Playing To Win
How to Prepare for Strategy
I get lots of questions about how much and what kind of prework a team should do before launching a strategy effort, and when I give my answer, most disagree with it. I thought it would be both fun and helpful to give my answer and the reasoning behind it to create (hopefully) a little more clarity. To that end, my 32nd Year III Playing to Win Practitioner Insights (PTW/PI) piece is: How to Prepare for Strategy: Less is More. You can find the previous 142 PTW/PI here.
The Standard Conception
As I have written and spoken about often, strategy is typically conceptualized as a formal process — usually referred to as the strategic planning process. It is sometimes seen as a months-long process and sometimes as an event — e.g., a three-day offsite. Regardless, the strategic planning process is seen as a thing — and a thing in the middle.
Before the thing, there is preparatory work for the thing, and then the thing produces an output, which is a strategic plan. Because the thing in the middle is so important, the people organizing for and participating in it want to be prepared for the thing. The preparation for the thing is typically a big deal, with much work being done to get ready for the thing. There might be an ‘environmental scan.’ There might be a SWOT analysis. (I wrote about this earlier in the series and it remains the series’ second most viewed post, mainly because it is one of the most reviled!) Often there is lots of customer work based on the sentiment that you can’t go into a strategy process without understanding what customers think/want/need.
With all that prep work in hand, you enter the strategic planning process and deal with all the issues raised by the prework. And in due course, you come up with a strategic plan that was informed by all of that prework.
I think it is fair to say that this is an accurate representation of most strategy processes. This is not an attempt to argue a point about it. It is just to describe the dominant modality.
I think of strategy as a thinking process that results in either the reaffirmation of the choices you have already made, or the making of new set of choices that are different than the choices that inform and guide what you are doing today.
For me, the starting point of that strategy thinking process is the set of choices that you have already made and its intersection with your competitive context. Those choices had a logic behind them, whether somewhat implicit or highly explicit. There was a reason why you did these things and not some other things. That set of choices was meant to intersect with the world to produce a desired outcome.
If the desired outcome is being achieved, then it is likely that the strategy thinking process will reaffirm those choices. It is quite conceivable that the existing choices produced the desired outcomes to date, but the leadership team might be worried about the match of those choices to future conditions.
If the desired outcome is not being achieved, then the thinking effort will need to contemplate new choices. That contemplation is driven most by the mismatch between the desired outcomes of the existing choices and actual outcomes.
So, in my conception of the strategy thinking process, the best — and only useful — starting place for strategy is the mismatch of the desired outcomes of your historical choices with the actual outcomes. One could argue that this should be the subject of the prework before the strategy thinking process. But in my experience, the only people who can do that exercise well are the people who need to engage in the strategy thinking process. Consequently, any such ‘prework’ is actually part of the strategy thinking process.
For this reason, my view is that any work that a company does in advance to prepare for strategy — whether environmental scan, SWOT, or customer research — is wasted, or in fact dangerous. This is a situation in which less is more.
The Argument for Prework
This is one of my views that receives reflexive objection. The argument against my view is that in order to make smart decisions in the strategic planning process, the executive leadership team (For simplicity, I will use the term ELT to describe the group of senior leaders who make the company’s strategic choices, regardless of what they are called organizationally) needs a rigorous fact set on its environment, its competitors, and its customers to guide it.
I totally understand why people think that this kind of prework is valuable. And I am all for having more pertinent information than less when making decisions. The question is whether the prework information is pertinent or not.
But before diving into that, it is important to recognize that there are certain groups that have great self-interest in doing lots of prework. Consultants love prework. It provides the opportunity to assign lots of junior consultants to massive data collection and analysis activities that provide an attractive billing opportunity. I can’t tell you how many times, I have arrived on the scene to help an ELT engage in a strategy process only to find an exceedingly thick deck of data that the strategy function had hired a consultant to put together. Typically, I am told, rather proudly, that “we hired _______ (fill in the blank) to put together this fact-set for us.” In addition, if the consultant is advising throughout the process, as is often the case, the creation of the prework enables them to look smarter about the client’s industry than they would have been otherwise. So, they always have the incentive to prescribe lots of prework — regardless of whether it has client utility.
The same can sometimes hold for internal strategy groups. They can utilize prework efforts to justify the need for more staffing (instead of outsourcing to consultants) and to help themselves look smarter when working with their ELT.
The Argument Against Prework
The world is absolutely chock-a-block full of information. There is, for intents and purposes, an infinite amount swimming around out there now — and the magnitude is growing by the terabyte. Collecting all the data is fully impossible. Therefore, you have to pick some data to collect and other data to ignore for your prework. To which things about the environment should you pay attention, and to which not? To which things about customers should you pay attention, and to which not, etc.?
If you are going to do prework, you are going to have to have a logic that shapes those selection/attention decisions — whether you admit it to yourself or not. If you are a consultant or internal strategy person, how will you develop the selection logic? You may use a model like SWOT, which is, of course, exceedingly popular. But how can you tell at this moment in time, in your particular context, what is a strength, what is a weakness, what is an opportunity, and what is a threat? The SWOT model doesn’t tell you that. It just tells you that you should search for, collect, and process things that you believe fit into these named categories.
Inevitably, inescapably, the prework that comes back will be based on the logic — and therefore, biases — of those doing the prework — whether consultants or strategy staff or both. The only thing you can know for sure is that it isn’t based on the logic of the ELT creating the strategy. If it is their logic, it is because they are doing the prework and it ceases by any useful definition of ‘prework’ to be prework. It is the work.
I never, ever want to outsource the strategy logic of the company to consultants or staff strategy functions. Strategy is and will always be a line function. It is the summation of the choices that the company decides to make. The absolutely worst thing about prework is that it typically isn’t even based on clear logic of any sort. I’ll ask folks who have done the prework, ‘why did you ask these questions of the customers, not some other ones?’ The typical answer is, ‘we asked the customer insights team to put together a fact set, and this is what they came up with.’
So, the ELT doing the strategy work is going to base their thinking on a ‘fact set’ of prework that neither they nor the people putting it together had explicit logic to guide its creation. Yet ELTs tend to pay lots of attention to the prework — because one way or another they paid for it, and they think it is best practice to base their thinking on ‘the facts.’ So, they focus on the things that the prework says are important about customers, and on the threats from competitors that the prework highlights, etc. in a classic case of anchoring.
That is very dangerous outsourcing of strategy logic. And that is what prework is. It would be handy if it wasn’t, but I prefer to be realistic not romantic when I work on strategy.
So, Where Does Data Come In?
At the start of a strategy choice process, I am only interested in the data that is in the heads of the ELT that is tasked with making the strategy choices. That data will always be imperfect and incomplete. Why not start with perfect and complete data? It is because no such thing ever exists in strategy.
Yes, but what if the ELT is terribly ill-informed? That can be a problem to be sure. But the job of a strategy advisor is to help the company move from its current position to a better position. It is not about ignoring the current position of the company and wishing it was someplace better. Hope is not a strategy and fantasizing is not helpful. If the ELT is ill-informed, the job is to help it become progressively less ill-informed by starting where it is and helping it walk steadily to a better-informed place. That means starting with its logic and data and helping it pressure-test both in order to come up with progressively stronger logic for its strategy.
I argue for collecting data to test hypothesis concerning potential remedies for gaps between the outcomes we are experiencing and our desired outcomes. Each remedy comes with logic and with assumptions about data that would need to hold for the logic to be sound (i.e., What Would Have to be True — WWHTBT). Collecting that precise data based on the specific WWHTBT logic is where data collection and analytics comes in — and lots of it!
Resist the siren call of prework. Doing prework isn’t being thorough. It is outsourcing your strategy logic to people to whom it dangerous to outsource. Rather than start with piles of data that someone has collected based on their own often hidden logic, start with the logic of your own choices and how that logic and those choices have interacted with the world to produce outcomes.
Be truly scientific, not modern business faux scientific. Don’t collect data without a hypothesis just because it makes you feel smarter. Collect data when you have a hypothesis — a WWHTBT — that enables you to be laser-focused on the precise data that you need. Your strategy will be better when you internalize that in this domain, less is more.