Strengthen Your Strategy With Experimentation
A good strategy is, in the end, a hypothesis about what may work. All business strategies should be tested and refined through a process of disciplined experimentation.
Introduction
Strategy is the goals you choose and the actions you take to achieve those goals. Simply, strategy is a path over time. There are many potential actions and paths that you can take to achieve your goals. Your strategy is your chosen path.
Traditional strategic planning processes are rigid, inflexible and slow to adapt. Once the plan is set, it is often followed to the letter. Using this approach, long-term planning is valued more than learning.
Business needs to flip the traditional strategic planning process on its head, moving to a hypothesis-led process of strategy development and validation with experimentation.
Organisations can’t possibly know in advance which hypotheses will be correct. A disciplined process of experimentation is required to test assumptions, so that strategic plans can be evolved and directionality adjusted where required.
Experimentation strengthens and improves the quality of your strategy.
What is strategy?
Overview
Business strategy is often shrouded in mystique, typically being limited to board rooms and executive leadership teams.
“What’s the strategy?” or “We need a strategy!” … is a common catch cry in meetings. Undoubtedly, the importance of strategy is universally understood.
People are often categorised as being strategic or, not strategic, and many business leaders have fallen on a sword due to a perceived lack of strategic capabilities.
For those that aren’t constantly devising strategy or thinking about strategy, it can be confusing or intimidating, particularly because of its abstract nature. Strategy can also be challenging to teach.
The truth is, strategy is everywhere, all around us.
We’ve all developed and executed strategies in some form to achieve future goals, whether in business, relationships, sports, career or personal life.
One of the big challenges with strategy is that there’s so many different types of strategy – Corporate strategy, Growth strategy, Marketing strategy, Product strategy, M&A strategy. The list is long.
However, the importance of strategy shouldn’t be downplayed - good strategy is hard work.
All of us in business have a role to play in strategy.
Experimentation should act as the keystone, supporting successful strategy development and execution.
“Any intelligent fool can make things bigger and more complex. It takes a touch of genius – and a lot of courage – to move in the opposite direction” - Albert Einstein
Good strategy provides focus and choice
Strategy is about focus and choice.
Simply, strategy is the goals that you choose and the actions that you take to achieve those goals.
Think of strategy as a path over time. There are many potential paths and actions that you may take in order to achieve your nominated goals.
A strategy is a way through difficulty, an approach to overcoming an obstacle or a response to a challenge - obstacles or challenges that stand in the way of an organisation.
The strategy should channel energy into one or two of the most attractive opportunities, where you can potentially have the biggest impact, or make major breakthroughs.
The better you become at choosing the right actions to achieve your goals, the better your strategies.
Choice means setting aside some goals, in favour of others. If this hard work is not done, it results in bad strategy.
Bad strategy lacks clarity
Bad strategy is much more than the antithesis of good strategy.
In his book Good Strategy, Bad Strategy, Richard Rumelt suggests there are four hallmarks of bad strategy:
Fluff
Failure to face the challenge
Mistaking goals for strategy
Bad strategic objectives
Fluff:
When complexity and buzzwords are used to communicate strategic concepts or arguments. Complex or obtuse words and phrases are used to create the illusion of disciplined thinking.
Failure to face the challenge:
Bad strategy fails to recognise or define the challenge. When you cannot define the challenge, you cannot evaluate a strategy or improve it.
Mistaking goals for strategy:
Many bad strategies are just statements of desire, rather than plans for overcoming obstacles.
Bad strategic objectives:
Strategic objectives are set as a means to an end. Strategic objectives are bad when they fail to address critical issues or when they are not practical.
Why is strategy important?
A strategy is like a lever that magnifies force.
Sure, you may be able to brut force an obstacle out of the way with sheer motivation and willpower to make progress in your organisation, however, using levers to move the obstacle will be more efficient and effective.
Archimedes famously said, “give me a lever long enough, a fulcrum strong enough, and I’ll move the world”. Focussing organisational minds, energy and action on crucial pivot points is what creates strategic leverage.
Strategy does four things:
Creates focus
Creates alignment
Creates clarity
Creates value
Focus:
In any given year, there are an infinite number of actions that any large organisation could potentially pursue to achieve their goals.
At its core, strategy is important because it gives an organisation focus. It allows a business to choose what to do, and what not to do, in order to achieve the right goals.
Typically, organisations pursue multiple goals at once, not concentrating resources to succeed at any of the goals.
“The essence of strategy is choosing what not to do” - Michael Porter
Strong strategic planning coordinates and aligns the goals and actions across all the organisational functions. It is one of the most effective ways to coordinate organisational activity.
Alignment:
A good strategy creates a vision and direction for the whole organisation.
It is important that all people within a company have clear goals and are following the direction, or mission of the organisation.
A strategy can provide this vision, preventing individuals from losing sight of company goals.
Strategy requires constant reinforcement - people aren’t going to remember every element of the strategy.
The MIT Sloan suggests that, “to influence day-to-day activities, strategies need to be simple enough for leaders at every level of the organisation to understand, communicate, and remember — a strategy that gathers dust on a shelf is nothing more than an expensive bookend.”
Clarity:
A well defined strategy provides a guide on how the organisation is performing internally relative to strategic goals.
“However beautiful the strategy, you should occasionally look at the results” – Sir Winston Churchill
The business can also understand how it is performing relative to competitors.
The organisation can then adjust focus and resourcing effort if internal performance measures indicate that goals are not being met.
Value:
In business, growth is always the superficial goal, but not really. With the right strategies every company will grow.
Company growth is more a by-product of attracting the right customers and retaining existing loyal customers.
The best way to drive customer acquisition and retention is to deliver superior customer value through differentiated offerings at the right price. This results in competitive advantage.
Great Britain rowing end an 88 year drought
A great example of strategy, and how to think about strategy, is the Great Britain Men’s Eight Rowing Team.
Coming in to the 2000 Sydney Olympic Games, team Great Britain had not tasted victory in the men’s eight event since 1912, when the Leander crew beat the fellow British boat from New College at Stockholm.
This is even more embarrassing, given that the sport of rowing was first conceived in England.
At the 1996 Atlanta Olympic Games, the Great Britain Men’s Eight Rowing Team finished the final dead last in eighth place.
To elevate the team out of a near century of poor performance, the team had to think very differently about what they were going to do, and how they were going to do it.
The goal for all elite rowers is the same, to win a gold medal.
However, the goal of winning a gold medal is not one that can elicit different actions and strategies.
A completely new goal and focus was what was required.
Great Britain Rowing took a step back. In order to win a gold medal, they had to have the fastest boat. All of the actions that were needed, had to align to the goal of having the fastest boat.
They came up with a key question that served as a filter for all of the actions that they were going to take … Will it make the boat go faster?
Every action that was proposed to be taken to improve performance was screened against the key question of “Will it make the boat go faster?”. This included on-water conditioning sessions, technique training, diet, sleep, recovery etc.
This approach aligned all of Great Britain Rowing’s strategies and actions to the goal of having the fastest boat.
At the 2000 Olympic Games in Sydney, Great Britain Rowing surprised the world by winning the gold medal in the men’s eight.
This victory was even sweeter, as Great Britain were caught on the hop in their opening heat, losing to the Australian eight and having to row through all of the repechage heats to even make the final.
The team achieved the outcome of winning a gold medal by taking a completely different approach.
They took a totally different view on defining the goal that they were actually trying to achieve, then aligning all of the actions to achieving those goals.
Traditional models of strategic planning don’t work
Prepare the plan, then hope for the best
Traditionally, the dominant mode of operation in large corporations is to place a premium on the annual strategic planning process.
It emphasises processes that generate multi-year plans that cover – in elaborate detail – a variety of tactics, roles and outcomes.
The old adage “plan your work and work your plan” captures the spirit of this approach.
Traditional Strategic Planning - prepare the plan & hope for the best
Planning is important, of course, I’m not discrediting the notion of planning. However, by over-indexing on planning, it implies certainty – there’s nothing else left to learn.
This approach can provide a false sense of security that leaders “have all of the answers”.
“Hope is not a strategy” - Vince Lombardi
The linkages between strategy and business risk are generally poorly understood, with inordinate planning providing the illusion and perception of a low-risk operating environment.
The challenge with this approach is that execution of the plan is the key measure of progress and success.
Businesses become completed immersed and fixated with tracking progress against the plan, rather than focussing on learning.
Learning is not a priority
By nature, this approach discourages experimentation, flexibility and risk-taking. With business confident that they know all there is to know, the desired tactics, tasks and outcomes are adhered to year on year.
Funding for projects is predicated on the plan. The “strategy” is more akin to a rolling three to five year budget, than a plan to overcome a business obstacle or challenge.
This model works well for problems that have clear, known solutions, however, it’s not geared to support the discovery and exploration of solutions for problems where there is no known solution.
Many of the problems that we’re trying to solve and, questions that we’re trying to answer, in business nowadays, have no known solutions.
Inherently, this approach lacks in flexibility and adaptability, posing significant business risk in the event of changing market conditions or consumer needs.
As we’ve all witnessed in 2020, even enduring business models and well thought out strategies have been no match for the upheaval that has resulted in local and global markets.
We’ve seen the deceleration of unsustainable business models and strategies accelerate.
Improve the quality of your strategy with experimentation
Strengthen your strategy through disciplined experimentation
To generate better strategy, businesses need to create more options by developing a portfolio of actions that can be taken.
In order to generate more options, a hypothesis-led, experimentation driven approach is what is required. This approach flips the traditional strategic planning process on its head.
“Designing a winning strategy is the art of asking questions, experimenting and then constantly renewing the thinking process by questioning the answers. No matter how good today’s strategy is, you must always keep reinventing it” - Constantinos Markides
It offers a new mantra to follow: “Define your hypotheses, plan your tests and test your plan”.
In this approach to strategy development, tactics and tasks are replaced by business hypotheses and experiments.
We never know in advance which hypotheses will be successful, or not.
Instead, it’s more prudent to run many small tests, adjusting effort and directionality after discovering what does and, doesn’t work.
This allows you to strengthen your strategy - a good strategy is never static.
Experimentation Driven Strategic Planning - small tests preserve options
Experimentation delivers rapid learning & insights
Experimentation enables businesses to test new strategies and ideas at small scale, at low-cost – a small audience subset, one geography, variants of ideas.
Experimentation delivers business leaders and project teams with rapid learnings through relevant, high-quality data and insights.
“An organisation's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” - Jack Welch
Validating customer and market assumptions much earlier in the strategic planning process or project delivery lifecycle significantly decreases business risk.
It also enables business leaders to make more informed, better quality decisions, ultimately translating to more successful business investments.
Strategies and hypotheses can be refined and adjusted on the run, rather than waiting for quarterly or annual planning processes.
Experimentation reduces business waste
Through increased speed and experimentation businesses can reduce wasted effort. Many organisations spend a considerable amount of time and resources developing solutions that generate little business impact.
An experimentation led approach helps businesses to weed out initiatives that have no merit, quickly understanding which ideas show promise.
Roadmaps and execution plans are no longer set in stone, rather transitioning to a quarterly, rolling experimentation roadmap.
Company mission and vision remain anchored, however, the strategy and execution plan to achieve these ambitions are subject to change based on experiment outcomes.
Many opportunities for experimentation
Key assumptions on Targets (Markets, Customers, Geographies), Value Proposition (Products, Services, Pricing) and Go To Market (Sales, Distribution, Marketing) all present opportunities for testing and validation through experimentation.
Less time is spent developing protracted plans, with organisational effort anchored around understanding what works, and what doesn’t.
When performed in a systematic and industrialised manner, an experimentation driven strategic planning process helps organisations to innovate more efficiently, building new products and services that meet the needs of their customers, and developing solutions to previously unanswered questions.
Conclusion
Strategy doesn’t have to be complicated.
Think of strategy as a path over time. Your strategy is the path you choose to take.
Experimentation should be the keystone to successful strategy development and execution. Experimentation enables you to improve and strengthen the quality of your strategy.
Good strategy is a hypothesis about what may work . No organisation can ever possibly know which hypotheses will be correct.
Experimentation allows you to create a portfolio of different options. The more options you have, the greater the likelihood that you’ll be able to figure out which is the optimal path to achieve your business goals.
Traditional models of strategic planning are slow to adapt, lack flexibility and are very rigid.
Remember, no strategy or plan ever survives intersection with a customer.
The perfect plan doesn’t exist.
References:
Richard Rumelt Hamiton Helmer Kim & Mauborgne A G Lafley Joe Newsum SSIR
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