What Now? Strategy Creation and the Board Agenda for 2021
Whatever your process for creating strategy was, chances are its changed.
“What’s next” is the question on everyone’s mind.
The reality is, we don’t — and can’t — know for sure. What we can do is articulate our best hypotheses and assumptions and then pay close attention to the early warnings that might suggest which are bearing out.
This thought spark is based on a recent meeting of Extraordinary Women on Boards, a community of women corporate board directors focused on advancing board excellence, modern governance, and board diversity. They convene regularly to learn together, build relationships, and share insights, leveraging the extraordinary experience and expertise within their group.
This meeting was specifically about setting strategy and framing the Board agenda. I was joined by my colleague Ron Boire, a veteran C-suiter with deep organization transformation experience.
We’ve all forgotten by now, but what happened in the early days of the pandemic was absolutely extraordinary. Within days, organizations built technology infrastructure that would normally take months. Entire sectors retooled — certainly education, communications and meetings were overhauled. Companies learned that people can be perfectly productive in all kinds of non-office environments. Organizations learned to do business remotely. We figured out that you can think well, even in sweat pants. One comment that has struck me is that we could have been doing so much of this in the “before” times, but the motivation just wasn’t there. Of course, now that we’ve learned all these new tricks, which will stick as we emerge into a new era?
Ron jokes about strategic planning — “when things are going well, I don’t need to take the time to think strategically, and when I’m in trouble, I don’t have the time for it!”.
As Ron worked with clients through the pandemic, we all thought it was going to be 18 months before people got into growth mode, and it turned out to be a lot more like 90 days. One friend of ours, the CEO of a ceramic business has been delighted by the changes it has allowed him to make in his company — business has never been better, and the digital agenda has accelerated substantially.
Humans are terrible at understanding exponential changes
Human beings are pretty bad at anticipating exponential rates of change. As Megan McArdle of the Washington Post explains, exponential changes are inflection points that, just as I propose in Seeing Around Corners appear gradually, and then suddenly. Her headline explains “When a danger is growing exponentially, everything looks fine until it doesn’t.” In a prescient article dated March 10 of 2020, at a time when many were arguing that fears of the novel coronavirus were overblown and that it was a hoax, she expressed concern. At the time, there were 29 deaths attributed to the virus, which did seem insignificant relative to the 14,000 that typically occur from normal seasonal flu. She was, unfortunately, right. As of this writing, over 16 million Americans have been infected with the disease and over 300,000 have died.
To understand the implications of an exponential shift requires that the strategist be able to step back from the current moment and try to “see” the big picture. We knew, back in March, that infection rates had taken on an exponential form, meaning that infections doubled every few days. But to grasp what that means requires stepping back mentally from the current environment. A wonderful metaphor for this kind of thinking comes from two Harvard professors, Ronald Heifetz and Marty Linsky, who call it moving between the balcony and the dance floor. As Board members, we argued, you need to take that mental step back to really see what’s going on. Then you can re-engage with the action.
Ron has coined the idea of Boards being responsible for building “forever companies.” As he says, “boards of forever companies don’t beat up management to make the quarter, they beat up management to imagine the future. And that’s unfortunately, incredibly rare. Hopefully, one of the things that will come out of the COVID era is more of that forever company thinking.”
A great place to begin is with the question, “what is our core mission here,” because hopefully that hasn’t changed. That then leads to a process of articulating our values, building on Ron’s idea of creating a forever company.
Where do you start when thinking strategically?
The crucial thing to remember about strategy is that its main purpose is to help make choices. What to do, and crucially, what not to do. Where to play. With what vehicles? And the reason you need strategy is because all of us face limited resources and competition. If you have unlimited resources, and little competition, strategy feels less important, which is one reason so many super-successful companies find themselves getting into trouble with a lack of focus.
I use a definition for strategy that builds on Don Hambrick and Jim Frederickson’s excellent article from way back when, “Are You Sure You Have a Strategy?” In it, they define a strategy as the “central, integrated, concept of how we are going to achieve our objectives.” Each word here matters. Central means the idea is broadly shared. Integrated mean the parts work together — you can’t have the low-cost operating model of a Wal-Mart jammed together with the high touch model of, say Tiffany’s. The reality that strategies are concepts is important, because it places a premium on human communication to bring the ideas to life. Great strategies are stories. The “how” is super important, because I see leaders confusing the strategy with the outcome all the time. Sounds like “our strategy is to be #1 or #2”…well, OK, but how?.
You begin by articulating the mission — what is the fundamental purpose and values of the organization. Then, what is it specifically that we are trying to achieve? In parallel, you’ll need to conduct your analysis of the external and internal environment. I like to think of this analysis in terms of 5 “C’s” — your customer, competition, collaborators, company capabilities and greater context, and there are any number of tools you can use to probe into those areas. After defining the strategy, you can now move into articulating what the supporting structures are that would make it come to life. For my take on that, have a look at this article on Medium.
This chart goes into the detailed choices that are within what Hambrick and Frederickson call the “strategy diamond” — you’ll notice that each area is concerned with a “how” choice:
- Where will we be active? I call these arenas.
- What speed and sequence of moves will we use?
- How will we get there?
- How will we win?
- What is our economic logic?
Don Hambrick, who co-authored this article, was a good friend and mentor to me at Columbia Business School. He subsequently left and returned to his Ph.D. alma mater, the Smeal School. If you’d like to see a short video about what he’s doing these days, you’ll find it here:
Four ways of centering a company
In the discussion, one Board member asked, “well, with so much uncertainty, and things changing every day, how do we decide what to focus on in thinking strategically?”
This led to a discussion of how you ‘center’ a company. I used the example of Amazon and how they are really centered around the customer. Jim McKelvey, the co-founder of Square, was recently on a Fireside Chat with me, and tells a great story about this (see also his terrific book The Innovation Stack).
Square, as you may know, turns your phone into a credit card for lower interchange fees than are offered by the credit card majors. They make it possible for the kinds of vendors — artists, artisans, independent contractors — who could never afford to take credit cards to do so. Amazon decided to go after that business with a copycat card reader called “local register.” Despite its considerable advantages, Square’s more complete offering withstood the onslaught, and in a sign of true customer-centricity, Amazon exited the business and mailed all of its existing customers a Square reader. A classy move.
A different way of centering a company might be an approach used by Corning, which has a strategy of being considerably far ahead of its competition on the technological front. As they say on their website, “We are best-in-the-world in three core technologies, four manufacturing and engineering platforms, and five market-access platforms. Corning directs 80 percent or more of our resources to opportunities that draw from at least two of these capabilities sets.”
A third way of centering an organization, is through purpose and mission. At the not for profit Dress for Success, for example, CEO Joi Gordon has articulated their mission as follows: “The mission of Dress for Success is to empower women to achieve economic independence by providing a network of support, professional attire and the development tools to help women thrive in work and in life.” They only count as success those activities, including counseling and training, that succeed in actually getting women into work.
Ron added a fourth way — bringing in the Japanese concept of Ikigai, which has to do with finding joy in life through purpose. He was passionate about how the combination of purpose and organizational capabilities creates an unbeatable combination. Ron used to work as a senior executive at Best Buy and often mentions the cultural and long-term factors that makes them “one of the greatest retailers in history.” The forever company concept comes into play here, as well. In those kinds of firms, there is huge transparency on the part of the company front line and the board, and the leadership, such as Brad Anderson at Best Buy when Ron was there, would “slay himself” with honesty before the board.
How can Board members become smarter about finding out what’s going on?
As I’ve said in my most recent book, snow melts from the edges. What that means is that the places where significant things are emerging for a company tend to happen at the “edges,” not in the boardroom. A big challenge for Board members is how to get that unfiltered information from the edges, particularly if the management team is not keen for Board members to be sniffing around. We talked about a couple of approaches boards could take to become more knowledgeable.
Create a task force — Board members could be useful members of a cross-organization task force, particularly if it was relevant to some specialized area of expertise or access a member possesses. These could be quite focused on particular issues — digital transformation, say — and temporary, but can serve as a useful mechanism to create that line of sight to the real issues facing an organization.
Ask great questions. One of the distinguishing characteristics of great strategists (and great board members) is endless curiosity. This needs to be coupled with a growth and learning mindset, and psychological safety or else the conversations get shut down. Boards should not be afraid to press senior leaders on how they get their information about big changes and whether they are taking enough time to assess potential inflection points.
Push for diversity. Diversity is another topic Boards can get involved in. Even as the issue has percolated to the top of our social agenda, many companies are still not very representative of the customers they serve and the communities they live in, particularly at the more senior ranks. With even the NASDAQ making some noise on the issue, Board members would be remiss if they didn’t follow suit.
Watch how time is spent. How senior leaders are spending their time is also a concern. David Cote, the former CEO of Honeywell has a great new book Winning Now, Winning Later, in which he describes a practice blocking time for “blue notebook” thinking, rather than having his days nibbled up with meetings. He also describes getting rid of a meeting culture in which the goal was to impress the boss, not come to smart decisions.
We also discussed the early warnings model which I feature in a chapter in the book, in relation to a question about strategic planning timeframes. Essentially, the idea is to outline a time zero event that represents the arrival of an inflection point, and then work backward to today, asking the question all along, “what would have to be true for this to be happening.” For a worked example of how I do this, have a look at this article on Medium.
Connecting strategy, budgets, projects and people — the quagmire that is often the corporate investment portfolio
Do you know where your company is investing its resources? Most of the time, the answer is, not really. Portfolios are full of zombie projects, things that once had a senior champion that is there no longer and ideas that seemed good at the time but didn’t pan out. Portfolios often also lack balance between the activities that support the business of today, and those that are necessary to invest in for the future. One of the tools we’ve been working on at Valize is to make the process of identifying what is in the portfolio less painful. I describe it in this blog and video.
I’ve long said that the purpose for setting up an early warning system is not to make predictions, but to help us better prepare for whatever might come our way. Just finished reviewing all those “top predictions for 2020” articles that were published in 2019, and this pandemic was definitely not flagged in any of them. So as we think about what 2021 and beyond holds, I’d emphasize that the process is to consider possible uncertainties, the assumptions we’re making about them and what evidence we’d need to find to learn whether one or another were more or less likely.
Uncertainties and assumptions to test here might include:
- We will or won’t go back to the office, or we’ll go back to offices that are re-imagined
- We will or won’t go back to sponsoring big in-person events, or the kinds of events that will be relevant will be rethought
- We will or won’t transition a large part of our business to remote technologies
- We will or won’t see major pushback from people who like working remotely
- We will or won’t find that corporate travel budgets are going to require a lot more justification
- Will we keep the digital tools we’ve been using (looking at you, Zoom!) or will we move on to others?
This article was written before the eruption of events involving the storming of the US Capitol building on January 6, 2021. Even then, I observed that we have epochal questions before us, the urgency of which is only becoming more clear.
Will we revisit the social contract so that inequality lessens? Will we create more diverse and inclusive communities? Will we muster the discipline to take action on climate change? Will we reverse decades of financialization? I’ll close by noting that the answers depend on choices we’re making today, tomorrow and the next day. Strategy matters. Choices matter.