Etude

How to Breathe New Life into Strategy

Fixed-cycle is out. Dynamic, adaptive and connective is (finally) in.

Par Herman Spruit et James Dixon

First published on juillet 09, 2020
min


En Bref The rigid, conventional process for developing strategy hinders rapid responses to insurgent competitors and crises—a harsh reality made even more acute by the Covid-19 pandemic. Some leading companies split their planning into two discrete agendas, based on the current and future business, resulting in a more dynamic strategy. Organizations can continuously reinvent themselves with a living strategy to meet changing customer behaviors and navigate a world of routine disruption. Incumbents have long recognized the need for strategy to become faster and more flexible. Nimbler, customer-focused digital insurgents have been carving out parts of incumbents’ market share and producing a stream of new challenges. Investors have been pushing for more influence—and loudly when they feel their concerns are going unaddressed. Most CEOs realize the brittle, fixed-cycle approach to strategic planning isn’t working anymore. For decades, they’ve made future-altering decisions according to quarterly and annual deadlines, rather than rapidly changing customer behaviors, technology trends and competitor moves. They’ve been flexing old muscles on new issues. For Our Clients Macro Surveillance Platform For more detail on the business implications of coronavirus from Bain’s Macro Trends Group, log on to the Macro Surveillance Platform. Learn more about the platform > The Covid-19 pandemic puts this problem in sharp relief—and helps CEOs to cross the chasm. By taking advantage of this abrupt disruption, they can make their companies more adaptable and resilient for the future. How? It starts with a fresh approach to strategy that splits the planning process into two distinct agendas. The delivery agenda focuses on the firm’s essential purpose: how best to fulfill its promises to customers and stakeholders consistently and systematically, every single day. The development agenda reckons with the strategic choices of the company and determines how to build the next generation of businesses that will serve changing customer needs. It sounds simple. Yet experienced leaders recognize the change in approach is profound. This isn’t how most companies think about strategy today. Rather, leadership teams often produce documents full of generic initiative headings, such as “win in China,” which don’t specify the issue at hand, the expected outcome, the timetable or the resources required. The delivery and development agendas reach far beyond creating two separate lists. They constitute radically different activities and require different ways of working. While they work in concert, they run with different meetings, different information, different cadences and different mindsets. The result is a vibrant, living strategy. It’s dynamic; it doesn’t become irrelevant before the ink is dry, because it’s composed of a series of decisions over time. It’s also adaptive, as leaders constantly evaluate the shifting business environment across forward-looking opportunities, threats and lessons. And it’s connective. Strategic decisions quickly and directly gain traction through resource allocation and performance management processes, ensuring everyone—from the front line to investors—is on the same page. The delivery agenda This element of strategic planning focuses on fulfilling the promises of the existing business, on time and on budget. Objectives and playbooks clearly define what people need to do and how they need to do it. A key principle of the delivery agenda is empowering teams to execute those known playbooks. The guidelines are nonnegotiable, the decision rights are unambiguous, and thus, the outcomes are predictable. What does the delivery agenda look like on the ground? Teams don’t waste their time and energy worrying about strategic issues. By eliminating any confusion around expectations and motivations, they focus on continuously and consistently meeting immediate customer and stakeholder needs. At the same time, executive leaders concentrate on accelerating the delivery of successful initiatives or rapidly course-correcting and removing roadblocks where needed. They repeatedly ask, “What’s off-track, and how can we intervene? Have we identified the root cause of the problem? Who has the opportunity to accelerate ahead of schedule, and how can we help?” Delivery leaders also empower the front line and other execution roles to evaluate data and quickly change customer offerings or respond to customer needs. Some executive teams establish several leading indicators in each business unit—for market growth, customer reactions, competitor moves, major disruptions and more. With hard data on hand, delivery teams are alert and responsive to shifting landscapes and promising opportunities. When they find the firm does need to change its playbooks and routines, leading delivery teams employ a “pit-stop approach.” Working like a Formula One crew, they efficiently apply known and practiced solutions. They don’t engage in spontaneous, drawn-out experiments or invent new ways of working. They need the car back on track as soon as possible, in order to win the race. By enabling delivery teams to operate on real-time analytics and swift reaction, winning companies build greater adaptability, more customer relevance and a learning culture. Many CEOs have experienced this in recent months. The pandemic temporarily cleared up the delivery agenda. Leaders got back to basics, telling their teams, “We have to do X now, and this is how we’ll do it.” Because executives couldn’t afford the time to debate, the firm moved fast. CEOs ignored the organization’s layers and went directly to the people who could make things happen quickly. Through these new activities and ways of working, they realized how the delivery agenda should be. To lock in their new pace and vigor, CEOs can start by removing all of the “unknowns”―things that still require experimenting, iterating and adapting—from the delivery agenda. The delivery organization becomes a lean, mean machine. It needs much less management, which is a great thing, because the firm needs those freed-up leaders elsewhere, namely, on development teams. The development agenda This element tackles the ambiguities in the strategy, where leaders need to test and learn their way to the right solutions. A major part of the agenda involves adapting the existing business for the new world. The teams are searching for the next big idea that will regenerate the firm. They’re making strategic choices and often building new businesses. Development teams systematically eliminate uncertainty. They protect difficult issues from the rushed, deadline-driven solutions that so often result from calendar-based planning. Instead, teams have the time and space needed to constructively debate alternatives and narrow the possibilities down to an inspiring answer. They can’t always commit to numbers right away, because too much is unknown. That’s acceptable—it’s even celebrated on some of the most advanced leadership teams. With each iteration, development teams try to solve the “failure point,” or the next big potential problem threatening to derail them. And they might fail. But they’re given the freedom to eventually reach a winning solution. At one bank, the development agenda includes an initiative to build up wealth management services in Europe. While it may take two or three years to reach their desired end state, leadership will know in six months which solutions to continue pursuing and which to throw out. They can secure a sense of certainty for an uncertain future. Although separate, the delivery and development agendas speak to and depend on each other. For example, at one leading enterprise software company, the delivery agenda included an initiative to improve the day-to-day productivity of the salesforce. At the same time, the development team was working on shifting the business to a cloud-first, software-as-a-service model. As they refined the transformation plan, executives realized that they needed a full overhaul of the sales model to deliver the new strategic goals. Connecting with the delivery teams, they quickly reframed the sales productivity initiative as a vital element of the e-commerce transformation and moved it to the development agenda. The effect was liberating. The organization was able to think much more broadly and disruptively about its sales approach. The development team discovered ways to build a better customer experience, strengthen client relationships and speed up sales cycles. With the new model in place, sales quickly grew. As the organization develops a new rhythm by shuffling initiatives between the two agendas, it begins to move at an upbeat tempo. Whether their job is to think about the vital activities of today or discover new growth and renewal for tomorrow, delivery and development team members both become faster, more effective decision makers and executors. The human side of strategy In order to pull off this drastic departure from traditional strategic planning, leadership teams need to be committed to changing some crucial behaviors. Static strategy expects the delivery and development discussions to occur with the same teams, in the same rooms, during the same meetings. At one moment, the CEO is castigating a leader over poor performance on critical financial targets. She’s pounding the table, arguing that the organization has to simplify and home in on its core. She wants the team to renew its commitment to avoid distractions and get the job done. In the next moment, she’s asking the same leader to suggest partnerships for the digital strategy. She wants her team to look around corners and debate various options. The situation requires the leader to dramatically shift from a defensive mindset (“I’m sorry, but let me explain”) to a growth mindset (“Here are innovative new possibilities”) in the span of five minutes. That’s impossible. It defies human nature. With a living strategy, the delivery and development agendas use different meetings to sort out different behaviors. In delivery meetings, team members solve problems and deliver results. In development meetings, team members come to the table with an open and innovative mindset for making strategic decisions, experimenting, testing and learning. CEOs can cultivate the environments for each of these dialogues and manage them accordingly, rather than delegating it as a staff activity. When they hold delivery meetings, for instance, leading CEOs abandon backward-looking dashboard reviews in favor of constructive dialogues aimed at accelerating results. About 20% of meetings are short performance reviews that examine business and financial performance, pinpoint the root cause of any issues and predict future performance. But 80% of discussions are debates that identify and explore issues. By course-correcting where needed and revving up on-track initiatives, team members sharpen the strategy and gain momentum. These discussions also serve as coaching and experience-sharing sessions that foster talent and bolster capabilities. A more connected organization The distinct separation of the delivery and development agendas cascades behavior change throughout the organization. However, real acceleration won’t happen without tying the agendas to budgets and performance management processes. In traditional strategic planning, all too often, the firm’s various systems lack cohesion and integrity. For example, the head of China operations might argue that he can’t meet the strategic goal of “winning in China” based on current investments. During the financial review, the organization cuts the commitment to make the budget work. But there’s no reconciliation with the strategy. No one revises it to acknowledge that the firm has decided not to win in China, at least not this year. Some CEOs tightly weave the strategy throughout the organization by negotiating performance contracts for resources with executive leaders. In the delivery agenda, leaders understand that resource allocation is based on achieving specific outcomes. In the development agenda, where the outcomes are unclear, CEOs distribute resources based on the ability to eliminate uncertainty through experimentation. Performance contracts aren’t siloed or business-unit specific; they acknowledge the interdependencies of the entire organization. They align executives to deliver on strategic promises cohesively and effectively, working as a harmonious unit. Propelled by this strongly linked strategy, leaders set the cadence of the delivery and development agendas. They assemble and disassemble cross-functional teams according to firm priorities. Executives design career paths and help individuals rotate through roles in both agendas. They provide regular encouragement to help teams overcome the inevitable bumps in the road. They create communities of experts who share lessons with their peers. They track promises to stakeholders and communicate progress. This isn’t conventional, stale management; leaders act as coaches and mobilizers. As leaders nurture the independent delivery and development agendas, clarity permeates the organization. Pragmatic priorities and objectives can mobilize, inspire and align people. Delivery teams know the issues, the options and the people working on each solution, and can ruthlessly focus on that agenda. Development teams experience a similar clarity, ensuring the strategy has long-range headlights illuminating the obstacles ahead as well as opportunities to accelerate. And both teams cultivate a stronger sense of purpose and identification with the customer mission. CEOs who have adopted this approach note that these teams aren’t debating each other’s alternatives or fighting over resources. Instead, they’re advancing toward clear objectives and pulling together. Distinct, well-defined strategic agendas also reassure boards. Board members want to know that executives are addressing their concerns, and the development agenda provides assurance. CEOs can map quarterly meetings and messages to investors 12 to 18 months out, providing updates on progress. Investor relations similarly become strategy-led, rather than strategy becoming investor-led. By orienting the strategic approach to real ways of working, executive teams can make a living strategy the singular, steady heartbeat of the organization. Now more than ever, CEOs have a chance to implement this real, enduring change. While no one has all of the right answers yet, it’s imperative to get started before the moment passes. After all, the need for flexibility and responsiveness will extend far beyond the current crisis. With a dynamic, adaptive and connective strategy, CEOs can build a faster, more resilient firm in the short and long term. Related Insights Coronavirus The global Covid-19 pandemic has extracted a terrible human toll and spurred sweeping changes in the world economy. Across industries, executives have begun reassessing their strategies and repositioning their companies to thrive now and in the world beyond coronavirus.

En Bref

The rigid, conventional process for developing strategy hinders rapid responses to insurgent competitors and crises—a harsh reality made even more acute by the Covid-19 pandemic.
Some leading companies split their planning into two discrete agendas, based on the current and future business, resulting in a more dynamic strategy.
Organizations can continuously reinvent themselves with a living strategy to meet changing customer behaviors and navigate a world of routine disruption.

Incumbents have long recognized the need for strategy to become faster and more flexible. Nimbler, customer-focused digital insurgents have been carving out parts of incumbents’ market share and producing a stream of new challenges. Investors have been pushing for more influence—and loudly when they feel their concerns are going unaddressed.

Most CEOs realize the brittle, fixed-cycle approach to strategic planning isn’t working anymore. For decades, they’ve made future-altering decisions according to quarterly and annual deadlines, rather than rapidly changing customer behaviors, technology trends and competitor moves. They’ve been flexing old muscles on new issues.

For Our Clients

Macro Surveillance Platform

For more detail on the business implications of coronavirus from Bain’s Macro Trends Group, log on to the Macro Surveillance Platform. Learn more about the platform >

The Covid-19 pandemic puts this problem in sharp relief—and helps CEOs to cross the chasm. By taking advantage of this abrupt disruption, they can make their companies more adaptable and resilient for the future.

How? It starts with a fresh approach to strategy that splits the planning process into two distinct agendas. The delivery agenda focuses on the firm’s essential purpose: how best to fulfill its promises to customers and stakeholders consistently and systematically, every single day. The development agenda reckons with the strategic choices of the company and determines how to build the next generation of businesses that will serve changing customer needs.

It sounds simple. Yet experienced leaders recognize the change in approach is profound. This isn’t how most companies think about strategy today. Rather, leadership teams often produce documents full of generic initiative headings, such as “win in China,” which don’t specify the issue at hand, the expected outcome, the timetable or the resources required.

The delivery and development agendas reach far beyond creating two separate lists. They constitute radically different activities and require different ways of working. While they work in concert, they run with different meetings, different information, different cadences and different mindsets.

The result is a vibrant, living strategy. It’s dynamic; it doesn’t become irrelevant before the ink is dry, because it’s composed of a series of decisions over time. It’s also adaptive, as leaders constantly evaluate the shifting business environment across forward-looking opportunities, threats and lessons. And it’s connective. Strategic decisions quickly and directly gain traction through resource allocation and performance management processes, ensuring everyone—from the front line to investors—is on the same page.

The delivery agenda

This element of strategic planning focuses on fulfilling the promises of the existing business, on time and on budget. Objectives and playbooks clearly define what people need to do and how they need to do it.

A key principle of the delivery agenda is empowering teams to execute those known playbooks. The guidelines are nonnegotiable, the decision rights are unambiguous, and thus, the outcomes are predictable.

What does the delivery agenda look like on the ground? Teams don’t waste their time and energy worrying about strategic issues. By eliminating any confusion around expectations and motivations, they focus on continuously and consistently meeting immediate customer and stakeholder needs. At the same time, executive leaders concentrate on accelerating the delivery of successful initiatives or rapidly course-correcting and removing roadblocks where needed. They repeatedly ask, “What’s off-track, and how can we intervene? Have we identified the root cause of the problem? Who has the opportunity to accelerate ahead of schedule, and how can we help?”

Delivery leaders also empower the front line and other execution roles to evaluate data and quickly change customer offerings or respond to customer needs. Some executive teams establish several leading indicators in each business unit—for market growth, customer reactions, competitor moves, major disruptions and more. With hard data on hand, delivery teams are alert and responsive to shifting landscapes and promising opportunities.

When they find the firm does need to change its playbooks and routines, leading delivery teams employ a “pit-stop approach.” Working like a Formula One crew, they efficiently apply known and practiced solutions. They don’t engage in spontaneous, drawn-out experiments or invent new ways of working. They need the car back on track as soon as possible, in order to win the race. By enabling delivery teams to operate on real-time analytics and swift reaction, winning companies build greater adaptability, more customer relevance and a learning culture.

Many CEOs have experienced this in recent months. The pandemic temporarily cleared up the delivery agenda. Leaders got back to basics, telling their teams, “We have to do X now, and this is how we’ll do it.” Because executives couldn’t afford the time to debate, the firm moved fast. CEOs ignored the organization’s layers and went directly to the people who could make things happen quickly. Through these new activities and ways of working, they realized how the delivery agenda should be.

To lock in their new pace and vigor, CEOs can start by removing all of the “unknowns”―things that still require experimenting, iterating and adapting—from the delivery agenda. The delivery organization becomes a lean, mean machine. It needs much less management, which is a great thing, because the firm needs those freed-up leaders elsewhere, namely, on development teams.

The development agenda

This element tackles the ambiguities in the strategy, where leaders need to test and learn their way to the right solutions. A major part of the agenda involves adapting the existing business for the new world. The teams are searching for the next big idea that will regenerate the firm. They’re making strategic choices and often building new businesses.

Development teams systematically eliminate uncertainty. They protect difficult issues from the rushed, deadline-driven solutions that so often result from calendar-based planning. Instead, teams have the time and space needed to constructively debate alternatives and narrow the possibilities down to an inspiring answer. They can’t always commit to numbers right away, because too much is unknown. That’s acceptable—it’s even celebrated on some of the most advanced leadership teams. With each iteration, development teams try to solve the “failure point,” or the next big potential problem threatening to derail them. And they might fail. But they’re given the freedom to eventually reach a winning solution.

At one bank, the development agenda includes an initiative to build up wealth management services in Europe. While it may take two or three years to reach their desired end state, leadership will know in six months which solutions to continue pursuing and which to throw out. They can secure a sense of certainty for an uncertain future.

Although separate, the delivery and development agendas speak to and depend on each other. For example, at one leading enterprise software company, the delivery agenda included an initiative to improve the day-to-day productivity of the salesforce. At the same time, the development team was working on shifting the business to a cloud-first, software-as-a-service model. As they refined the transformation plan, executives realized that they needed a full overhaul of the sales model to deliver the new strategic goals. Connecting with the delivery teams, they quickly reframed the sales productivity initiative as a vital element of the e-commerce transformation and moved it to the development agenda. The effect was liberating. The organization was able to think much more broadly and disruptively about its sales approach. The development team discovered ways to build a better customer experience, strengthen client relationships and speed up sales cycles. With the new model in place, sales quickly grew.

As the organization develops a new rhythm by shuffling initiatives between the two agendas, it begins to move at an upbeat tempo. Whether their job is to think about the vital activities of today or discover new growth and renewal for tomorrow, delivery and development team members both become faster, more effective decision makers and executors.

The human side of strategy

In order to pull off this drastic departure from traditional strategic planning, leadership teams need to be committed to changing some crucial behaviors.

Static strategy expects the delivery and development discussions to occur with the same teams, in the same rooms, during the same meetings. At one moment, the CEO is castigating a leader over poor performance on critical financial targets. She’s pounding the table, arguing that the organization has to simplify and home in on its core. She wants the team to renew its commitment to avoid distractions and get the job done.

In the next moment, she’s asking the same leader to suggest partnerships for the digital strategy. She wants her team to look around corners and debate various options. The situation requires the leader to dramatically shift from a defensive mindset (“I’m sorry, but let me explain”) to a growth mindset (“Here are innovative new possibilities”) in the span of five minutes. That’s impossible. It defies human nature.

With a living strategy, the delivery and development agendas use different meetings to sort out different behaviors. In delivery meetings, team members solve problems and deliver results. In development meetings, team members come to the table with an open and innovative mindset for making strategic decisions, experimenting, testing and learning. CEOs can cultivate the environments for each of these dialogues and manage them accordingly, rather than delegating it as a staff activity.

When they hold delivery meetings, for instance, leading CEOs abandon backward-looking dashboard reviews in favor of constructive dialogues aimed at accelerating results. About 20% of meetings are short performance reviews that examine business and financial performance, pinpoint the root cause of any issues and predict future performance. But 80% of discussions are debates that identify and explore issues. By course-correcting where needed and revving up on-track initiatives, team members sharpen the strategy and gain momentum. These discussions also serve as coaching and experience-sharing sessions that foster talent and bolster capabilities.

A more connected organization

The distinct separation of the delivery and development agendas cascades behavior change throughout the organization. However, real acceleration won’t happen without tying the agendas to budgets and performance management processes.

In traditional strategic planning, all too often, the firm’s various systems lack cohesion and integrity. For example, the head of China operations might argue that he can’t meet the strategic goal of “winning in China” based on current investments. During the financial review, the organization cuts the commitment to make the budget work. But there’s no reconciliation with the strategy. No one revises it to acknowledge that the firm has decided not to win in China, at least not this year.

Some CEOs tightly weave the strategy throughout the organization by negotiating performance contracts for resources with executive leaders. In the delivery agenda, leaders understand that resource allocation is based on achieving specific outcomes. In the development agenda, where the outcomes are unclear, CEOs distribute resources based on the ability to eliminate uncertainty through experimentation. Performance contracts aren’t siloed or business-unit specific; they acknowledge the interdependencies of the entire organization. They align executives to deliver on strategic promises cohesively and effectively, working as a harmonious unit.

Propelled by this strongly linked strategy, leaders set the cadence of the delivery and development agendas. They assemble and disassemble cross-functional teams according to firm priorities. Executives design career paths and help individuals rotate through roles in both agendas. They provide regular encouragement to help teams overcome the inevitable bumps in the road. They create communities of experts who share lessons with their peers. They track promises to stakeholders and communicate progress. This isn’t conventional, stale management; leaders act as coaches and mobilizers.

As leaders nurture the independent delivery and development agendas, clarity permeates the organization. Pragmatic priorities and objectives can mobilize, inspire and align people. Delivery teams know the issues, the options and the people working on each solution, and can ruthlessly focus on that agenda. Development teams experience a similar clarity, ensuring the strategy has long-range headlights illuminating the obstacles ahead as well as opportunities to accelerate. And both teams cultivate a stronger sense of purpose and identification with the customer mission. CEOs who have adopted this approach note that these teams aren’t debating each other’s alternatives or fighting over resources. Instead, they’re advancing toward clear objectives and pulling together.

Distinct, well-defined strategic agendas also reassure boards. Board members want to know that executives are addressing their concerns, and the development agenda provides assurance. CEOs can map quarterly meetings and messages to investors 12 to 18 months out, providing updates on progress. Investor relations similarly become strategy-led, rather than strategy becoming investor-led.

By orienting the strategic approach to real ways of working, executive teams can make a living strategy the singular, steady heartbeat of the organization. Now more than ever, CEOs have a chance to implement this real, enduring change. While no one has all of the right answers yet, it’s imperative to get started before the moment passes. After all, the need for flexibility and responsiveness will extend far beyond the current crisis. With a dynamic, adaptive and connective strategy, CEOs can build a faster, more resilient firm in the short and long term.

Related Insights

Coronavirus

The global Covid-19 pandemic has extracted a terrible human toll and spurred sweeping changes in the world economy. Across industries, executives have begun reassessing their strategies and repositioning their companies to thrive now and in the world beyond coronavirus.

How to Breathe New Life into Strategy

How to Breathe New Life into Strategy