Jul 22, 2021 at 5: 05 pm

On the Evolution and Future of Strategy

Rather than working with one preferred advisor who provides all required services, there will be a move towards a ‘cherry-picking’ approach.

Ian Pallister

6 MIN READ

The essence of strategy, as applied to the business world, has always been about finding a sustainable competitive position in chosen markets so that an acceptable return is made for shareholders. That fundamental premise is unlikely to ever change greatly.

However we have seen how, over the last 20 years, the role of strategy has evolved to become broader and deeper as markets have become more volatile and the competitive arenas have become more complex and challenging. I expect that trend to continue and I see five areas where the role of of strategy will continue to evolve and change to provide greater impact for the organisation.

Strategy = Digital (Plus)

The gradual digital transformation of the organisation has been happening ever since the advent of widespread internet technologies some 20 years ago. This is nothing new. What is new is the rapid enablement of all aspects of current technologies – artificial intelligence, robotics, massive data analysis, and other Industry 4.0 technologies.

All of these technologies are fundamentally changing the way organisations conduct their business operations and this is disrupting many traditional industries. But strategists must look beyond the current wave and look to the enabling technologies 5-10 years out and consider what impact they will have on the firm’s ability to compete and sustain their business model.

What are the likely industry shifts? What are the competences and assets that we will need to utilise? How do we obtain them? Do we bring them in-house or do we partner? These are just a few of the fundamental strategic challenges that organisations will face. This does not mean that strategists will need to become technology experts, but it does mean that it will become increasingly important for strategists to be ‘tech-savvy’, to work closely with technology colleagues, to be aware of medium and long-term trends, to recognise weak signals and to continuously model the possible implications, and responses, for their organisation.

Strategy = Aligned Innovation

The link between strategy, as a provider of corporate ambition and direction, and innovation, as a driver of new products and services has never been more important. However, our research tells us that 90% of organisations do not obtain the desired impact from innovation activity. And one of the key reasons for that is that innovation activity is not correctly aligned with corporate strategy. Traditionally, innovation activity has been closely linked to R&D departments, resulting in more of an inside-out approach to innovation activity. What is needed, especially in difficult economic times, and with rapidly changing technology opportunities, is a formal cascade from strategic ambition through to the products and services in-market.

Strategists need to work closely with innovators and ask the questions, ‘Which Strategic Domains should we focus upon, and why?’ ‘How do we compete successfully and sustainably in these domains?’ ‘What is the portfolio of products, services, new business models required in each domain?’ ‘How do we enable success in these domains?’ ‘What core competences and assets will drive innovation?’ And most importantly, ‘How can we maximise the impact from innovation activity by ensuring there is a clear alignment up and down the organisation?’.

Strategy = Building Resilience

Strategy is about choice. It is about generating a range of plausible options and then choosing the most optimal so as to minimise risk and maximise return. And, of course, we have tools to help us to understand risk and calculate returns. And we also have methods to allow us to build scenarios that inform our decision-making. But thus far the role of the strategist has not been to specifically seek to build additional resilience into the organisation. That was traditionally seen as increasing cost in a non-linear, non-competitive manner.

However, recent events have taught us that those organisations that have considered how to build resilience have fared much better and have better long term prospects. Organisational Resilience is the ability to react to unfavourable circumstances such that there is a sustainable and profitable operation and business model. And, of course, this ability to react only comes about from a mindset that is ‘pro-active’ in terms of planning for different scenarios and market changes.

The implication for the strategist is that it is not enough to consider scenarios and use them for option development and strategic choice, but they must also be used to build resilience – to broaden customer and market positions, to implement alternative business models, to identify and develop multiple relevant competences and to drive culture change so that employees are as adaptable as possible, and to generate plausible Plan B strategies in case of major business and societal shifts.

Strategy = Social & Environmental Impact

A key element of strategy is identifying the key drivers of customer choice. As is reacting to, and planning for, a changing regulatory system.

No one can doubt that one of the key drivers of customer behaviour, and one of the main influences on government policy, is climate change. Allied to this are other aspects of social awareness that are changing consumer behaviours and affecting government policy. Social and environmental issues will consistently be the biggest drivers of change over the next 20 years. And almost all value chains will be impacted by factors such as micro-plastics, ocean pollution, modern slavery, animal welfare, plus many others.

Of course, this is not new, and strategists have been factoring ‘green issues’ into their decisions for the past 40 years, but as with the new digital wave, there is now an increased need for strategists to be more informed and be able to be pro-active in the way they consider the opportunities rather than respond reactively to such perceived threats.

Our research shows us that strategists under-estimate the speed of change in this area and over-estimate their ability to react to changing customer demands and regulatory systems. Value chains are being rapidly de-carbonised. The automotive industry is moving quickly to an electrified model. And Tesla is the most valuable automotive company. Why did Big Auto not move quickly enough? What is the implication for strategists? As with other major disruptive forces, the answer is to listen intently, constantly model scenarios and options, build broader competences, adopt an innovation mindset, experiment and learn quickly, and execute with conviction.

Strategy = Fresh Challenges, New Tools, Different Mindset

How will the actual process of doing strategy change? How can strategists analyse and manage the vast amount of data available to them and make sense of it? How can they make use of the new tools that are required to deal with new challenges and new competitive arenas? And how can they work
collaboratively with experts and stakeholders outside of their immediate strategy team and outside of their organisation or sector?

One of the answers lies with the emerging Strategy Platforms that seek to provide fresh tools, a collaborative online environment, and access to a broad range of problem-solvers. Again, whilst versions of such platforms have been around for many years, these new platforms are pushing the boundaries of technology to provide an enhanced analytical service and real-time access to a broad array of expert problem solvers whose input can be efficiently and effectively managed. Such platforms will potentially disrupt traditional service offerings in the strategy area, such as consulting, corporate finance, venture start-up, by providing strategists will the ability to work with the optimal external partner as well as using the optimal combination of tools and processes.

So, rather than working with one preferred advisor who attempts to provide all required services, usually sub-optimally, there will be a move to more of a ‘cherry-picking’ approach where strategists can quickly, and probably virtually, access a range of key advisors. The implications for the strategist is clear – they need to know the right questions to ask rather than feel they have to provide the answers themselves, and they need to be open to a new way of doing strategy which is more open, more collaborative but ultimately more productive.

______________________________

Download the Strategy Tools in Action Report to dig into expert views on the future of strategy, and meet 18 consultants actively going to work every day equipped with new tools, new simulations and new ways of working.

If you want to start your own journey with Strategy Tools and build a greater impact with clients and colleagues, register for our intense four-week, hands-on digital workshop Strategy Tools Global Coaches Program starting on 27th September.

Ian Pallister

Ian Pallister

With over 25 years track record across a range of sectors including energy, high tech, life sciences and financial services, Ian Pallister helps organizations create new, innovative concepts and develop breakthrough ideas.
He had held senior positions in both boutique and large consulting firms. He was Global Head of the Palladium Innovation Practice, as well as Head of Europe for Strategos Inc., the renowned strategy and innovation consultancy founded by Gary Hamel

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