition of the fitness landscape in the first place. The impossibility to define the landscape is known as the ‘frame problem.’
• Ambiguity and uncertainty about the future: Business leaders must live with many unknowns and even ‘unknown unknowns.’ There is no crystal ball. As already indicated, the present state of the strategy landscape is too complex to model. To complicate things further, strategy is about the future. The future is, in most cases and to different degrees, uncertain. Using the valuable work of Hugh Courtney, we distinguish between four levels of uncertainty about the future.
  • The lowest one is ‘a clear-enough future.’ At this level, it is feasible to develop a forecast, identify any factors that may influence the forecast and conduct a sensitivity analysis.
  • The second-lowest level of uncertainty is known as ‘alternative futures.’ At this level, the future is one of a few alternative outcomes that can all be identified upfront.
  • The third level of uncertainty is labelled ‘a range of futures.’ At this level of uncertainty, you can identify the limited number of so-called ‘critical uncertainties’ that define a range of plausible futures or scenarios.
  • The fourth level of uncertainty is known as ‘an unknown future.’ At this highest level, there is no basis to develop a forecast because we cannot even identify a range of plausible futures. Therefore, the future is unknown at the fourth level.
• Bounded rationality of actors (strategists and stakeholders): No mind is big enough to develop a strategy and orchestrate the execution of a strategy on its own. Even in a theoretical case in which all of the required data for strategy analysis were available, strategists – like all people – would have insufficient mental-processing capacity with which to analyse and synthesize the data to develop strategies. The computational complexity of strategy development exceeds the capacity of even the most powerful, artificial intelligence-based computer programs. Strategy is more complex than games like chess and Go. To make matters worse, strategists and stakeholders – again, like all people – suffer from various kinds of cognitive and social biases that typically cause misperceptions, irrational decisions and other dysfunctional behaviour.
• Opportunism of actors: People may have hidden agendas and play political games. Strategy is a process concerned with people, and, consequently, it is concerned with politics. While acknowledging the legal obligation of a firm to its shareholders, we adhere to a stakeholder view of the firm. It is a mistake to perceive a firm as a unit. Instead, it is a nexus of (contractual) relationships between natural actors. These natural actors – owners, leaders and subordinates – do not necessarily form a unit, as they typically have their own distinct (conflicting) interests and values. Such actors may act opportunistically if others cannot detect and/or control it.

VUCA has never been at such high levels before as a result of (digital) disruption, globalization, geo-political tensions, rising interconnectedness on a global scale, hypercompetition, the fourth industrial revolution, energy transition, economic development of Asia, ageing population, changing future of work, depletion of some natural resources, concerns about climate change and growing economic inequality. We perceive VUCA not only as a challenge but also as a condition for strategy. In a static, certain, simple and clear enough world, there is no, or at least much less, potential for strategies to create a (sustainable) competitive advantage and (persistently) superior economic performance.

LIMITATIONS OF POPULAR APPROACHES TO STRATEGY

Conventional Strategic Planning

Strategic planning is a classic but still very popular method among business leaders. It is a formalized and detailed process of analysing a firm and its environment. The resulting understanding of the strengths, weaknesses, opportunities and threats (SWOT hereafter) forms the basis for strategy development. The analyses are highly formalized, detailed and codified. In contrast, the synthesis of the SWOT to create new strategies is treated as an implicit, not-codified process, resembling a black box. Strategies appear full-blown and explicit from this black box process. Strategies are subsequently implemented through, again, a formalized and detailed process. The whole planning process is under control of the firm’s leadership while the execution of the strategy is delegated to the firm’s strategic planning staff and/or consultants. Line management and frontline employees are not involved in this top-down process until they have to implement the new strategy.

Limitations of Conventional Strategic Planning

Conventional strategic planning has been heavily criticized. One main point of criticism was the planning method’s fallacy of predetermination. Long-run strategic planning presumes that you can predict the future. However, under high levels of uncertainty about the future you cannot predict the future, and therefore you cannot do long-run planning.

Boiling the Ocean. The fallacy of detachment is another critique on strategic planning. The planning method is based on a division between thinking and doing, respectively, strategy development and strategy implementation. It is presumed that the thinkers in the corporate headquarters can figure everything out. But the VUCA of the firm’s situation is generally too high for the leadership and their planning staff. There is no master mind that can deal with this VUCA. An exhaustive SWOT analysis is not going to solve the VUCA problem. Since it may easily turn into ‘boiling the ocean,’ such approach may result in a work overload for the planning staff.

Strategy Development as a Black Box. Perhaps the biggest problem with strategic planning is that it is not a method for synthesis. It is a method for analysis. However, synthesis is critical for strategy. Without an approach for synthesis, it is not a method for strategy development. Strategic planning lacks techniques to synthesize a SWOT analysis. The connection between SWOT analyses and strategic option development is not clear. Option development, therefore, resembles a black box.

The Failure of Strategy Implementation. Moreover, the intended strategy resulting from the strategic planning by those in the headquarters is often not realized. Study after study has indicated a high rate of failure in strategy implementation. Implementation, according to conventional strategic planning, suffers from the divide between thinking and doing. The top-down approach to strategy, whereby planners at the corporate headquarters hand over the implementation plan to line management in the field is a problematic one. It may easily induce misunderstanding, resistance and ...

Table of contents

• Cover
• Title
• 1 Overcoming the Challenges of Strategy with the Mapping Method
• 2 Engaging Critical Stakeholders to Support The Strategy Processes
• 3 Spotting the Real Strategic Issues and Developing Superior Insights
• 4 Developing Superior Strategic Options and Making Winning Choices
• 5 Making Your Strategy Work: Anticipating Execution Issues
• 6 Looking Ahead: Developing Strategies for Anticipating Your Future
• 7 Getting Started: The Mapping Method in Practice
• Appendix 1: Quick-start Template Maps
• Appendix 2: Notes About Key Techniques
• Bibliography
• Index