The Foundation of Strategy: Who are you?

Who are you? What do you do? What is your current business model? What is your current revenue model? Where are you currently positioned within your competitive landscape? Who are your customers? How do your customers currently perceive you? What is your organization's culture? 

In order to develop strategy in a complex environment, you have to have a thorough understanding of who you are, what your identity is and what your organizational perspective is.

Managers with a linear perspective on the environment tend to develop business models to fit what they think are predictable futures. The consistency of execution of these business models determines the success of the organization only for the duration of that predictable scenario. This, in turn, drives the organization's culture as those people and ideas that fit within the consistency of the business model are kept and those people, ideas and opportunities that don't fit are discarded. In other words, strategy can be viewed as a reflection of the organization's culture

In the machine model of business, strategy is set at the top of an organization and communicated to the rest of the firm. Actual strategy, on the other hand, emerges as a result of the myriad actions of the stakeholders of an organization as they perform their day-to-day tasks: who they call, who they sell to, who they buy from, which tasks they choose to perform, who they hire and so on. These daily tactical decisions are made based on internal processes, incentive programs, tactical resource allocations and other bits and pieces that make up organizational culture. The sum total of all these things describe who you are as an organization.

Bottom line: the foundation of strategy is understanding who you are as an organization. Not what you think you are, or what top management has decreed you are, but what emerges as the identity and perspective of your organization from the sum total of all the actions of the organization.

Bruce Borup

How you play the game

In order to understand the development of strategy in turbulent times you have to recognize that:

• There is a high level of uncertainty about your ability to predict the future, and 

• Your organization will interact with its competitive landscape in a non-linear fashion. 

You will also face organizational resistance to developing strategy in new ways by those who confuse a long-term trend with minimal fluctuation for a linear reality. Once your organization is hit by a dramatic event or a series of disruptive changes, those same people will rationalize their linear reality by declaring such events unforeseeable. Better to understand from the start that rapid change and high impact events are part of the non-linear reality of your organization.

In an attempt to make the future more predictable, strategy managers often up the volume of scenario planning using greater variables or they go in the opposite direction and try to focus predictions on very narrow areas of uncertainty, using mapping exercises to define possible outcomes. I can't deny that these solutions have some value, especially with short-horizon events, but the problem with non-linear competitive landscapes is that they are not static. You can't develop a static map of an ever-changing competitive landscape that has an infinite number of possible outcomes.

Therefore, as far as strategy is concerned, "how you play the game" becomes more useful than predictive strategies. How you play the game is concerned with developing a meaningful understanding of your present situation. Understanding the immediate consequences of your current strategy and how your organization will cope with an ever-shifting fog of uncertainty. Honestly define what you know and what you don't know. Develop this conversation as a shared narrative within your organization. Avoid arrogant statements of predictive knowledge and challenge others who declare predictive knowledge. On the other hand, be prudent about predictable disruptive events. In other words, try asking "what do you think would happen" before you have to ask that same question with hindsight. Finally, be aware of a sensitive dependence on initial conditions - understand that small disruptions can escalate into high-impact events.

Bruce Borup

The Stability Myth

As advantageous as equilibrium may be at the project level, it is a serious threat to the survival of an organization at the strategic level. Prolonged stability tends to make a system less responsive to change, whether it is caused by a lack of competition or by management intent through excessive use of detailed standard operating procedures.

Rigid process management, the very structure that managers tend to use to ensure quality products and services, can be the death knell for an organization by eliminating the requisite variety needed to withstand shocks to the system.

When motivated by competitive threats, or new opportunities, complex adaptive systems self-organize and move toward the "edge of chaos,"where increased levels of experimentation tend to lead to new solutions that improve the survivability of the organization.

As an adaptive leader, your job is not to direct the organization along a linear path. That sort of arrogance assumes predictable change. Your job is to disturb the equilibrium in a manner that would tend to encourage desired outcomes and discourage undesirable outcomes. Some of the tactics you can use to achieve this include, communicating the urgency of the problem, establishing why traditional solutions are not sufficient to meet the challenge and developing a system-wide understanding of the roots or causes of the problem. This is not a single-item agenda. The adaptive leader must sustain disequilibrium by holding stress in play until other adaptive leaders start to emerge, self-organize and begin experimenting with potential solutions.

You can create artificial stress in an organization by taking it out of its comfort zone: overload the organization, use short deadlines or other actions that tend to force the organization towards the edge of chaos. Where traditional managers might tend to identify an issue, develop a plan and step in to fix the problem, an adaptive leader identifies the issue, but then does NOT step in to fix the problem. Rather the adaptive leader communicates the urgency of the issue and creates disequilibrium so that the entire system can self-organize to develop solutions.

This is tough and counter-intuitive for most organizations. "Leaders-as-head"are expected to have all of the answers, provide all of the solutions. Adaptive leadership is part of a strategy that looks to the entire living system to develop innovative solutions so that the whole organization can thrive.

There will be organizational resistance to adaptive leadership. In the "leaders-as-head" model, members of an organization tend to look to their leaders to protect them from fear, uncertainty and doubt. Adaptive leaders must hold all members of the organization accountable for its success and regulate the stress on the organization so that you maintain disequilibrium without descending into dysfunction. You will have to use all of your soft skills to ensure that passive-aggressiveness and other avoidance mechanisms are defeated before they become an institutional defense against adaptive leadership.

Bottom line: beware the myth of stability. It has its uses at the project level and is a very useful tool in quality management. However, at the strategic level you require requisite variety and adaptive leadership in order to sustain disequilibrium and survive shocks to the system. You must create an environment where the complex adaptive system will self-organize in order to find new and exciting ways for the organization to thrive.

Bruce Borup