Early Innovations in Strategy Creation

In addition to the traditional strategic planning approach described above, it is instructive to review four early impactful innovations in strategy creation that emerged over the past 50 years, long-range scenario planning, action planning, systems thinking applied to strategic planning, and competitive advantage.

Long-Range Scenario Planning. Long-range scenario planning is an innovative planning methodology that emerged in the 1960s and 1970s, mostly from military and corporate practitioners. Early scenario planning approaches found analysts generating simulations for policy purposes which later evolved to very sophisticated culture and mindset changers by the 1980s. When broader and more complex ecosystem principles and dynamics were added through the 1990s and 2000s, scenarios evolved into complex and insightful ways to model multiple futures in convincing detail taking environmental conditions into account. The method utilizes descriptions of possible competing futures dependent on noted drivers of change in the environment. Scenarios can be simple or extraordinarily complex, but all make assumptions about the future that are tested and applied. Implementation of scenario-based plans balances insight with action in a continual evaluation of the system in which the organization is embedded.

The figure above shows some of the key dynamics in long-range scenario planning where the quest is to optimize the path from the current situation to the desired future. Scenario construction follows are relatively predictable process although there are many variants. The first step is to produce a large number of potential drivers for change then select a smaller number on which to build the scenarios. These key drivers are combined into a framework. Then it is assumed the drivers will produce a variety of potential results as they range from the best to the worst of outcomes. When the drivers are combined, certain conditions are created from which initial future scenarios (a dozen or less) are generated. Further analysis and inspection helps reduce the number of scenarios in play from ten or more to the best three or four. These final scenarios are then augmented and built into narratives accompanied by data and information that makes them rich and vivid. In the final planning steps, the implications and opportunities in each of the scenarios are fully explored to derive insight for the current situation. The desired future is navigated to by a series of actions based on these insights.

Action Planning. An early influencer and thinker in the area of action planning was Kurt Lewin, a psychologist and pioneer of social, organizational, and applied psychology. Lewin was one of the first to study and experiment in group dynamics, organizational development, group communication, and action research. Combining action research with other innovations like force field analysis, leadership, change processes, and group dynamics, Lewin practically invented action planning yet was never recognized as a traditional strategic planner. More than two decades later, organizational learning is a variant on action research, which emerged in the 1970s especially from the works of Chris Argyris and Donald Schon. The primary focus of organizational learning is the creation and transference of knowledge within an organization. The concepts of single-loop and double-loop learning extend the simple four stage action planning cycle (depicted in the figure on the next page). Double loop learning allows organizations to continually reevaluate their strategies and goals instead of merely reassessing their actions and outcomes. Often both kinds of learning are occurring in organizations, but planning extends these processes by making them intentional. Single-loop learning occurs when an organization observes mistakes and corrects them, yet continues their strategic course. Double-loop learning occurs when an organization observes mistakes then purposefully changes its strategies and goals to produce better results.

Action planning, like its counterpart action research, is a method for taking action, observing the results, and continually modifying course. There are four steps in the process that form the action planning cycle. Initially plans are made, strategy is formulated, and actions are determined much like the traditional strategic planning method. Then action is taken and while the best course of action is hoped for, there is an understanding that many actions will have unknown or unexpected consequences. These consequences, both positive and negative, are closely watched and monitored. When the actions move the organization away from its hopeful destination, adjustments in course or made and plans and future actions are reformulated. The innovation here is the cyclical nature of action planning. The cycle is ongoing and morphs in response to changing conditions. These cycles can be long or short, but they are generally much shorter than the multi-year cycle of traditional strategic planning. Action planning can be applied as a strategic or tactical technique depending on the range of plans, focus of the actions, aspects that are monitored along the way.

Systems Thinking. At first glance at the figures, systems thinking may appear as an incremental innovation on action planning, but in reality the innovation is much more. Systems thinking arose out of the life sciences in the late 1880s as evidence mounted about the interdependencies of living things and their environments. This thinking was dramatically opposed to the pervasive linear paradigm of basic science, cause and effect, and scientific management. It spread rapidly as a revolution as the limits of linear thinking were evident. Driven by new insights in the science of chaos and complexity theory, by the 1960s systems thinking reached organizations and planners began to take note. In the last three decades, strategic planning based on systems thinking has more fully emerged. It is dependent on a mindset based on nonlinear dynamics, complexity beyond simple explanations, ecosystem qualities and dynamics, and mathematics only recently understood due to advances in big data analytics. The figure below shows an organization’s ecosystem with basic planning mechanisms.

Strategic planning from the systems perspective is highly dependent on understanding and intervening in the broader environments and ecosystems in which the organization is embedded. In the figure, the cloud represents an organization as it continually interfaces with its environment and ecosystems. Within this larger system, the organization activates multiple feedback loops to create action. Each of the these feedback loops has three components: understanding, mapping, and taking action. Understanding is a blend of qualitative and quantitative analyses and syntheses of results. These results are them mapped to portray the dynamics of the portion of concern of the overall ecosystems. From these maps, action plans are built, actions are taken as interventions in the system, and observations are made that enhance understanding. A number of these feedback loops are activated (the figure above shows two) and simultaneously manipulated to drive changes in the external ecosystem as well as the organization’s systems. Strategic planning from the systems perspective is not for the faint of heart or inexperienced, but the results can be transformative resulting in much broader environmental impact if the organization has the capacity and perspective necessary to endure long-term system change.

Competitive Advantage. There are many methods for building strategy based on competitive analysis, but here I will select one as example taken from the book Playing to Win: How Strategy Really Works (2013) by A.G. Lafley, Roger Martin, and Jennifer Riel. The authors suggest that “Every organization must find a combination of where to play and how to win that is appropriate, doable, and decisive for it, within its unique context.” and when entering a competitive marketplace… “Strategy is a choice; it is a set of choices about what we will do and what we will not do, so as to create advantage over the competition.” They base strategic formulation on five questions shown in the figure as interconnected choices –What is your winning aspiration? Where will you play? How will you win? What capabilities must be in place? What management systems are required?

A winning aspiration is far more specific and direct than a mission or vision statement. It describes what winning is, includes tangible outcomes that may result from winning, gives specific details about the particular places and particular ways in which it will happen, and makes reference to competition, customers, and winning. The playing fields represents a set of choices that narrow the competitive field here the organization chooses to compete and specifies in which markets, with which customers, in which channels, in which product or service categories, with which competitors, and at which vertical stages of the industry.

The method for winning describes how the organization will win and is dependent on where it decided to play; this should include determinations of how to create unique value, how to sustainably deliver that value to customers, and how to hold competitive advantage, either by having lower costs or through differentiation. Next, organizations must focus on a finite number of key activities to make the difference in winning and losing. These core capabilities bring where-to-play and how-to-win choices to life, focus more on what the organization needs to do win in new markets, self-reinforce, and set the organization apart from competitors. Finally, the authors suggest that to truly win, an organization needs management systems in place to support and measure the strategy that include robust processes for creating, reviewing, and communicating about the strategy, support management of the core capabilities, and metrics to determine whether a strategy is working or not.