Strategy knowledge with Christian Underwood
How to set up a strategy process correctly, which factors to consider and which questions to answer before starting the process.
For the first time in the new format "Strategy Knowledge", Christian Underwood explains how to set up a strategy process correctly, which factors to consider and which questions to answer even before the process starts.
Essentially, it's about 12 key questions:
- For which part of the company is the strategy intended?
- Situation analysis: What is the overall objective of the strategy and what type of strategy is it?
- What is the common language in the strategy process?
- Time aspect in the strategy process: What half-life should the strategy have?
- On what basis (mission statement, BHAG, etc.) is the strategy aligned?
- What is the time horizon of the strategy process itself?
- What strategic framework (methodology) does the process follow and what is the common understanding of strategy?
- Who is the sponsor of the strategy process?
- Who acts as the operational strategy process or project manager?
- Who needs to be involved in the strategy process and actively shape it?
- Is an external strategy consultant or strategy coach needed? And if so, which one and when?
- How is the strategy process communicated?
How exactly the answers to these questions are and which tips, tricks and tricks there are already before the planning of a strategy process, you will learn in the new episode #12 "Strategy knowledge: Strategy process properly plan" or in the detailed Shownotes.
Detailed episode description:
For many, strategy is an overpowering word with which they have great difficulty. At the beginning of a strategy process, therefore, the child is often not called by its name. There are often good reasons for this. The term is misunderstood or has already been used in one's own company for so many things that it is preloaded. There is talk of repositioning, realignment, new focus or even strategic journey.
Therefore, it is important to answer the essential questions for the process in the initial meeting and to minimize possible risks due to misunderstandings. Otherwise, the end result will be something that no one wanted at the beginning, because the use of different terminology and language did not provide the necessary clarity.
In this episode, Christian brought 12 questions that you should have a clear answer to even before the strategy process:
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For which part of the company is the strategy intended?
The first area concerns the entire company or group of companies and culminates in the corporate strategy or group strategy. Here, the focus is on which markets and industries one wants to be active in and which synergies arise beyond the portfolio.
As a second area, Christian designates a business unit or a business division in which a business area strategy is designed. Here, the question is addressed as to how a company can compete in a specific business area and which opportunities can be exploited to build up competitive advantages.
The third area, the functional area, contains the company's functional strategy. Here, the main focus is on how individual functional areas should operate.
It is helpful in the creation of the above-mentioned strategies if an overall corporate strategy exists and all corresponding business field strategies are aligned with it. In practice, however, one often encounters the absence of strategy at the corporate or business level. In this case, it is still important to know where and how to allocate resources to one's own area. This can be achieved, for example, through a suitable situation analysis. Furthermore, it should be considered whether the strategy is applicable to different countries and regions; after all, not every market behaves the same way. In order to clarify the scope, Christian always recommends the perspective from the overall view of the company, because this question should already have been answered at this level.
- Situation analysis: What is the overall objective of the strategy and what type of strategy is it?
At the beginning, you should be clear about the type of strategy you are pursuing - after all, different approaches also vouch for different risks and opportunities.
If, for example, everything is focused on growth, then this is a growth strategy. If you are thinking more in terms of the future and the future viability of the company, then you are developing a future strategy. Examples of sub-strategies would be a sustainability strategy, a digital strategy or an innovation strategy. A wide variety of factors can form the basis of the decision here.
Often, the link to the overall strategy is not clear in this context. This is why many strategies exist side by side. However, it is then important to precisely define the scope of these individual strategies in order to fully exploit their strengths. This can also be essential when it comes to clarifying what should and may really be questioned.
Does the strategy process focus on the goal of realigning the core business? Should new innovative business areas/business models be developed? Or should even a dual approach that combines both and drives them forward in parallel be focused and planning integrated?
This is where essential questions about the method of the management team come in. Is a brownfield or greenfield approach being taken? What can we really question as a management team? It becomes unpleasant when the boss talks about greenfield, but has actually already planned the new factory for the existing product portfolio and no experiments are required now.
So it's all about clear expectation management for those involved. There is hardly anything worse than when the top management of a company sits down together, develops innovations and new business models, which are then not in demand or implemented in the end. This leads to false information, unfulfilled expectations and, in the end, great disappointment on all sides. Accordingly, situation analyses are crucial for targeted preparation.
- What is the common language in the strategy process?
The common language refers to various issues in the process: on the one hand, the name of the strategy process, but also the name of the strategy as well as the actual language of the strategy process.
Even before the strategy journey begins, you can start thinking about the name of the strategy. Although this is a very early stage, the name is nevertheless crucial. Giving the strategy a name helps to actively determine how it will be perceived and received in the end. Gathering information about it and developing knowledge about it are part of this. So this should definitely be included in the implementation.
Often the strategy is named pragmatically. In everyday corporate life, strategies and strategy processes can be found that are referred to as "Strategy 2025," "Strategy 2030," and so on. This naturally arouses little emotion among all employees and participants. One tip would be to intervene here already and give the strategy a programmatic name, as it needs a strong message internally or externally.
However, language is not only decisive in the overall name, which is why this question is asked very deliberately at the beginning of the process, as it is also closely related to the objectives of the strategy. Should the strategy process be conducted in German or English? Many customers are German companies or global players, where Germans often sit in top management. Here a linguistic balancing act is performed, because under certain circumstances it can be difficult not to act in one's own native language. Words and letters can make a decisive difference in terms of strategic orientation, as they ultimately pass on crucial information and knowledge. This is a major issue even in top international teams at the corporate level. When colleagues who are native English speakers themselves are then brought in, the balance of power can shift in the strategy workshop, the strategy process, the strategic direction and in the overall formulation. That's why Christian always makes it a point to have clarity beforehand and to pay special attention to this in the implementation. There are always ways to resolve these problems, for example through translations and adaptations. Because it is often not a matter of 1:1 translations, but of suitable adaptations.
- Time aspect in the strategy process: What half-life should the strategy have?
Christian's experience shows: Over the last ten years, a corridor has developed that often specifies three to five years as the half-life. The strategies that are developed with customers today operate in this environment. Parts of the strategy process, such as some considerations and situation analyses, must nevertheless be reviewed at least annually. The environment changes quickly, information lapses or knowledge becomes obsolete. Nevertheless, three to five years is considered a good order of magnitude so that strategy can be tracked during implementation and execution. After all, strategy takes some time until the desired effect occurs, the goal is achieved and the strategy becomes visible.
- On what basis (mission statement, BHAG, etc.) is the strategy aligned?
The first thing to check here is whether there is a corporate mission statement with vision, mission, values, a BHAG (Big Hairy Audacious Goal), a WHY statement or a defined Purpose. All of these things can serve as a guiding or north star for the strategy. If none of these are in place, then a strategic foundation is needed. It would then be ideal to define one of these even before the strategy process starts. Of course, vision, mission, and BHAG are generally more appropriate. The time horizon of validity here is more likely to be between ten and thirty years. In no case should this be drafted on the side in a strategy process; rather, clear goals should be set from the beginning. Even if a mission statement exists, it cannot always be used 1:1 for the new strategy. Christian then uses the impact proposition method. It describes a target state or effect (impact) that the company wants to create. This can be a melange of many things. However, it is important to have this anchored above and in the target picture in order to be able to give topics such as value proposition, clear objective and competitive focus an anchor. This can further strengthen a good strategy.
- What is the time horizon of the strategy process itself?
This also has a dramaturgical component. Christian also receives requests at short notice, where the strategy is supposed to be finalized after two weeks. He categorically rejects such requests. Important steps, such as a sufficient situation analysis, cannot be carried out in two weeks; even the most sophisticated methods would fail here.
To be able to guarantee a reasonable quality of an analysis, one should plan four to six weeks. With a lot of strategic effort, this can be achieved in four weeks, but if information or data of a qualitative and quantitative nature is still missing, it can take up to three months to perform a substantial analysis.
After the analysis, time is needed for at least two workshops. The first workshop is held with top management on the topic of a common understanding of the situation analysis and the target picture. The second workshop is held with the extended management circle to translate the target picture into concrete fields of action with measures. A recognized method is then to leave at least two to four weeks between the workshops so that the workshop content can mature in the mind.
The entire strategy process, on the other hand, takes about three to twelve months. It should not take longer than that to implement it, because otherwise so much will already have changed in the time horizon that the strategy would have to be revised again before moving on to target formulation.
An important indicator for the timing are internal and external factors that condition the strategy publication. These can be, for example, major industry trade fairs at which the new strategy is to be presented or the influence of the advisory board or supervisory board. This also regularly leads to an increase in knowledge, which can contribute to strengthening the strategy. Such events have a significant influence on the strategy process, provide a time horizon and clarify the objectives of the strategy(s) at all levels.
- What strategic framework (methodology) does the process follow and what is the common understanding of strategy?
It is important to clarify in advance which methodological framework you want to use. This not only analyzes, controls and aligns the entire strategy process, it also helps to ensure that nothing is forgotten along the way and that the common understanding of strategy is defined. Here it is possible to fall back on various well-known models or methods. Christian works with his own developed StrategyFrame, which he will explain in detail elsewhere. Briefly he reports that this consists of 3 pillars - the situation analysis, the target picture and the concrete fields of action. Only with all these elements can there be a complete strategy that exploits targeted strengths to bear fruit in implementation.
- Who is the sponsor of the strategy process?
Classic sponsors for corporate strategy are the CEO or managing director. In practice, a team approach has been frequently asked for lately. But Christian has a clear opinion on this: the management or the board should be the sponsor for the strategy process. Responsibility is not divisible and in the end there can only be one overall person responsible, even if in the end several have to share the implementation of the selected strategy. Otherwise, there will be too strong particular interests of individual actors, which will weaken the process and cause it to falter. Concentrating on one person with overall responsibility helps to create clarity and also to be able to make clear announcements in necessary situations. This should always be kept in mind during planning.
- Who acts as the operational strategy process or project manager?
The most experienced colleague is not necessarily always required here. Young, fresh minds with an initial stable network in the company are just as suitable for this. However, if they are too new to it and have no networking yet, then it can have a negative impact on the timing and content work of the strategy process - which is why planning and selection mean everything here.
There is a lot of scope for creativity here, and Christian reports that he has seen many young colleagues deliver their first little masterpieces, implement strategic methods flawlessly, and ultimately make a decisive contribution to achieving goals.
- Who needs to be involved in and help shape the strategy?
Co-creation is on everyone's lips and it means more than mere involvement. Co-creation creates the feeling of having worked together on the new strategy and the implementation experiences a much higher acceptance. But here, too, one should look at the measure.
There are different elements in the process with different levels of involvement - not everyone needs to be in the big first strategy workshop. Here, Christian recommends only the top management team. Anything beyond twelve people has only limited value, otherwise ambiguities arise in terms of responsibility. In the second workshop, the extended management circle can then be additionally invited.
However, there are also opportunities to involve a wide variety of people during the process. For example, qualitative interviews during the analysis phase can be used to gather the views and expectations of internal and external stakeholders. This method offers a particularly differentiated insight into the structures and divisions of the company. It also provides information about interpersonal factors of the employees.
Christian is often asked whether employees who are not part of the management team can also be involved. Here the answer is then: It depends. Such a decision sends a symbolic signal to the existing management team and raises expectations among the invited protagonists. The team dynamics of individual employees then change massively. If these are not fulfilled afterwards or were not clearly outlined in advance, he advises against it. However, if this is done well and communicated clearly, valuable impulses can arise for the process and later in the dissemination and acceptance of the strategy. No clear answer, but one should consider this decision carefully in the planning.
On this topic, there is a fresh technical article from the MIT Sloanreview on the topic "Amazon Raised Its Minimum Wage - Will Its Rivals Do The Same?" which deals in particular with the advantages of a more open process in times of disruption. A clear reading recommendation for all who want to deepen their knowledge even further.
- Is an external strategy consultant or strategy coach needed? And if so, which one and when?
Christian believes that companies can handle a large part of the strategy process themselves. It is YOUR strategy and not that of a consultant. The role of consultants in such strategy processes is changing more and more. The legions of young consultants who develop new strategies far away from corporate reality still exist, but they are becoming fewer and fewer. Today, one often encounters highly specialized, small consulting firms and colleagues with distinctive expertise who accompany the strategic process as well as the implementation as facilitator or moderator. Nevertheless, many medium-sized companies find it difficult to deal with consultants. There are prejudices here and these must be clearly addressed and resolved. Good experienced consultant colleagues know this situation and can often solve it well. What you should look for is a healthy mix of what the company needs.
Nevertheless, there are areas where consultants and coaches can be helpful and play an important role with their professional knowledge and know-how. It takes someone who can hold up a mirror and address truths that one does not dare to say internally. It also helps when new impulses are really needed and you have the feeling that you are just swimming in your own juice. It also helps when there is a lack of internal resources in terms of time, skills and know-how (e.g. about markets, market potentials, etc.) - especially when many projects are pending that cannot be managed internally in this form. An in-depth situation analysis at the beginning of the company's strategy process can speak volumes here and, above all, create clarity.
- How is the strategy process communicated?
The days of secret projects are over. Christian recommends that teams and managers embark on the strategy journey as early as possible. Exchanging information behind closed doors and having top management build the new strategy is no longer the last word and is only possible to a very limited extent these days. You can already use the entire process - from analysis to goal formulation - to (conditionally) involve everyone and report that you are thinking about it. Afterwards, one can take a look at the current company situation and choose a strategic communication of content and channels very wisely. However, this does not have to be fully transparent - as is often promised and desired. The smartest method here is much more to communicate a perception of success and progress of such a process.
Following planning, the focus is then on communicating the roadmap to the top management team. This team must critically scrutinize the approach, target strengths and make a joint commitment in terms of time and resources for this process.
Contact:
Need help planning your strategy process? Feel free to send an email to christian@underwood.de.
Thank you for your interest and until the next episode...
...Because HOPE IS NOT A STRATEGY.