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DEVELOPING

ACTIONABLE

STRATEGY

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A great strategy does not assure marketplace success unless it is accompanied by a clear action plan which can be communicated and implemented throughout the company. Andreas Birnik and Richard Moat believe that it’s critical to have everyone involved in managing strategy reading off the same page. Literally.

H ow many businesses slip or fall even though

they had a great strategy? In other words,

how much business potential has been lost

because business leaders fail to convert a good strategy into productive actions? Our sense is that the number is embarrassingly

high. Developing a relevant and actionable strategy

is a key challenge for most management teams.

Success never comes easily, as most people running

a business know all too well. Instead, it is rather

common to hear managers talk about “paralysis through analysis” – so much time spent developing

(or understanding) a new strategy that implementing

it is either an afterthought or the execution effort is

either sloppy, half-hearted, or off target. We’ve heard managers attest to such business sins too often to count. Comments of this nature indicate that there is still scope for innovation in the strategy field to provide frameworks and tools that can help practitioners develop strategy that really matters to their organizations. More than that, we feel that what is most needed is a structured process aimed at capturing key strategic insights and condensing the business strategy into an actionable one-page summary: if you will, into a “strategy grid”.

Dedicated followers of fashion

Our creation of a strategy grid to help managers execute their strategy comes from real-life experience. Our proposed approach is the result of five years of experimentation with a range of different

strategy frameworks and tools, developed while working for Orange subsidiaries of France Telecom in Denmark, Romania and Sweden. During this time, we were exposed to the fads and fashions of strategy as a result of our own reading and interaction with consultants and colleagues. As a consequence, when involved in planning and executing a strategy, we have used strengths- weaknesses-opportunities-threats (SWOT) analysis to create a snapshot of our situation. We have also held off-site workshops around scenario planning to understand how our environment is evolving. We have carefully analyzed our market positioning. We have assessed our valuable resources and capabilities. We have drawn up detailed strategic plans to try to ensure linkages between strategy formulation and implementation. We have created companywide road shows to communicate and embed the strategy. And we share all this now because we want you to know that we truly have “been there” when it comes to all the latest fads in strategy development. However, despite the use of a variety of different strategy approaches, we often found it challenging to convert the elegance of strategy formulation into a relevant and actionable set of initiatives and options. Thus, while these strategy exercises have been intellectually stimulating, we have often

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concluded strategy events somewhat dissatisfied. We felt, as others surely did, that while we may have experienced a great discussion about strategy, it was (more often than not) alarmingly unclear what anyone should do differently as a result of the day’s thinking and what we should communicate to the rest of the organization in terms of executing the new strategy. After much thought, we concluded that what was needed most is a bottom-up/top-down strategy process reinforced by a strategy grid – all designed to make strategy actionable.

Bottom-up/top-down

The strategy process we now recommend follows two parallel tracks, which we call bottom-up and top-down. These two different starting points for analysis and strategy development provide an opportunity to tease out important conclusions that might otherwise have remained hidden from view.

The bottom-up process takes its starting point in a solid micro-level articulation of the current base case for the business. We have found that while the budget process usually achieves a shared understanding regarding metrics (such as top line financial numbers or key performance indicators), there is often a lack of a clear overview around the key initiatives and activities forming the base case. Given this, we have found it useful to articulate the base case across dimensions such as business scope, marketing, sales

levels we will deliver across our different segments, the percentage of total revenues that we will generate from new data services, convergence opportunities and the overall potential for organic growth compared to merger and acquisition alternatives. We thus build up a high-level, but fairly comprehensive, overview of the base case that serves to align key stakeholders within the company; this case can be used for discussions with managers at headquarters.

Stress test

Having achieved this overview, the next step in the process consists of stress-testing the base case by identifying limitations and issues. To the greatest extent possible, we try to structure limitations and issues according to the same format as the base case. After completion of these steps, we have found that a number of key strategic imperatives typically become evident. Based on this, we then seek to identify “must have” initiatives as well as potential strategic options that address the identified limitations or issues with the base case. Some of the “must have” areas to address in the past have included the need to increase the geographic reach and capillarity of our distribution network; to increase both network capacity and coverage in specific locations; to spend more on advertising relative to competition; to diversify our advertising agency resources to improve the

Another good test of the quality of the grid is to ask how valuable it would be if a key competitor were somehow to obtain it.

and distribution, customer service and technology. This essentially serves to provide an answer to the question of what we currently perceive the business to look like, across different areas, if we execute according to current constraints, intentions and plans. To develop this view of the base case, we use the budget for the current year, our business plan for the next four years and our operational programme plan that lists all major approved initiatives across the business. Examples of areas that we focus on when articulating the base case include the product and segment markets for which we will have competitive propositions guided by needs-based segmentation, the size and capillarity of our distribution network, the coverage of our network (outdoor and indoor), the brand metrics we are likely to achieve with our current level of advertising expenditure and the overall customer experience we provide. We also focus on the customer service

creativeness of our marketing communications; to upgrade our billing system to be able to offer new tariff plan structures; and to improve our CRM systems to enable us to up-sell services to our existing customer base. How useful is such a process? We have seen it make a real difference. In terms of new business opportunities, this process has led us to realize that we have not had competitive propositions in place to address some fast-growing market segments, that we have been missing out on new data and convergence product areas, that we may have been too cautious in terms of roll-out plans for wireless broadband solutions and that we have not done enough to monetize our substantial customer base through partnership opportunities for cross-selling. Overall, the benefit of the bottom-up process is that it creates a shared understanding around the base case in terms of what we must do versus what

30 Business Strategy Review Spring 2008

© 2008 The Author

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Journal compilation © 2008 London Business School

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Bottom-up process

Top-down process

B ase c ase

Assumptions and drivers

Articulate cu rre nt base case a n d ide ntify limitatio n s

Ide ntify fun dame ntal ass umptio n s a n d drivin g forces

case a n d ide n tify limitatio n s Ide n tify f un dame
case a n d ide n tify limitatio n s Ide n tify f un dame

B ase c ase imper atives

Ide ntify strategic imperatives based o n base case

Ide n tify strategic imperatives based o n base case
B a se c a se imper a tives Ide n tify strategic imperatives based o
B a se c a se imper a tives Ide n tify strategic imperatives based o
B a se c a se imper a tives Ide n tify strategic imperatives based o
Ide n tify strategic imperatives based o n base case Initi a tives a nd Options

Initiatives and Options

O u tlin e base case initiatives for impleme ntatio n an d strategic optio n s for evalu atio n

n tatio n a n d strategic optio n s for eval u atio n Disruptions
Disruptions Ide n tify a n d track pote n tially disr u ptive forces

Disruptions

Disruptions Ide n tify a n d track pote n tially disr u ptive forces a
Disruptions Ide n tify a n d track pote n tially disr u ptive forces a
Ide n tify a n d track pote n tially disr u ptive forces a

Ide ntify a n d track pote ntially disr uptive forces a n d other risks

Top down imper a tives Ide n tify strategic imperatives based o n ass u
Top down imper a tives Ide n tify strategic imperatives based o n ass u
Top down imper a tives Ide n tify strategic imperatives based o n ass u

Top down imper atives

Ide ntify strategic imperatives based o n ass umptio n s a n d drivin g forces

Ide n tify strategic imperatives based o n ass u mptio n s a n d
based o n ass u mptio n s a n d drivi n g forces Figure

Figure 1. The top-down / bottom-up strategy process

we might do. The advantage of this process is that we typically get highly actionable initiatives and options as output. The drawback is that the clear focus around the base case might trigger a form of strategic myopia with too much focus on short-term, operational issues. To remedy the risk of becoming myopic, we also conduct a top-down process.

The top-down process starts at the other end of the micro-macro continuum by trying to tease out the fundamental assumptions about the business environment in order to provide a foundation for the strategy. This part of the process is drawn from some prior experience with Shell’s famed scenario planning model. It thus seeks to isolate certain factors called “TINA” (There Is No Alternative). TINA could include factors relating to demographic evolution, economic growth, competitive intensity, level of industry regulation and entry into trade blocs such as the European Union. We don’t mean that these factors may never change, simply that it is unlikely that a different trajectory will emerge before the end of the current strategy horizon. In a turbulent and rapidly changing world, we have found that it provides an element of comfort to seek to anchor – and track – the strategy in a set of fundamental assumptions. In our case, such fundamental assumptions required us to check and verify such factors as the declining overall population size, the entry of Eastern European countries into the European Union, shift from double-digit to single-digit growth rates as mobile markets mature, increased competition due to the introduction of new telecoms licenses or virtual operators and increased customer churn due to the introduction of number portability.

Following from this alignment around fundamental assumptions, we then focus on the key forces affecting both our core business and shaping adjacent or emerging business areas. We structure this into columns spelling out the driving forces, the implications and the strategic imperatives. In the telecom industry in which we worked, we discovered the need to shift from a heavy focus on customer acquisition towards retention and up-selling as markets mature. Increased maturity of telecoms markets also inevitably leads to commoditization of basic services with downward pressures on price and thus an imperative to focus on cost control. To escape from the “commodity trap”, there was also a need to explore new emerging business opportunities for data and converged services. This required new capabilities beyond basic voice and messaging services and the ability to better segment both the overall market and existing customers based on an in-depth understanding of customer needs. The top-down process is also especially useful to identify the emergence of new disruptive technologies and to explore opportunities for acquisitions. Similar to the bottom-up process, this top-down process thus typically yields some initiatives that we should take and a set of strategic options worth further consideration.

A broad look

After having completed the first iteration of both the bottom-up and top-down processes, we take a broad look at potential disruptions that might affect the business and articulate those so that they can be further evaluated and tracked. We do this without specific consideration to bottom-up or top- down thinking. This could include one of our

© 2008 The Author

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Journal compilation © 2008 London Business School

Business Strategy Review Spring 2008

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local competitors being acquired by a major international player, new licences being issued or further regulation on a national or European level. At this stage in the process, we have found it beneficial to take stock of where we are and try to get an overview of the insights we have reached so far. We have found it quite useful to dust off and use SWOT analysis as a tool to provide a helicopter view and summary. Rather than being a mechanistic ritual, we have found that conducting a SWOT analysis takes on a deeper significance after we have been through both the bottom-up and top-down processes. The next step in the process consists of trying to visualize the actions and options emerging from the strategy process.

The strategy grid

The strategy grid is a framework that can be used to summarize key initiatives and potential strategic moves emerging from the strategy process. While we find it useful to follow the bottom-up and top-down processes, the strategy grid can be used to summarize the output of strategies developed through other processes as well. The X-axis of the strategy grid is based on the insight (popularized by James March of Stanford University) that a business needs to strike an appropriate balance between exploiting the potential of its core business and exploring new business opportunities. We have further subdivided the latter into the pursuit of adjacent opportunities that serve to extend the core business versus more exploratory entry of new business areas. The Y-axis seeks to make clear what future actions and objectives are included in the base case versus potential strategic moves that need to be assessed further. We have found it useful to divide the potential strategic moves into organic growth, alliances and partnerships along with mergers and acquisitions. To complete the strategy grid, we go back to the findings generated from the bottom-up and top- down strategy processes. Apart from minor discussions regarding in which box a particular action or strategic move belongs, we have found it quite easy to insert key findings into relevant cells of the grid. We have also noted that a very clear separation between strategy and objectives is not always very helpful. Based on our experience, we think it is fair to have a mix of objectives and actions (though we stay clear of purely financial targets in the strategy grid and instead focus on business drivers). The beauty of the grid is that it summarizes key objectives, actions and strategic options coming out of the process and separates those into what is already included in the base case versus potential strategic moves. The framework also provides an overview

regarding the relative balance between actions seeking to exploit or improve the core business versus initiatives of a more exploratory nature. Once the grid is complete, the single-page overview is useful to facilitate discussions of where these initiatives would take the company in terms of its market position; it also assists in developing valuable resources or capabilities toward the desired direction of the company. After using the grid several times, we have learned to challenge ourselves regarding whether or not we have managed to achieve the right balance between exploitation and exploration. We have found that we typically tend to place too much emphasis on the bottom-left corner in the model, which represents exploitation and improvement of the familiar terrain of our core business. Thus, while we may find too little space (for our sense of what needs to be emphasized) in the bottom-left corner, we have noted that, too often, other boxes on the strategy grid might be empty or only sparingly addressed. In short, we have learned to correct our own misuse of the grid. From that insight, we iterate our strategy process until we feel that we have managed to achieve an appropriate balance in our strategy as depicted in the grid.

The action imperative

In addition to striving for balance, we also try to ensure that the initiatives are actionable. We have found that the best way to do that is to develop a high-level programme plan in parallel with milestones for each initiative. If an initiative or target is phrased in such a way that it is difficult to put a milestone against it, we change the formulation into something that is more actionable. Another good test of the quality of the grid is to ask how valuable it would be if a key competitor were somehow to obtain it. Discussing this far-fetched “what if” tells all involved whether the grid is indeed something that indicates solid, competitive actions. Asking this question can lead to the sharpening of the key initiatives underpinning the strategy. Initiatives on the strategy grid can also be colour- coded into clusters that would take the business in a specific direction. This can be used to distinguish between different evolutionary paths for the business. As an example, we have often distinguished between strategic options targeting new market segments or entering new product markets. Once the strategy grid has been developed, it should remain a living emblem of the strategy and thus be continuously updated. This means that the grid can be used as a framework to discuss the fit of new incremental initiatives and options that emerge outside of the formal strategy process. The grid can also be used together with scenario planning to test how well the company will fly under different future environments.

32 Business Strategy Review Spring 2008

© 2008 The Author

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Journal compilation © 2008 London Business School

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Exploit a tion of Core Business Opportunities Explor a tion of New Business Opportunities a
Exploit a tion of Core Business Opportunities
Explor a tion of New Business Opportunities
a
nd Business Improvement Initia tives
Exte n sio n of Core
Enter New Areas
● Co n solidate market by acquirin g compa ny X or Y
● Exte n d geographic footprint by acquirin g competitor X
● Acquire compa ny in
adjace nt a n d fast
growin g in du stry X
● Acquire compa ny
with stro n g R&D
capabilities in area X
● Acquire distrib u tio n chain for produ ct lin e X
● Fin d systems integratio n partn er for produ ct lin e X
● Fin d distrib u tio n partn er for produ ct lin e X in market Y
● Enter into partn ership
with company X for
cross-sellin g of produ ct
● Partn er with company in
in du stry X to leverage
o u r distrib u tio n a n d
● Partn er with in s u ra n ce compa ny to provide exte n ded
warra nty optio n
X
with produ ct Y
marketin g capabilities
● Rollo u t additio nal shops in areas X a n d Y to improve
sales capillarity
● Laun ch n ew produ ct
● Invest in R&D for
lin
e X
area X
● Laun ch n ext ge n eratio n produ ct lin e X based o n n ew
techn ology Y
● Introdu ce lifestyle
accessories for produ ct
● In crease share of wallet for produ ct lin e X
lin
e X
● Ge n erate at least x% of reve nu es from produ ct lin e X
● Laun ch n ew produ ct
● Develop offer for
● Streamlin e operatio n s by o u tso urcin g area X
lin
e based o n a nnu al
s ubscriptio n rather
tha n produ ct p u rchase
segme nt X previo u sly
n ot targeted
● Impleme nt n ew segme ntatio n model an d CRM tools
● Build prototype in
● In crease sales thro u gh co ntrolled chann els to X%
area Y
● Co n solidate produ ctio n from X to Y locatio n s
● Redu ce cu stomer chur n levels from X% to Y%
● Introdu ce n ew o nlin e
orderin g a n d
fulfillme nt system
● Co n du ct market
research to assess
● En s u re p u rchase inte ntio n of at least X%
● Improve overall cu stomer satisfactio n from X% to Y%
● Offer cu stomers the
optio n of o n -site repair
a n d mainte na n ce
within 24h
pote ntial of produ cts in
area x
● Redu ce workin g capital by X%
● Improve cu stomer service performa n ce for high valu e
cu stomers from X to Y
● Build n ew orga nizatio nal
capabilities in solu tio n s
sellin g
● Impleme nt n ew ERP system before e n d of year X
● Revise recruitme nt an d promotio n process to improve
co n siste n cy a n d tran spare n cy
Or ga nic
Growth
nces/
Mer
g ers a nd
P Allia
a rtnerships
Acquisitions

Figure 2. The strategy grid

The strategy grid provides an action-oriented output of the strategy process by summarizing the strategy via a one-page overview listing both planned initiatives and potential strategic moves. The strategy grid is also a useful tool to ensure that the strategy is balanced between exploitation and exploration – and between organic growth and growth derived from partnerships or

acquisitions. By taking an activity-based view, the focus shifts from the notion of a single-point, unidirectional strategy toward a more helpful perspective of a portfolio of ongoing initiatives and potential strategic moves. For, in the end, your real strategy is not what your management team thought; it’s what your company actually did.

Andreas Birnik (andreas@nus.edu.sg) is a Visiting Fellow at the National University of Singapore’s Business School.

Richard Moat (richard.moat@orange.ro) is currently the CEO of Orange in Romania.

London Business School Regent’s Park London NW1 4SA United Kingdom Tel +44 (0)20 7000 7000

London Business School Regent’s Park London NW1 4SA United Kingdom Tel +44 (0)20 7000 7000 Fax +44 (0)20 7000 7001 www.london.edu A Graduate School of the University of London

© 2008 The Author

|

Journal compilation © 2008 London Business School

Business Strategy Review Spring 2008

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