It hardly needs to be said, but we live in uncertain times. The Covid-19 pandemic, the war in Ukraine, the reshuffling of supply chains and capital structures — the past few years have seen unprecedented disruptions, and the turmoil shows little sign of letting up any time soon. Challenges abound, and companies are finding it nearly impossible to plan for the future. Such a volatile environment requires a new approach to devising strategy.
But is it even worth trying to predict the unpredictable? Sure, uncertainty means risk, but it can also spell opportunity. Handled correctly, it gives organizations the chance to expand beyond the boundaries of their current business, potentially in unexpected directions.
The magic words here, of course, are “handled correctly.” Turning a world of uncertainty into a world of possibility requires a change of perspective, a new mindset on the part of business leaders. Companies need a different approach to devising strategy, one that relies less on looking at what the company can do and more on imagining what it could do — and then doing whatever is necessary to make that possible, however much it goes against past assumptions and established practices.
How to Rethink Strategy
When devising strategy, taking a strict customer view is critical. What is it that your clients really want? Rather than drawing up endless customer profiles, companies should consider what individuals want to achieve in a specific circumstance: the “job to be done,” as Clayton Christensen, Taddy Hall, Karen Dillon and David Duncan succinctly put it.
Equally important is involving the entire organization in the strategy development process. This is not an exercise to be carried out by a corporate strategy team working in splendid isolation. Instead, companies should draw on the power of an adaptable organization to come up with ideas and allow solutions to emerge. Naturally, having the right skills in the right place within the organization is important. But the interactions between different individuals are often much more important than the individuals themselves.
Moreover, the process of devising and revising strategy should be continuous. You define the ultimate outcome that you want to achieve — what military strategists call the commander’s intent — then adjust and adapt the strategy on an ongoing basis. In a military context, the goal may be to take a certain hill, but the strategy for achieving that end state is not fixed. The strategy is not, for instance, we will take the hill by crossing that bridge, because the bridge in question may no longer be there when you come to it. The path to achieving your stated goal needs to change in response to the reality on the ground. Likewise, in a business context, companies should define their goal but not decide in advance how they will achieve it. Instead, they should rely on the experience they gain along the way — and the collective genius of the organization.
This new approach to defining strategy is what makes it possible for companies to thrive in a fast-paced, constantly changing and increasingly global market. Based on my work supporting companies, I recommend taking a four-step approach.
1. Find the big question.
The first step is to formulate the right question — the question that your strategy then seeks to answer. Jim Collins and Jerry Porras talk about big hairy audacious goals. I like to think about big hairy audacious questions.
The big question should be one that stretches your business to expand its value creation. Dreaming is not only allowed, it’s encouraged. A key source of inspiration can be customer problems and desires, which are of course changing all the time. So rather than trying to guess what customers want, a better idea is to ask them what problems or frustrations they have encountered and then work constantly on solving those issues. You can also regularly ask other stakeholders — investors, government bodies, local communities, and naturally also your employees — for new ideas.
Oftentimes, the ideas you’re looking for will already be out there, but they may have been laughed off as being too far removed from current operations. I recently led a consulting project for a large international airline that had long been aware that customer demand for flights was now much more volatile and fluid than in the past. However, because of the way major airlines’ flights are scheduled across the industry, generally with just two fixed flight schedules a year, they were restricted in the amount of flexibility they could offer. Rather than wondering how to tweak at the edges of the problem — maybe by offering one or two more schedules a year — we started at the other extreme with a radical question: “How can we offer flights on demand, wherever and whenever a customer wants to fly?”
The idea of on-demand flights did not come out of nowhere: It had cropped up on various occasions in the past but had always been dismissed as being too far from the company’s core business and existing capabilities, which — like every other major airline — involved offering regular flights based on fixed schedules. Everyone knew that offering on-demand flights could open up new opportunities for value creation. But the question of how to do it was too big, too hairy, and too audacious for the airline’s existing mindset.
2. Break it down.
Next, break down the big strategic question into subsidiary questions relating to different parts of your operations or business process. This allows you to anchor the strategy-devising process within the organization. It also opens the door to inspiration from outside your own industry. Brainstorming exercises, like the ones described by Hal Gregersen, can be incredibly useful here, with the emphasis at this stage on coming up with new questions rather than searching for answers.
In the airline project, we ran the big question by various functional teams within the company, such as network management, crew scheduling, and so on, to see what it sparked in them. More often than not, their response to the idea of offering on-demand flights was “No way!” We then asked them to tell us why. They told us what the airline would have to do in order for it to be possible, revealing some information we hadn’t considered.
See the trick? Rather than trying to win the teams over, to get them on board with the idea, you ask them why it’s not possible. People find it easier to answer that question, and they also come up with some angles that you may not have thought of. Better still, taking an idea that everyone thinks is ridiculous and going for it is a fun, almost playful process — and play is the secret of creativity.
The result of this exercise is a series of sub-questions grouped into clusters by subject area. One of the sub-questions that emerged from the discussions about on-demand flights was: How can we spot trends in demand for flights earlier and adapt capacity and prices accordingly? In other words, how could the company take the various activities relating to yield management — without which on-demand flights would never get off the ground from a business perspective — to the next level?
3. Generate ideas.
The third step is to take each of the sub-questions and start the process of generating ideas and strategic options. Importantly, you now no longer think about the questions, adjust them, or ask if any questions are missing — you simply look for strategic ideas. Inspiration can come both from within the organization and outside it, by looking at what top performers both in your own industry and elsewhere do.
This approach was particularly useful when working with the airline. For the big strategic question of how to offer on-demand flights, no external examples existed — none of the company’s competitors were offering such a service. But when we looked at the sub-questions, we found plenty of examples. In the area of yield management, for example, there were many young companies effectively forecasting customer demand and adjusting prices accordingly for other means of transportation, such as buses. Inspiration also came from other industries. For instance, today’s fast-paced fashion industry renews its collections more than 12 times a year, as opposed to the spring/summer and fall/winter collections that used to be the norm (like the two schedules a year in the airline industry).
4. Identify the best options.
Finally, identify which strategic options from the previous step best deliver on each of the sub-questions. Our recommended approach is to first define what success looks like for the process in question, then run the new solution in parallel to the existing one. As soon as the alternative solution outperforms the incumbent one, abandon the existing process completely. Do this not once but continuously as opportunities in the market change.
Continuously challenging existing solutions has far-reaching consequences for your strategy. For each process, ask yourself two questions: Is this part of our true value proposition? Do we have the capabilities and resources to master this area? The point here is that you should only do the things for which you can answer yes to both questions. Everything else you either outsource by means of partnerships or acquisitions, or you spin off.
For the sub-question of how to take the airline’s yield management to the next level, it turned out that the company could significantly enhance this area by working with an existing travel retail startup that had outstanding capabilities when it came to forecasting demand and predicting how airlines would react in terms of pricing and capacity. The startup in question was actually a competitor of the airline when it came to retailing airline tickets, so the best strategic solution was for the airline to acquire a share in the startup and outsource parts of its yield management for on-demand flights to it. Ultimately, the airline delegated several different yield management-related activities to its new partner — as well as a whole range of new, exciting developments based on the use of artificial intelligence (AI).
Look to the Skies
When it comes to devising strategy, companies all too often get bogged down in their own capabilities, fixating on the question of what they currently do and how they can do it better. Instead, we encourage businesses to look to the skies, to open their minds and play with even seemingly ridiculous ideas in a fun, creative way. Follow our four steps and you may find that an idea you had previously ruled out as impractical or overly costly suddenly becomes both possible and profitable.
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