Strategy

Bringing science to the art of strategy

Harvard Business Review /

Strategic planners pride themselves on their rigor. Strategies are supposed to be driven by numbers and extensive analysis and uncontaminated by bias. All those analyses feel scientific, and in the modern world, “scientific” equals “good”.

Yet if that’s the case, why do the operations managers in most large and mid-size firms dread the annual strategic planning ritual? Why does it consume so much time and have so little impact on company actions? Talk to those managers, and you will most likely uncover a deeper frustration: the sense that strategic planning does not produce novel strategies. Instead, it perpetuates the status quo.

One common reaction is to become explicitly anti-scientific – to throw off the shackles of organised number-crunching and resort to off-site “ideation events” or online “jam sessions” intended to promote “out of the box” thinking. These processes may result in radical new ideas, but more likely than not, those ideas cannot be translated into strategic choices that guide productive action.

Many managers feel they are doomed to weigh the futile rigor of ordinary strategic planning processes against the hit-or-miss creativity of the alternatives. We believe the two can be reconciled to produce creative but realistic strategies. The key is to recognise that conventional strategic planning is not actually scientific. Yes, the scientific method is marked by rigorous analysis. But also integral to the scientific method are the creation of novel hypotheses and the careful generation of custom-tailored tests of those hypotheses – two elements that conventional strategic planning typically lacks.

The approach we’re about to describe adapts the scientific method to the needs of business strategy. Triggered by the emergence of a strategic challenge or opportunity, it starts with the formulation of well-articulated hypotheses – what we term possibilities. It then asks what would have to be true about the world for each possibility to be supported. Only then does it unleash analysts to determine which of the possibilities is most likely to succeed.

Step 1: Move from issues to choice

Conventional strategic planning is driven by the calendar and tends to focus on issues, such as declining profits or market share. As long as this is the case, the organisation will fall into the trap of investigating data related to the issues rather than exploring and testing possible solutions.

A simple way to get strategists to avoid that trap is to require them to define two mutually exclusive options that could resolve the issue in question. Once you have framed the problem as a choice, your analysis and emotions will focus on what you have to do next, not on describing the challenge. The possibilities-based approach therefore begins with the recognition that the organisation must make a choice and that the choice has consequences.

Step 2: Generate strategic possibilities

Having recognised that a choice needs to be made, you can now turn to the full range of possibilities you should consider. These might be versions of the options already identified. Possibilities might also exist outside the initial options.

Constructing strategic possibilities is the ultimate creative act in business. To generate such creative options, you need a clear idea of what constitutes a possibility. You also need an imaginative yet grounded team and a robust process for managing debate.

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