Sherpa Alliance

A recurring and rigorous strategy conversation is about having options. The further up and out we expand the envelope of our strategy conversation then the more options we have – “up” in terms of the altitude of our strategic thinking/ conversation and “out” in terms of the time-horizon of our strategic thinking/conversation (Execution Excellence - missing in action?).

 In his 2008 edition of Contemporary Strategy Analysis, Robert Grant puts it this way:

“Creating options, by increasing the strategic flexibility of the firm, increases its value. Creating option value means positioning the firm such that a wide array of opportunities become available”.

Options are valuable because they create degrees-of-freedom to navigate problems and opportunities in front of us – the higher up our vantage point and the further out our line of sight when we first begin to perceive problems and opportunities, then the more options we have to navigate them well. We always have fewer options and degrees-of-freedom when problems and opportunities sneak up on us, first becoming aware of them from a lower vantage point and with a shorter line of sight. Part way through a strategic alliance/acquisition negotiation, a product development/go-to-market program or a bid/proposal process, for instance:

• If we had perceived problems and opportunities earlier, with a longer line of sight, we would have had more time, resource and budget options/degrees-of-freedom.
• If we had perceived problems and opportunities from a higher vantage point, we would have had more strategy formulation, conceptual design and positioning options/degrees-of-freedom.
• When we hear phrases like, “if only we had thought of that”, or “its water under the bridge”, or “that’s the benefit of 20/20 hindsight”, then we know that something just happened that we could have seen coming. Learning from hindsight is always going to be a fact of life, but learning as much as possible from insight (a higher vantage point) and foresight (a longer line of sight) can be a lot less costly and painful!

When our strategy process falls short like this, we forego options/degrees-of-freedom, we incur opportunity cost and we give away shareholder value of the firm. A recurring and rigorous strategy process is about raising our sights to a higher vantage point and a longer line of sight, to maximize the shareholder value of having options and degrees-of-freedom, which provide us strategic flexibility. In other words, organizational agility. Increasing organizational agility increases shareholder value.

When asked about increasing organizational agility, many people imagine the biggest impact comes from the hard work of improvements in operations management, infrastructure (processes, systems and structures) and productivity. It seems counter-intuitive that the smart work of a more rigorous strategy process may actually be more impactful to our organizational agility and shareholder value - of course, the reality is that we need a combination of both, but no amount of the hard work makes up for a lack of the smart work of a more rigorous strategy process.

Part of that smart work is to consider a range of scenarios and plans. Scenarios provide what-if versions of how our business environment and industry structure might shape up, in terms of assumptions and drivers, without necessarily predicting any one scenario with any degree of certainty. Scenarios free us up to consider possibilities, not just probabilities, and do some what-if planning of options. In simple terms, scenarios to consider might be:

• Scenario A: Acceleration
  • ………………. for which we should consider our Plan A Options
• Scenario B: Business as Usual/Baseline
  • ………………. for which we should consider our Plan B Options
• Scenario C: Consolidation/Cost-Cutting
  • ………………. for which we should consider our Plan C Options
• Scenario D: Downshifting/Downsizing
  • ………………. for which we should consider our Plan D Options
• Scenario E: Exit
  • ………………. for which we should consider our Plan E Options
• Scenario F: Fold
  • ………………. for which we should consider our Plan F Options

See a free downloadable template for working within this framework, to drive secanrio thinking and contiongency planning, at Options & Futures Template.  Whether we are in good times or bad, the reality is that we face a combination of scenarios all the time in business, not least because of the different market segments we serve, the different products/services we offer and the different phases of the life-cycle which apply to these. So we always have the possibility of a portfolio of plans. The key is to do this scenario based planning, to generate, develop and nurture a portfolio of plans and options. Even if we are in an emerging situation in which we predict Scenario C or D with increasing probability, there may well be some Plan A options we can be launching (accelerating our efforts on a new product or service to create a new revenue stream, for instance), and certainly some Plan B options (additional focused efforts to retain existing clients, for instance) that can make a real difference – giving us more degrees of freedom to navigate the difficult phase coming at us.

As part of our recurring and rigorous strategy process, when we have been doing this scenario thinking/planning from a higher vantage point and longer line of sight, we have more opportunity to develop more options. When we have more options, we have more influence in choosing our future. When we don’t have options, our future chooses us. Real options create real value.

In his 2007 book, The Future of Management, Gary Hamel puts it this way:

“In a discontinuous world, what matters most is not a company’s competitive advantage at a single point in time, but its evolutionary advantage over time – the quest to build a company that can outrun the future – tomorrow’s profitability depends upon today’s evolvability – an adaptability advantage.”

Our challenge is to build a company that has the organizational agility of options and plans to outrun the future of different scenarios which might emerge. Us choosing our future, not our future choosing us. Gary Hamel goes on to say:

“I dream of organizations that are capable of spontaneous renewal, where the drama of change in unaccompanied by the wrenching trauma of a turnaround. It is a passion for solving extraordinary problems that creates the potential for extraordinary accomplishments. If you don’t already have such a challenge in mind, here are a few leading questions that will help you focus your search:

What’s the “tomorrow problem” that you need to start working right now?

What’s the frustrating “either/or” you’d like to turn into an “and”?

What’s the espoused ideal you’d like to turn into an embedded capability?

What’s the “can’t do” that needs to become a “can do”?

Having zero’d in on a big-league challenge, you’ll need to break it into smaller, more tractable components (Traction Plan). This will allow you to focus your energies on high-impact sub-problems, and will help you to maximize the returns on your innovation efforts.”

That’s what our work is about – helping you get clear about your big league challenges, tomorrow problems and desired evolution; deriving a traction plan to execute on these; putting a lot of things in motion to have options and outrun the future. Are you choosing your future or is your future choosing you?