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
530.798.4082
Steve Rothstein, Ph.D.
Director of Strategy, FDI Strategies
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