Have you tested your strategy recently?

Have you tested your strategy recently?

by Mark Blackwell, Arkaro (mark@arkaro.com)

“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,” are the challenging opening words from Collis & Rukstad in their thought-provoking article Can you say what your strategy is? (Harvard Business Review – April 2008).

The Emergent Approach™, 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 the 35 words or less really are strategies, the Emergent Approach toolkit includes new tests of strategy called The 5 Disqualifiers™,  which ask the following of a strategy statement: 

  1. Is the opposite of the statement absurd?
  2. Does the statement include numbers?
  3. Is the statement a duplicate of the parent organization?
  4. Does the statement exclude anything or anyone in the organization?
  5. 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, and 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™ ?

  1. 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 delete them???

Fail – In all cases the opposite is absurd avoiding any meaningful trade-off and therefore no real time guidance on what to do.

  1. Does the statement include numbers?

Pass –  the number four is simply an identifier

  1. 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?)

  1. 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.

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 are stated as:

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™ 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. 

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

Dr. Peter Compo Emergent Approach
Dr. Peter Compo

Dr. Peter Compo, author of the Emergent Approach to Strategy™ —scientist, engineer, and corporate veteran—spent twenty-five years at E.I. DuPont in a wide range of positions in R&D, product management, supply chain leadership, and business management—including director of DuPont Display Materials and Director of Corporate Integrated Business Management. Coupled with a background in music, Dr. Compo began to see the same adaptive patterns of innovation and successful change in all these areas. He also saw the need for a new approach to strategy and spent seven years integrating the science of complex adaptive systems with strategy theory and practice. The Emergent Approach to Strategy™ is the book he wished he had had at the start of his career.

Mark Blackwell - Arkaro
Mark Blackwell

Mark Blackwell founded Arkaro in 2016 following a career in organisations both large and small, covering a wide range of industries including animal health, specialty chemicals, advanced materials, food and feed ingredients.  13 years at DuPont included 8 years of consulting  roles across multiple businesses.  Expertise included Six Sigma, Integrated Business Planning, Product Line Management and Business Productivity. At this time Mark worked with Pete as the ideas forming Emergent Approach to Strategy™ were developed.  More recently Mark has provided feedback on the book prior to publication and is the first affiliated partner to deliver the Emergent Approach to  Strategy™