Open Up Your Strategy

Making strategy behind closed doors is a prescription for failure when disruptions are coming from all directions.

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Michael Austin/theispot.com

Formulating and executing sound organizational strategy is difficult work. Strategy is often made by elite teams and thus can be limited by their biases about competitors, customer needs, and market forces. And it can be an uphill battle convincing stakeholders across the company to channel money, time, and energy in a new and unproven direction.

Our solution to both the strategy formulation and execution challenges is radical: Open up your strategy process. Open strategy offers leadership teams access to diverse sources of external knowledge they wouldn’t otherwise have, while also making individual leaders aware of their biases and helping them build the buy-in needed to speed up execution.

This approach is particularly valuable when companies face disruptive threats and contemplate transformational change. It’s much easier to master disruptions when you’re forging strategy in concert with others who view the world through a different lens than you do. Progress and innovation depend less on lone thinkers with exceptional IQs than they do on diverse groups of people working together and capitalizing on their individuality, as social scientist Scott E. Page has shown.1 In short, diversity of perspective matters — a lot.

Involving people from outside the C-suite — and outside your company — in strategy-making not only provides a wellspring of fresh ideas but also mobilizes and galvanizes everyone involved. Thus, execution becomes an integral part of strategy. The best part: All this can happen without a loss of control over the strategy-making process.

The Limitations of a Closed Approach to Strategy-Making

According to a 2018 Bain survey, strategic planning is the most popular tool available to managers.2 Yet, too often, the results of that planning are underwhelming. Studies find that somewhere between 50% and 90% of the strategies devised by leaders don’t work.3 Our own 2018 survey of 201 American and European executives found that 52% of their strategic initiatives over the previous three years had underperformed.

These disappointing outcomes are particularly surprising considering the resources companies pour into strategy-making. Each year, they spend more than $30 billion on consultants, tapping their knowledge of industries, competencies, and business models, and CEOs spend over 20% of their working hours, on average, focusing on strategy.4

At the core of this problem is the very process by which strategy is crafted.

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References

1. S.E. Page, “The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies” (Princeton, New Jersey: Princeton University Press, 2008).

2. D. Rigby and B. Bilodeau, “Management Tools & Trends,” PDF file (Boston: Bain, 2018), www.bain.com.

3. C.J.F. Cândido and S.P. Santos, “Strategy Implementation: What Is the Failure Rate?” Journal of Management & Organization 21, no. 2 (March 2015): 237-262.

4. E. Mazareanu, “Size of Global Consulting Market Worldwide by Sector 2011-2020,” Statista, Dec. 10, 2019, www.statista.com; and M.E. Porter and N. Nohria, “How CEOs Manage Time,” Harvard Business Review 96, no. 4 (July-August 2018): 42-51.

5. P.J. DiMaggio and W.W. Powell, “The Iron Cage Revisited: Collective Rationality and Institutional Isomorphism in Organizational Fields,” American Sociological Review 48, no. 2 (April 1983): 147-60.

6.New Survey Shows 27 Percent of U.S. Households Plan to Cut Cable TV Subscriptions in 2021,” Business Wire, Jan. 12, 2021, www.businesswire.com.

7. G. Tett, “The Silo Effect: The Peril of Expertise and the Promise of Breaking Down Barriers” (New York: Simon and Schuster, 2015).

8. G. Hamel, “Strategy as Revolution,” Harvard Business Review 74, no. 4 (July-August 1996): 70.

9. Christian Presslmayer, author interview, May 7, 2018.

10.H2Future on Track: Baustart der Weltgrößten Wasserstoffpilotanlage,” Voestalpine, April 16, 2018, www.voestalpine.com.

11. C.M. Christensen, T. Bartman, and D. van Bever, “The Hard Truth About Business Model Innovation,” MIT Sloan Management Review 58, no. 1 (fall 2016): 31-40.

12. Liam Cleaver, author interview, Aug. 24, 2018.

13. G. Gavetti and J.W. Rivkin, “How Strategists Really Think,” Harvard Business Review 83, no. 4 (April 2005): 54-63.

14. D. Tapscott and A.D. Williams. “Wikinomics: How Mass Collaboration Changes Everything” (New York: Penguin, 2010); and S. Johnson, “Where Good Ideas Come From: The Natural History of Innovation” (New York: Penguin, 2010).

15. Klaus Bachstein, author interview, Aug. 11, 2017.

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