We live in a world where technology advances rapidly, spreading ideas, products, and services faster than ever before. Political and market changes that may seem distant can have a significant impact on one’s own business. In such an environment, strategic work is more crucial than ever. In the article series “Mastering Strategy”, we delve into the challenges related to strategic work and explore what defines a successful strategic process. In this segment, we examine the central elements of strategic work, focusing on the “strategic cycle.”
What constitutes good strategic work?
Good strategic work involves understanding the whole picture, identifying critical turning points, and acting proactively. It requires exploring uncertainties, asking the right questions, and discussing bold ideas and strategic measures. A crucial part of the process is recognising significant turning points in developments that will alter the organisation’s future needs in time. A turning point is a major, abrupt change in status or situation. It may result from slow trend shifts that suddenly become apparent or from abrupt changes in the external environment. Climate policy, with increasingly stringent targets, is an example of a slow-moving trend shift. New technology or other events like pandemics and geopolitical unrest are examples of sudden shifts. Good strategic work also means acting in a timely manner, allowing management to adapt optimally before the turning point occurs or leads to severe consequences. In short, it’s about doing the right thing at the right time, reducing surprises, conducting sound processes, and ensuring that the decided strategic direction is followed through in action.
Strategic work is a continuous process
Strategic work is a continuous process, starting from within an organisational unit. The strategic cycle is the same for all organisations regardless of size, complexity, or industry. However, the content of discussions and the implementation of the cycle may vary. At the corporate level, strategy discussions often focus on overarching goals and long-term strategies, whereas at the business area level, the focus shifts to specific operational challenges and market opportunities. Furthermore, strategy discussions in a commercial organisation often emphasise different topics than those in an organisation with a defined public mission. Despite these differences, the strategic cycle comprises some fundamental elements relevant to all types of organisations and industries, as illustrated in the figure below.
We distinguish between the large (comprehensive) and small (focused) strategic processes. The large strategic process involves setting a new, overarching strategic direction for the organisation. In the small strategic process, the strategic direction is taken as given, and the focus is on how the organisation can achieve its strategic goals by developing business area- and thematic strategies.
- Strategic Monitoring and Control: This involves a thorough assessment of both the current situation and anticipated developments. The current situation entails an overview of the organisation’s ongoing results and position. In most companies, financial monitoring of operations and progress in major investment and strategic projects is central, along with key organisational aspects (“Balanced Scorecard”). Anticipated developments focus on understanding where values in the industry will arise and what is required to fulfil the organisation’s public mission. This includes evaluating whether the organisation is meeting its goals today and is likely to continue doing so in the future. Answers to these questions are vital for determining if a strategic process is necessary and whether it should be comprehensive or focused.
- Clarifying the Overall Strategic Direction: When an organisation faces a turning point, it may be necessary to set a new, long-term direction for portfolio development. This involves identifying which areas to improve, develop, or scrap. In this phase of the strategy cycle, questions such as “what should be done?” and “why?” are often asked to ensure the strategy is clear and purposeful.
- Further Developing One or More Business Area- or Thematic Strategies: This phase of the strategy cycle focuses on defining which strategies should be developed to realise the overarching strategic direction. Here, the aim is to translate the overall strategy into specific initiatives for various business areas or develop thematic strategies applicable to the whole or parts of the organisation. Asking questions like “what should be done?” and “how will we do it?” helps ensure that the strategy is implementable and well-planned.
- Strategy Execution: In this phase, the strategy is translated into concrete actions for the organisation to implement. It is essential that strategic work is well-planned and coordinated to achieve the desired outcomes.
Effective strategic work is about optimising this cycle. It is crucial for an organisation’s leadership to have a clear understanding of where they are in the cycle and whether a new strategic direction is necessary. Our experience shows that few businesses systematically consider whether they need to initiate a strategic process tailored to the large (comprehensive) or small (focused) process.
Initiating a strategic process without a real need can have significant consequences for the organisation. If a comprehensive process is chosen when a focused process would suffice, it can lead to excessive resources being spent on strategy development that ends in “status quo” or, at worst, the introduction of numerous new initiatives that are either not taken seriously or implemented on a flawed basis. Especially in favourable economic times, there is a risk of launching ambitious projects without sufficient backing or solid foundations. On the other hand, failing to initiate a necessary strategic process may mean missing important external changes, potentially leading to serious consequences for the organisation.
Effective strategic work, therefore, requires that management can control the pace of the cycle, particularly when the “cycle time” suddenly decreases. Cycle time can vary significantly between organisations and industries. For example, a business handling physical infrastructure such as water and sewage or electricity networks will operate with longer timeframes than industries like media and finance, which experience rapid changes. The speed of cycle time affects how the strategic work is conducted. When cycle time is faster, the strategic process is more characterised by a “bottom-up” dynamic. This is because the value chains in individual business areas change so quickly that it is primarily the business area management that can identify the opportunities. The role of the corporate management is more to facilitate effective solutions across multiple business areas.
A strategic process may involve developing a new overarching strategic direction, creating specific business area- and thematic strategies, or a combination of both. Whether the strategic process should include both a new overarching strategic direction followed by the development of business area- and thematic strategies, or focus solely on the latter, is determined through strategic monitoring and control. In conclusion, the question remains: Where does your organisation stand in the strategic cycle, and what type of strategic process do you need?
In the next part of the article series “Mastering Strategy” we will take a closer look at what determines the need for a strategic process and what triggers it. We will also explore how strategic control can assist in determining whether a strategic process is necessary and which type of process is most appropriate for your organisation.
Read also:
Mastering Strategy 1: Five strategy development pitfalls
Mastering Strategy 3: What determines whether you need a strategy process?
Mastering Strategy 4: How to choose the right strategy process for your organisation?
Mastering Strategy 5: Management engagement as a success criterion
