Three useful things to know about setting strategy
Organisations get better at doing what they repeatedly practise
The game of business is ever changing – with digitisation, globalisation, automation and disruption adding complexity and doubt to decision-making processes around the smartest way to proceed.
But even against this backdrop, strategy is still fundamentally about defining a future target and an approach to getting there, says George Shinkle, an associate professor in the school of management at UNSW Business School.
Shinkle notes that in today’s dynamic environment there’s a temptation to gamble, but that’s not an acceptable use of company or investor money. Yet, BlockBuster could have bought Netflix in 2000 for $50 million and today the market cap is $160 billion. Would such an investment have been viewed as rolling the dice?
Or, in 2006, Jeff Bezos opened Amazon Web Services as a standalone cloud computing service that has been highly successful. At the time, Wall Street was extremely critical.
We may not be leading an organisation such as Amazon or Blockbuster, but how should we think about strategy?
Shinkle recommends keeping leader and organisational attention outwardly focused on customers and competitors, searching for disruptive opportunities. At the same time, businesses need to concentrate on being agile in daily operations. Agility means being flexible; being good at change.
“An important lesson is that organisations get better at doing what they repeatedly practise,” he says.
“This means we should keep continuously changing. It will make our organisations more agile and more able to disrupt, if and when opportunities are discovered or created.”
'Who would want a strategy of small losses? Well, anyone who did not want the alternative of a strategy of large losses'GEORGE SHINKLE
“Undertake scenario thinking exercises,” says Shinkle. “This is not to predict the future, but to develop a small set of plausible futures that can be used to evaluate the robustness of the strategy – and to develop better strategy and strategic options.”
Scenario thinking means being situationally aware – paying attention to what has happened, what is happening, and what may happen. This builds enhanced awareness of situational changes, as well as better capability to forecast and to respond.
“Such scenario-based forecasts allow organisations to better detect critical divergences from expectations,” Shinkle says. “This is often where opportunities, as a well as threats, are found.”
Options and experiments
According to Shinkle, we should simultaneously play the long and the short game – by developing a portfolio of strategic options, using lean start-up concepts (developed by entrepreneurs), and focusing on creative capability.
“Lean start-up means assessing and testing hypotheses, running experiments with minimum viable products, and focusing on fast cycles of learning,” he says.
“Creative capability means building the innovation capability of the organisation and its members. It may be helpful to think of building such capabilities as establishing a set of human-capability options.”
Interestingly, this kind of options and experiments thinking has also been called a strategy of small losses.
“I like this name as it grabs attention,” Shinkle says. “Who would want a strategy of small losses? Well, anyone who did not want the alternative of a strategy of large losses.”
Shinkle believes we are now entering a very “strategic” time period – an era where strategy will be critical to long-term success due to the number of unpredictable forces that are in play.
“I suggest you lead with courage and curiosity, holding your knowledge and perspectives humbly (for they may be wrong). Question, experiment, and learn,” he says.