To ensure strategy statements really are strategies, the Emergent Approach toolkit includes new tests called The 5 Disqualifiers of Strategy.
by Mark Blackwell, Arkaro (mark@arkaro.com)
As long ago as 2008 Collis & Rukstad challenged with
“Can you summarize your company’s strategy in 35 words or less? If so, would your colleagues put it the same way? It is our experience that very few executives can honestly answer these simple questions in the affirmative.”
in their thought-provoking article Can you say what your strategy is? (Harvard Business Review – April 2008).
The Emergent Approach to Strategy, a new approach to strategy development from Dr. Pete Compo, aims to tackle this challenge head-on, and say goodbye to the 200 slide PowerPoint strategy presentations sleeping on hard drives.
To help ensure strategy statements really are strategies, the Emergent Approach toolkit includes new tests called The 5 Disqualifiers of Strategy which ask the following of a strategy statement:
- Is the opposite of the statement absurd?
- Does the statement include numbers?
- Is the statement a duplicate of the parent organization?
- Does the statement exclude anything or anyone in the organization?
- Is the statement a list?
If you can answer yes to any of these questions, then the statement is most likely not a strategy, but a goal, plan, or no more than a cliché or truism instead. In other words, the statement is disqualified to serve as a strategy.
The disqualifiers work by showing if a statement meets the three requirements of a strategy:
- free choice
- real-time guidance
- & unifying
Here’s an example: A CEO of a Fortune 500 company recently said, “This quarter’s results, while falling short of expectations due to market volatility, show signs that we are making progress to transform our corporation for long-term competitiveness.” He then added,
“Our strategy focuses on four major objectives: to narrow our focus on businesses where we can grow profitably, drive for efficiency, grow through innovation and optimizing our data assets, and return excess capital.”
The good news – 33 words, but how do these words fair versus The 5 Disqualifiers?
- Is the opposite absurd?
- Focus on businesses where we can grow profitably vs decline unprofitably?
- Drive for efficiency vs drive for inefficiency?
- Grow through innovation vs avoid solving problems?
- Optimise our data assets vs let them wallow in disarray???
Fail – In all cases the opposite is absurd avoiding any meaningful trade-off and therefore no real time guidance on what to do.
- Does the statement include numbers?
Pass – the number four is simply an identifier
- Is the statement a duplicate of the parent?
Pass but fail if the board has made this the rules-of-the-game constraint for him. (Could you imagine?)
- Does the statement exclude anything or anyone?
Pass But only because the strategy themes are so high level and because they are such clichés and apply to most every business in the world.
5. Is it a list?
Fail Lists are rarely strategies – more often aspirations.
As is so common with many corporate strategies, it is a list of strategy themes, without a unifying rule to tackle the dominant bottleneck.
Perhaps it would be fairer to look at the written statement from the same company? An annual report should provide guidance to shareholders on the strategic choices and objectives. From the 2018 report, the key priorities also appear as strategy themes but let’s continue with the tests
Annual Report
Balance and Diversification of Products
Technology
Leadership, Culture and Talent
Capital & Growth
Underwriting Excellence
Reinsurance Optimization
2018 – Creating value through profitable growth
Shifting our business mix to grow the best-performing lines of business and optimizing our global footprint
Improving operations that help employees evaluate business and serve customers while strengthening essential corporate system security and efficiency
Continuing to structure and cultivate teams to deliver world-class performance
Managing capital efficiently and making selective investments in complementary growth opportunities that advance profitability improvement efforts
Using newly implemented framework and guidelines – while further integrating underwriting, claims and actuarial – to enhance the portfolio
Partnering strategically with reinsurers on portfolio positioning and programs designed to reduce exposures and severity from individual risk losses
Fail – Absurd test. This objective provides very little information to an investor.
Fail – List test. the following list of objectives provides limited information.
Fail – Absurd test. De-optimise global footprint?
Fail – Exclude test. What is the choice for the non best-performing businesses?
Fail – Absurd test. The objective lacks a trade off.
Fail – Absurd test. The objective lacks a trade off.
Fail – Absurd test. As an investor would you want to see inefficient management of capital?
Pass? Maybe the new framework and guidelines allow for trade-off choices to be made?
Fail – This looks to be a description of reinsurance which is something large insurance companies do. Including the word “Optimise” always fails the absurd test.
If Wall Street accepts such a statement and the CEO buys some time, then it is useful. But if this is the CEO’s actual working strategy, it is a disaster. Like the zillions of “strategies” that are like this, it could apply to any business on earth; zero uniqueness. Where are the customers? Where are the competitors? Where is anything that says something about this company’s place in the world?
Let’s be clear, passing The 5 Disqualifiers of Strategy does not mean you have a strategy, or even a good strategy. However, once internalized, the Disqualifiers are a powerful, (and fun!), adaptive tool because they destroy unfit strategy ideas, allowing true strategies that pass the tests to emerge and evolve further.
Meanwhile next time you see statements such as:
- Maximize industry leadership
- Create value through profitable growth
- Instill a culture of operational excellence
- Enhance user and customer experiences
- Grow net investment income while reducing volatility
- Deploy capital efficiently to support profitable growth
- Strengthen senior leadership
Please think about the 5 Disqualifiers of Strategy!
Arkaro is the first affiliate partner to deliver Dr Pete Compo’s Emergent Approach to Strategy. By working with your teams in Agile-like sprints, Mark Blackwell helps your team create strategy alternatives, choose the best, and establish a dashboard of metrics and triggers to drive execution.
Instead of the “do it for you” approach, Arkaro takes the “do it with you” method ensuring the team has ownership of the strategy but guided by experienced expertise and external objectivity to secure a quality outcome.
The efficient agile methodology allows Arkaro to support as a trusted partner while the strategy evolves and is implemented. Please contact Arkaro to learn more
By the way what do you think about the following year’s report?
Annual Report
Balance and Diversification of Products
Technology
Leadership, Culture and Talent
Capital & Growth
Underwriting Excellence
Reinsurance Optimization
2019 – Creating value through profitable growth & instilling a culture of underwriting and operational excellence
Build on strategic portfolio improvement and product diversity by investing in attractive growth opportunities in our best-performing businesses or new areas, and optimizing our global footprint
Company programme 2020 Execute multi-year efficiency initiatives to support underwriting excellence, modernize our operating infrastructure, enhance user and customer experiences and become a more unified company
Continue to attract and develop world-class employees while furthering our commitment to diversity and inclusion
Generate and redeploy capital for the best long-term value creation for shareholders
Maintain discipline in risk selection by continuing to use recently implemented underwriting framework and guidelines to enhance the existing portfolio
Effective Risk Management Continue to manage risk and volatility for the company by maintaining discipline in underwriting, optimizing reinsurance and closing the sale of our legacy portfolio
To hear Mark and Pete talk about the 5 Disqualifiers listen to this podcast
Peter Compo is the author of The Emergent Approach to Strategy: Adaptive Design and Execution. With a doctorate in Chemical Engineering from the City College of New York, and also a musical background, he spent twenty-five years at E. I. DuPont in a wide range of leadership positions including product, marketing, supply chain, and business management, and he was the corporate lead for integrated business planning. He left the company after 25 years to work full time on developing the Emergent Approach. His mission is to help organizations achieve a new level of clarity in their strategy and to fully embrace the adaptive view of the world.
Mark Blackwell founded Arkaro in 2016 following a career in both large and small organisations, covering a wide range of industries across agriculture, food and chemicals. As Global Sales and Marketing Director Mark led the growth of the animal health company Antec International to its acquisition by DuPont. Leadership positions in DuPont developed expertise in Business Development, Innovation, Product Line Management, Integrated Business Planning, Business Productivity and Six Sigma Black Belt Project Management. At DuPont Mark worked with Pete Compo as the ideas forming the Emergent Approach to Strategy™ were developed. In recent years Mark has been involved in the preparation of the Emergent Approach to Strategy and is the first affiliated partner to deliver to help product line and business teams design and implement adaptive strategies.
I had worked with Mark to establish Innovation Strategy Process and develop Innovation Strategy within the organization. He has the ability to facilitate and lead the challenging discussion. Mark is structured in his approach to inspire the team to embrace the risk and step out of comfort zone.
Certainly, one of the great professionals that I have worked with."
Mark’ strong work ethic, flexibility and openness to people enables him to build relationships in new situations quickly.”
Mark was instrumental in building business cases for organizational changes across sales, operations, customer service and strategy. His strategic thinking and analytical capabilities fosters valuable discussions within organizations that are willing to invest to grow.
Mark is a self-less team player and leader, devoted to making meaningful changes within an organization by establishing partnerships across functions and stakeholders. He gains the trust of his peers through his hard work ethics, attention to details, accuracy of data interpretation and clarity in communicating vision"
