Full Article on Strategy's Horizons and Boundaries

Happy new year!

Steve and I would like to share the full article with you in .pdf format. Also as a bonus we've added a fourth tool for the strategist.

Please let us know if you like the article and we hope you can use the tools we offer.

Cheers... Rob

Applications for the Organizational Strategist

Applications for the Organizational Strategist

We said at the outset of this month’s blog posts that effective strategy crafting begins from a strategic frame of reference or habit of seeing the world that executive leaders can learn to embrace. In the first discussion we reviewed the three dimensions that compose our perspective on strategy – an organization’s internal dynamics, its external environment, and its movement through multiple time horizons. In the second, we compared strategy’s scope or boundaries to those of organizational activity and planning. We are now in a position to step back and examine more fully what a strategic habit of mind actually is, and what this way of seeing the world implies in terms of organizational strategy crafting. We offer three inventories as tools for the strategist to continually assess and keep the information portfolios well stocked for strategic thinking.

Recommendations Regarding Organizational Activity. The strategist sees organizational activity holistically, as the whole of what the organization does – its combined operations, accrued day in and day out – in its movement forward through time. Moreover, the strategic mindset understands that the product of this activity, or the outcome of all of this “organizational doing,” is much more than simply profit or loss, or production quotas met, or delivery schedules filled. Rather, strategy sees organizational activity as having a consequent effect (or set of effects) upon the organization’s environmental landscape. Whatever the organization does, whatever it touches in its activity, affects the world it inhabits in ways that can be, and often are, both intentional… or not. The release of a new product, for example, draws new market share but may also stoke competition; letting go of a disgruntled employee eases workplace tension, but may inspire a lawsuit; etc.

The strategist sees organizational activity as a vast flow of stimuli and response, of energy exchange with its environment. For an interesting tangent about this web of life we suggest the reader consider the work of Fritjof Capra to read more about interconnected systems. But back to our point, the strategist should develop a mindset that “sees” organizational activity and operations through a lens of what environmental effects and influence all of these activities create – a grand interchange of sorts of objects, ideas, artifacts, energies, and value. And on top of all of this should sit a handy set of tools and processes to observe, capture, analyze, modify, and augment the ongoing organizational activities to serve strategy in the long run.

TOOL 1: The first tool we would like offer up for the strategist’s toolbox is one at the level of organizational activity – the activity inventory. The activity inventory may seem obvious to most of you, but you would be surprised at how many organizations take this less seriously than they should. The inventory is a holistic and active inventory of an organization’s capacities – its structure, relationships, processes, brand/image, and individuals. There is a large variety of tools and frameworks for this kind of inventory and we won’t focus on any single approach. What we would like to reinforce is that the inventory must be done and built into the ongoing systems of the organization, not just a periodic event.

Recommendations Regarding Organizational Planning. Planning is an intentional and vital process of all organizations. Some level of planning must occur, even if it’s minimal, before organizational activity can happen. But the two proceed hand and hand along the arrow of time. Indeed, based on the set of desired effects an organization is trying to achieve through time (increased market share, decreased costs, market expansion, etc.), planning is a necessary process that prepares, informs, and guides organizational activity, both directly and indirectly.

Planning’s purview generally looks from today forward in time some measure beyond organizational activity. It is by definition forward leaning and endeavors to anticipate, for example, supply-chain requirements, delivery schedules, workforce expansion, etc. When the planning processes of an organization are functioning well, they not only generally predispose the organization to operate well, they also enable organizational capacity to look still further forward into the future (and capitalize on the efficiencies and advantages such forward-looking efforts afford). And when an organization’s planning functions are firing on all cylinders consistently typically one will find within that organization evidence, sometimes even a robust presence, of an important feedback loop. This loop measures and assesses, on a recurring basis, the effects organizational activity is generating, both intended and unintended. It answers a vitally important question: “Are we doing things right?” Is the organization, through its actions, achieving its intended effects, and, just as importantly, if not, then why not?

Organizational planning has a proactive capacity to drive organizational activity toward desired goals and objectives. At the same time, there exists a reactive tendency to adjust activity given environmental opportunities and challenges that emerge. These two exist as balancing act with planning informing activity and vice versa. There is also a translational role to turn strategic direction into achievable activity. When organizations achieve excellence in the planning realm, we see a legitimate assessment loop is in place and providing ongoing feedback to its planning processes. Here you’ll find the organization that is efficiently addressing market demands, and anticipating well its supply chain tensions, etc. These are typically the organizations that are top tier in the current market landscape. However planning, like operations, is also not strategy. It is a common misconception that just because an organization is planning well, it is being strategic.

So what would we recommend that organizations do at the level of planning to prepare for successful strategy processes? We recommend organizations employ the environmental data collected as an activity in high order environmental analyses. This sets up the second key strategy tool:

TOOL 2: Now focusing on the organization/environment, there also should be ongoing and deep assessment of the organization’s external environment and activity across the boundary. We recommend an environmental inventory as a descriptive assessment in terms of current opportunities and challenges (economy, market landscape, partnerships/collaborations/relationships, etc.). In addition to the inventory, however, we also recommend that this be augmented with a more sophisticated set of analytics and metrics to continually monitor changes in the environment relative to changes in organizational activity to evaluate fit in terms of widening and narrowing gaps.

Recommendations Regarding Strategy. Strategy sits “above” the realm of planning to inform and guide the planning process, just as planning does for operations. And like planning, strategy also looks forward, but much further out, and in our humble experience, much more comfortably so than the planner. Moreover, unlike the planning realm, notice that strategy’s cast is not limited to the future, but importantly also includes the past (and we’ll discuss exactly why in a bit). Indeed, when an organization’s strategic process are honed, arguably one could say that strategy’s purview could and should extend out onto the limits of an organization’s conceivable horizon line.

In strategy, there should be ongoing honest reflections on organizational effectiveness. A good way to differentiate strategy from planning is to suggest that strategy’s concern is not with an organization’s effects, but rather, strategy’s concern is with organizational “effectiveness.” And strategy’s corresponding feedback loop also helps differentiate this focus. Strategy’s feedback loop asks not Are we doing things right? but rather Are we doing the right things?. Are we in the proper markets, and if so, how long will these markets bear fruit? Are we leveraging the best practices internally? Are there new technologies approaching that could change our landscape? Is our organization well positioned for what we cannot predict? In short, strategy tends to be concerned with an organization’s existential interests, planning with organizational efficiencies, and operations with organizational output.

Figure 7 below now serves as our final image integrating all of the components from the prior sections. We find the organization, immersed in activity and operations, moving through time. All the while, the organization is impacted by the changing environment and in turn acts on the environment, creating changes and impacts as energy flows across the organizational/environmental boundaries. Multiple horizons exist across time, both into the short-term and long-term pasts as well as into the present, short-term, and long-term futures. The organization remains aware over time, on the level of activity, on the level of planning, and on the level of strategy by continually asking the questions – Are we doing things right? and Are we doing the right things?.

Figure 7 showing the full model for organizational strategy horizons and boundaries.

Let us now offer up a third tool for the strategist:

TOOL 3: In our experience we have found that few organizations do a very good job at keeping track of where they have been and where they are going. We recommended two inventories for activity and planning, the activity inventory and the environmental inventory. Now we would like you to consider a third, the historical inventory. Historical explorations and reconstructions prove to be a fundamental source for future context. There are fewer tools available to the strategist for building an historical inventory. Where we find many models for organizational activity and environment scanning and analyses, the practice of employing history as insight to the future is less developed. One can look to the historical sciences, cultural anthropology, and literature for clues. One can also consider ways to reformat the two prior inventories, activity and environmental, to highlight key outcomes and metrics for preservation in an historical inventory. In any case, again the key to do it, and do in a way that adds strategic value over time.

In our final post, the full article from this month, we will offer up a conclusion to our stream of consciousness and a .pdf of the full paper.

Happy holidays all!

Strategy's Scope

Strategy’s Scope

In our last post, we discussed how the lens of strategy’s perspective – developed across three organizational dimensions of internal capacity, environmental influences, and an organization’s history – provides a more complete and sophisticated foundation from which to assess an organization’s strategic potential. We suggested that effective strategy emanates from a perspective that pushes typical organizational horizon lines much further out, not only forward into an organization’s future, but also, and importantly so, backward and deeper into an organization’s past. In this post, we’ll build on that discussion, but through the lens of strategy’s scope. We suggest, as with the need to think further fore and aft in time, effective strategy crafting also demands a broadening and opening up of typically held organizational boundaries. To make that case, let’s first consider the scope and boundaries of organizational activity and planning.

The Boundaries of Activity. As we discussed earlier, every organization in the world moves inexorably and unavoidably forward into the future. And in this relentless movement, day-by-day, month-by-month, organizations therefore must and do act upon the world. They put product into the market, they develop new ideas, pay salaries, secure supplies, train employees, etc. Even organizations that might choose to do nothing for whatever reason, in that very choice itself, act. And typically we call this set of actions or activity an organization’s “operations”; it’s the total set of “stuff” that organizations do.

Figure 4 showing scope and boundaries of organizational activity.

The scope of organizational activity then is primarily concerned with the present, with the here and now. And because of this, its boundaries (or purview) rarely extend outside of, or beyond these present concerns. The scope of an organization’s activity can, to a certain extent, reach into the near-term future – activities put irrevocably into motion today may occur tomorrow, or even next week (the supply invoice that takes a few business days to transact, the new product line that launches early next week – but not significantly so. Similarly, organizational activity can have some connectivity with the organization’s immediate environment, but rarely as far as operations or activity is strictly concerned, is that connectivity very relevant or long-lasting. Operations are first and foremost about doing. And as such, we can imagine the scope and boundaries of organizational activity as thus: not too concerned about much beyond the near-future, not at all concerned with the past, and not too concerned with the organization’s external environment, beyond those things which may influence activity directly, such as traffic or weather conditions slowing deliveries, flu bugs cutting productivity, and supply chain backlogs. Activity exists in the present moment, and at best it may be tactical as opposed to strategic. When activity begins to consider the future, we step into the realm of planning.

The Boundaries of Planning. The scope of organizational planning, in contrast, is very much about tomorrow and beyond, and its boundaries therefore necessarily extend and exist well outside those of ordinary organizational activity. Planning’s most important purpose is the preparation of organizational activity. Planning keeps an organization on its intended track, forecasting and securing the resources necessary for desired productivity rates, preparing the landscape ahead for intended delivery of goods, positioning workforce capacity for projected skill and experience requirements, and so on. Consequently, where an organization’s march through time is concerned, “the future” is a more meaningful term to the planner than simply “tomorrow”. Tomorrow certainly matters, but so too does next week, next month, next year, and, where long-term planning is concerned, even the next few years. Full disclosure, we’ll also assert that there is an element of planning’s scope that pushes its boundaries backward a bit in time as well. We will discuss in greater detail soon.

Planning’s scope also broadens much further into an organization’s environmental context. Relevant environmental influences consistently matter to the planner. Weather conditions or logistical constraints necessarily affect an organization’s future activity and planning will work to mitigate these effects. Further out ahead, relevant environmental conditions that will change or may even appear to be changing also fall within planning’s purview. A new competitor seeking to acquire market share, a required resource that may be facing shortage conditions next season, or an opportunity to collaborate with another company on a new product, are three examples of the sorts of environmental issues that lie well within planning’s scope but are beyond the realm of organizational activity.

Figure 5 showing the extended scope and boundaries of organizational planning.

One definition of strategic planning we’ve seen is adapted from Mintzberg:

Consistent, focused behavior over time adapting in response to changing conditions.

Regardless of the precise words you might prefer, the scope of organizational planning, determined by planning’s purpose both to keep an organization on its intended track and to continue driving the organization toward its desired objectives, as well as the boundaries this scope implies, are necessarily broader and further out in comparison to those of organizational activity. Planning and activity, however, need to exist in and endless dance of informing each other and adapting as the organization’s internal and external environments shift and change over time.

The Boundaries of Strategy. Now we begin to get to our key points on strategy. Strategy is often misidentified as something that is merely important or something that has to do with planning for the future. While these may both be true, the boundaries of strategy are more expansive. Strategy’s scope pushes even further fore and aft, and wider into the environment than that of planning. Strategy’s focus, or perhaps more accurately its intentional lack thereof, changes the basic shape of strategy’s purview significantly.  

We have already made the case that the nature of planning’s domain is about identifying the probable, and preparing organizational activity for actual execution paths. Furthermore, the planning realm tends to be defined or guided by resource availability, even anticipated resource availability, all of which is to say that planning exists in the ever-present reality of resource constraints. Planning’s purpose is to move future ambiguities toward and into clarity.

In contrast, strategy lives and dare we say even thrives in ambiguity. Strategy is about identifying multiple possibilities and discerning from them, those which are better probabilities than others, from a standpoint of building long-term organizational advantage moving forward. We like Jeff Bauer’s insight about the future, which he laid out in Upgrading Leadership’s Crystal Ball – forecasts like clouds of probabilities of future possibilities are the strategist’s handiest tool, especially as uncertainty increases.

An important aspect in adjudicating among these alternate futures is a strategic understanding of organizational capacity informed very much by its past. What new markets or products should we consider in the coming decade? What is the nature of the next generation’s workforce expected to be, and how will that come affect or change our organization in the future?  

Figure 6 comparing the horizons and boundaries of organizational strategy to planning and activity.

Strategy’s horizons and boundaries extend well beyond the realms of organizational planning and organizational activity. And indeed, effective strategy can and should not shy away from existing in tension with planning perspectives. Consequently, just as strategic perspective pushes the horizon lines further forward and back, so too does aperture of strategy’s scope widen compared to planning’s. Moreover, unlike planning’s scope, the further out in front, the broader out strategy’s tends to widen. In strategy’s domain, the environmental influences on the periphery of an organization become more meaningful and worthy of attention the further into the future the strategist looks.  

Next week, we’ll examine the implications these observations on boundaries and horizons have on how organizations move forward. Strategy’s process is necessarily different from planning’s or activity’s. We’ll also include some useful prescriptions implied from all of this.

Strategy’s Horizons and Boundaries

Strategy’s Horizons and Boundaries

This month in the blog I have invited Steve Rothstein to explore the implications of strategy’s horizons and boundaries on strategy crafting. Steve has strategy experience in the US Air Force, in education, and in nonprofit leadership. He’s currently with FDI Strategies and consults in the areas of strategy and innovation. We will unpack an organizational perspective on strategy and delve deeper into scope and process. This month we have a series of graphics to accompany the text to further illuminate our perspective. We hope you enjoy.

As organizations and as individuals, effective strategy crafting begins from a strategic frame of reference. Indeed, at its most basic level, strategy is much less an end product for an organization than it is a habit of the mind or a consistent way of seeing the world that executive leaders and planners of all kinds come to embrace. While organizations craft strategies to help them steer more effectively into and through the future, the concept of strategy, at its core, emanates from a world-view whose boundaries and horizons extend well beyond those of organizational planning and operations, deep into the periphery, into history, and into the future.

To better understand the broader extent of these horizons and boundaries, and more importantly, how and why the realm of strategy differs from that of planning or operations, over the course of this month’s blog posts, we’ll first examine the concept of strategy through two interrelated lenses: strategy’s perspective and strategy’s process. Thereafter, we’ll look the prescriptions that strategy’s broader frame of reference implies for organizations seeking to be strategically more effective.

Strategy’s Perspective

We can elucidate strategy’s perspective with respect to any organization through three different, but interrelated dimensions; an organization’s internal dimension, its external environment, and an organization’s transit through time.

On “organization”. To begin, let’s examine the organization internally. The strategic perspective seeks to understand, assess, and maintain a holistic and nuanced picture of the organization’s actual qualities in the here and now – its strengths and weaknesses, its formal and informal structures, its capacities and potential, processes, technologies, groups and individuals. In essence, it’s about what the organization does well and perhaps not so well, how it communicates, the dimensions of power, and process. For the reader more interested in this conversation, we suggest a deeper dive in Gareth Morgan’s Images of Organization.

Figure 1 showing the organization with semipermeable boundaries exchanging energy with the environment.

Understanding an organization’s internal qualities begins with thinking about the organization well beyond its organization chart or financials. Any organization or agency can also be understood as a set of nested and interrelated individuals, work groups, offices, sections, departments, and so forth, each a sub-entity within others, each with varying internal qualities and effectiveness of inter-connectivity with other entities within the organization. Each of these are boundaries of one kind or another. Complexity rises pretty quickly when even viewing a small organization. Moreover, and importantly, it’s a strategic mistake to think of organizations as an entities independent of or unrelated to their outside worlds. Every organization’s boundaries, internal and external, are permeable to some degree, most even considerably. Typically, organizations have all sorts of relationships with agents beyond their own domains – all woven like a web in the environment. Even the tightest, most secretive of companies have employees who move into and out of these organizations on a daily basis, and who each have families, homes, and lives outside of the company. Looking at organizations through this sort of nested, permeable-walled lens, both one’s own and all of the others that surround it, is an important element in developing strategic perspective. In fact, we might say the flow of energy, the exchange of energy, between the organization and its environment is what keeps the organization alive and gives it its form.

More On “environment”. Extending this thinking now, the importance to developing strategic perspective on any organization is based on a clear understanding of where and how an organization is nested within its own broader environment. An organization’s external, environmental relationships should be viewed from a variety of facets. Industry, regionality, supply chain, sector, size, financial position are a few common examples. What is the quality of the organization’s industry relationships? What is its role and relationship with the region(s) wherein it exists? With government? With the public? What sort of clout and standing does it currently hold with respect to these different facets?

Figure 2 showing the organization internal and external environments over time.

Often in scanning an organization’s environment, we employ the PESTE framework at minimum – political, economic, social, technical, environmental – but we often extend this framework to add other relevant dimensions. To better understand an organization’s environmental context, it’s helpful to assess these various and multiple influences based on their relevancy, scale, and impacts. For example, a local school district may be as strategically relevant to a up and coming regional manufacturing firm (quality of life, workforce development, etc.) as might be the Chinese steel market (that makes up a significant portion of the firm’s supply chain interests). On the other hand, the local school district’s relevant and peripheral environmental interests will likely look substantively different. State legislation to adjust education standards is whole lot more relevant to the school district’s perspective than the manufacturing firm’s. And the district has little reason to care much about the steel market in China.  

On “Time”. The third, and perhaps most important dimension in developing strategic perspective with respect to any organization is to recognize and fully embrace the fact, by their very existence, organizations move inexorably forward through time. The same perspective applies to all of the entities that constitute any organization’s particular environment as well, relevant, peripheral, or otherwise. Moreover, a strategic perspective sees this movement as constant and fluid rather than as a series of discrete increments. The fully strategic perspective sees its ship moving constantly through the ocean, seeking better currents and weather conditions, adjusting course as needed to navigate there more effectively. The planning perspective sees the same ship heading toward a waypoint, reaching it then heading toward another one, and then another, and so on.

Figure 3 showing the organization moving through time and into the future.

An additional element of the time dimension, vital to the strategic perspective and in practice most often overlooked, is the past. While it’s true that, fundamentally, strategy’s primary concern is looking forward, it’s also true that effective strategic perspective with respect to an organization’s future emanates from a strong strategic understanding of the organization’s past. An organization’s capacity in the present is dependent on its past that brought it here. Moreover, this past defines, with much more clarity and accuracy, the viable or even possible futures looking forward. In other words, the strategic perspective evaluates an organization’s future possibilities by thinking of the organization as a vector – an entity with both magnitude and direction. A retail chain that has specialized in children’s clothing over the past five years cannot tomorrow or next week suddenly move into industrial protective wear. But it can consider such a move over the next few years, and certainly, if conditions warranted such a transition, the chain could be fully into and established in that new market within a decade. Two horizons exist, one into the past and another into the future.

So reviewing the three dimensions of strategic perspective – the internal dynamics, the external environment and forces, and the flow of time – we are now ready to talk in more detail about strategy’s scope. Eventually this will take us into the realm of planning. By the end of the month, we’ll offer up a few applications and methods to help guide you through a better understanding of strategy’s boundaries and horizons.

---

Robert Brodnick, Ph.D. Principal www.strategicinitiatives.com robert@strategicinitiatives.com 530.798.4082 Steve Rothstein, Ph.D. Director of Strategy, FDI Strategies srothstein@fdistrategies.com