Mark McDonald

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Mark P. McDonald
GVP EXP
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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Pre-strategy is a matter of Principles and Diagnosis

by Mark P. McDonald  |  August 8, 2012  |  1 Comment

‘Having a plan for the plan’ is an effective tool for starting any large or complex project.  Defining a business strategy is definitely complex project.  Creating a plan for the strategy is a good idea.  So is defining a pre-strategy or a ‘strategy before the strategy’.  That sounds redundant, but its not.

Planning for the strategy involves describing the course of action and resources required by the strategy formulation team.  This plan identifies the appropriate participants, information sources, governance arrangements, team and schedule.  All good. A plan defines how the strategy definition process works: who participates, how long the strategy process runs, what the team will do, etc.  A plan can also easily bias the strategy.

A plan is a plan and bad things happen when plans predetermine or bias the result.  That is why organizations should consider creating a pre-strategy.

Why should I consider working on a pre-strategy?

Organizations with rigid, formal or consensus-based approaches to strategy need a pre-strategy.  Rigid, formal, consensus describe convergent cultures that stamp out creativity, bury legitimate disagreements in PowerPoint where they are left to smolder, and generally create strategies based on the revolutionary idea of ‘last year’s plan + 10%’ because that is all we can agree on.

These organizations, in particular, and all organizations need to think divergently first before you circle the wagons around a plan.  This is no longer the realm of strategy formulation, which has become more formal in its results than strategic.

Pre-strategy is a semi-structured, lightweight approach that can encourage the open, fluid, divergent, creative and fosters debate needed to drive deep discussions, sharing of views and development of revolutionary strategies.

What is pre-strategy?

Pre-strategy is process that revolves around discussing enterprise principles and discovering the information required to drive strategic choices.  Pre-strategy can be a first step in strategy formulation, an activity in its own right, or an ongoing discussion that is part of enterprise governance and board oversight.   Pre-strategy is the responsibility of the executive team and while it may be facilitated by outside resources, they should not drive it.

Pre-strategy has two parts: Principles and Diagnosis.  Together they form an iterative process that builds a shared context and information base required for effective strategy formulation.

Pre-strategy is not a dry run, practice or early version of the strategy, that would be redundant.  Rather, pre-strategy should set the context and initial fact base for the strategy.  Pre-strategy should be published as the pre-amble for the formal strategy. It should be the social process that sets the strategic context before it becomes strategic content is frozen in PowerPoint.

Principles

Principles are statements of fact of belief that shapes the strategy, the organizations choices and how the organization sees the world.  A good principle embodies a fundamental assumption about the organization that will guide decision-making during strategy formulation and execution.  Generally there are no more than a half dozen principles that together capture the essence of the enterprise

“A customer of one division is a customer of all divisions.” is an example of a good principle.  The example is clear and established a guideline for strategic and operational decisions around sales, marketing, and even IT – for example an IT principle that ‘customer information is contained in a single database available to all divisions.’  Other examples include: “We work in the markets where our customers live”, or “Customer outcomes come before company profits”, or “Our competitive advantage is based on being the low cost leader in our markets.”

Every organization has its own principles.  But few make those principles visible, explicit, and the subject for discussion.  Organizations either bury their principles in vague notions of ‘culture’, trendy notions of ‘memes’ or simply ignore them in decision-making. Principles influence the strategy formulation process in different ways.

  • In organizations with a strong shared view, principles make this shared view explicit formalizing what ‘everyone knows’ to make sure that everyone knows the same thing.
  • Principles provide a staking horse in organizations where there are differences of opinion about the company and its strategy before the organization invests in a formal process that is unlikely to produce an actionable result.
  • Principles have their greatest value in organizations where there are differences of fact within the company or the senior leadership team.  Differences of fact are legitimate disagreements that need to be discussed and decided prior to formulating the strategy; otherwise strategy formulation can easily bog down in debates and arguments that should happen before we start planning the strategy.

Principles form part of the pre-strategy establishing the fundamental assumptions around the organization.  Forming a strategy based on principles alone is a start.  Combining those principles with a fact based, a business diagnosis completes the pre-strategy by testing reality and the principles.

Diagnosis

Diagnosis is the process of identifying or determining the nature and cause of something.  In medicine it’s the nature or cause of disease, in business diagnosis concentrates on the nature of the future of the business and causes for its performance.  Diagnosis and diagnosis techniques seek to use information to first understand and then define based on data the relationships and reasons something is happening, assess alternatives and describe strategic context via data.

Business diagnosis plays two roles in pre-strategy.  The first is to gain a fact-based understanding of what is going on.  This requires using operational, financial and market data to describe reality often in ways that bust myths and preconceptions about an organization’s situation.  Organizations with well-established ‘rules of thumb’ or assumptions that bad things happen infrequently and therefore are not a concern need this aspect of business diagnosis.  When someone says that they have been in the business for 20+ years and it has always been this way, then its time to see if it really is that way.

Defining the root cause, scope, scale, impact and opportunity facing an organization forms the second role of business diagnosis.  This aspect puts detail and data behind principles, giving them a needed dose of reality.  Remember the principle that a customer of one division is a customer of all divisions?  It’s a good principle, but business diagnosis gives that principle context by defining the data and profile of customers trading across multiple business units.  Diagnosis lets you know if the principles are real.

An approach to pre-strategy

Pre-strategy tasks work with each other. Principles define assumptions that are then described and defined in detail via diagnosis.  Likewise diagnosis identifies real business issues challenge or creates new business principles.  The figure below models the iteration between the two.

 

Pre-strategy work involves cycles of data collection and collaborative meetings.  Pre-strategy starts with data collection, often resulting identifying a list of candidate principles via executive interviews based by initial data diagnosis.  This starter set is then refined, explored, updates by bringing the executive team together in a series of collaborative meetings or workshop that allow them to explore these issues, discuss alternative and form the issues and context for strategy work.

The Minority Report on Pre-strategy vs. the Majority on Strategy Assembly

Strategy advocates and consultants will disagree with the concept of pre-strategy.  They will argue that principles and diagnosis are essential elements of strategy formulation and should not be pre-empted by a prior process.  They will claim we already do this work in strategy formulation and if its not done, then you are not working with the right people.

Technically they are right, strategy should start out open-ended, challenging, exploratory and data driven.  Organizations shy away form such a potentially disruptive and time consuming process in favor of one that is more strategy assembly than strategy formation.

Strategy assembly represents the majority of strategy projects I have experienced as a practitioner and as a participant.  Strategy assembly concentrates on proving the executive right, getting them the data that supports their idea and driving that idea into budgets and plans. Setting budgets and plans within the strategy turn many strategy projects political – creating localized winners and losers that draw attention away for how the organization wins and loses.  If the result of your strategy is a plan, then chances are you are practicing strategy assembly.

Pre-strategy recognizes that there is more to strategy than ‘crisp’ formal presentations where people shake their heads in agreement and then go their own way.  Creating a good strategy should be more like making sausage, messy, contentious, challenging and fatty with actual data.

Sausage is good, in moderation.  So sending the entire strategy process into the sausage factory may seem chaotic, which is why so many strategies are boring, limited and really operational plans.

Moving the messy bits – the principles and diagnosis, the divergent thinking bit, the disagreements into pre-strategy may be an approach to bring back the creative part of strategic thinking, give executives the opportunity to confront reality and set the context for the strategy formulation work ahead,

It is a good idea to have a plan for the plan.

In a world of rapidly changing business and technology, you may also need a strategy before you define your strategy.

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