On strategy.

On strategy.

People who write about management often set up false antitheses: that one is all for cost cutting, or else one is entirely dedicated to strategy. Obviously, one needs to have appropriate measures of both. Whilst it is clear what is entailed in cost cutting - and whilst it is straightforward to report its achievement to markets - it is not at all obvious what is entailed in having a strategy.

To many, the word "strategy" means having a self-consistent plan: that over the next five years, resources taken from over here will be used over there, in order to achieve self-evidently desirable things. To others, however, this is taken as read. The word "strategy" is then used to refer to a high-quality analytical understanding of the business, both as it is at present and as it may become. Both of these views tend to be analytical, cerebral, centrist; and their idea of a deliverable is a report.

There is nothing wrong with reports, with clear ideas or with consistent numbers. However, none of these things seem to create action on their own. There is a missing human dimension.

The nature of renewal

Organisations, like any complex structure, undergo decay. In order to offset this, new things have to be started, existing things need to be renewed and the irredeemable must be stopped. As we have already noted, the processes of trimming and terminating are easily defined and relatively easily undertaken, but it is getting new and undefined things going which can present a major challenge.

The goals of innovation may be to achieve gradual change, or to generate a discontinuity in the way that the organisation relates to its surroundings. Whatever the intended outcome, evidence suggests that the source of innovation seems to be weighted towards one-off experiments, generalisations from anecdotes, from events observed in other companies and the like.

Chance, however, does indeed favour the prepared mind. We notice piquant detail only when this resonates with the issues and understanding that occupy us. We can only take action when our colleagues also recognise this potential. Every project has to pass perhaps a dozen choke points in a complicated organisation. It can be killed off at any one of these by incomprehension. Its original godparent may have no influence on these, so the organisation as a whole has to know a good thing when it sees it.

It follows that each of the organisation's antennae - its staff, or anyway those members of staff not engaged in entirely routine activities - need both to be in a position to take note of new, relevant potential and, in addition, to have the means to flag this for evaluation. This implies that the innovating forms will spend much effort on creating such prepared minds, and in setting up processes that evaluate what may be found.

This requirement, in turn, demands clarity on two essential features.

First, the organisation needs to understand the logic, the machinery that governs its fate. This is much more than accountancy. The organisation needs to know the role that it plays for the various stakeholders, and how it performs these better, or with less friction, than others; and it needs to know how this influences resource flows, employee relations and the like. It needs to understand how all of this will change, and what will be entailed in living with and anticipating this change.

Second, the organisation has to identify its choices. That is, as its existing position and resource base dictate, it has circumscribed options open to it. Considerations of risk and uncertainty further limit what can be undertaken. This pathway, set against the potential which the changing dynamic creates offers a view of the future which is not crystalline, embedded in spreadsheets and agreed by committees, but which is sufficiently clear to guide the antennae as they tune into new options.

Achieving renewal

How this is to be achieved is probably the Next Big Thing in management, not least as cost management is now a routine and as continual improvement is now set to become a routine. The activities which are involved are labour-intensive, detailed and in need of continual oversight and review.

As we have already suggested, the organisation (firm, public sector body, network, regulator-industry complex) needs to analyse its resources, its potential, its environment and its options. Those whose primary jobs consists of preparing minds - senior staff, planners, trainers - need to be informed about what actually is the case on the ground today, not what ought to be true, or what was true when they were at university.

If the analysis and the generation of the options is number "zero" on the list of required processes, however, then the others are:

The communication of this insight to relevant stakeholder groups, in terms which they individually recognise. Bench scientists and salesmen do not always respond to the same language, or have the same referents. The act of telling stories - anecdotes about successful actions, the way in which senior staff act and, sometimes, play, explicit tools such as scenarios, meaningful vision statements - all contribute to the intuitive, tacit understanding that enables constructive risk-taking.
The adjustment of the criteria which are used to judge and control individuals and teams to directly reflect these messages. These are differentiated, again by stakeholder groups.
The creation of processes such that ideas (etcetera) can be tabled, judged, acted upon by the organisation. That is, people with a new idea need somewhere to 'put' it, and the firm needs a standard way by which it is developed.
Complications (e.g. telling shareholders about potential, dealing with partner-competitors, bringing regulators on stream) need tailored and distinct versions of this apparatus.

These parallel processes generate that most intangible of entities, joint understanding. This is not something which is written down or embodied in a report, but is rather contained within and innate to process. Processes work best when they are regular and regulated. Top management has to enable these processes and has to validate the key steps in them. This is best handled as a sequence of governance steps, in which processes, messages, rewards and so forth are proposed and signed off.

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