Strategic Conversation Report
This is a report ‘about’ what strategic conversation is - what it does and what it sounds like - when it occurs and why it is valuable. With this information you will be better able to understand the full meaning of your personal report.
About your Strategic Conversation report
Being strategic
Strategic conversation is essentially conversation that is strategic, so we need to clarify what ‘being strategic’ means. Only then can we tell the difference between conversation that is truly strategic and conversation that merely sounds strategic but isn’t. Perhaps what we hear is administrative, operational, social, technical, motivational, waffle, or some other kind. What makes it strategic?
The English word “strategy” is from the Greek word “strategia,” which means generalship. In 1948 Von Neumann and Morgenstern formally introduced the idea of “strategy” to the business world. Originally, strategy was very ‘goal’ or 'ends' focused. Only the outcomes mattered, and it sought the outputs that would bring about the desired outcomes. However, that approach didn't recognise that humans are part of the equation, with considerable variability, so those strategies didn't work very well. Why? - because people aren't machines. Humans get tired - stressed - and can sabotage the most complex strategic plan if they don't like it! On the other hand, they are a tremendous source of ideas and energy within a good strategic plan. Unfortunately, even today, most strategies are described AFTER they happen.
Recent literature has finally acknowledged that people are an important part of the strategic equation, and MUST be considered. The following definition is my adaptation of the new understanding of strategy:-
A strategy is a fundamental pattern of present and planned objectives [the ends] that place the organisation in an advantageous (market or other) position, reducing negative impact from competitors or other threats including environmental factors. The planned objectives take into account present, outsourced and needed organisational capabilities, and interactions that focus on discovery, development alignment and delivery of capabilities [the means].
Regardless of the size of your organisation, strategy concerns the organisation's view and behaviours both inwards and outwards. Inwards, the purpose of strategy is to align and integrate the daily work of all employees in a common, focused direction. This means that each employee, partner, owner, executive etc who is engaged in activities on behalf of the organisation, must know and agree with the goals. If they don’t know the goals, or don’t agree with them (ethics, principles, values), then the plan won’t work very well if at all. Outwards, strategy involves identifying and defining strategies based on intelligence collected from the competitive market, other environments (political, economic etc), and from organisational memory.
It follows that ‘being strategic’ involves any action that is part of 1) creating, 2) modifying, 3) evaluating, or 4) terminating a strategy. Once a strategy exists, execution of that strategy is an operational activity that may include tactics, with periodical strategic review and assessment. Strategic conversation is, therefore, the purposeful conversation within any process that creates, modifies, evaluates, or terminates a strategic topic. So let’s do a very brief refresher on styles of creating and managing a strategy, because strategic conversation will sound quite different within each style.
How your strategies are formed, implemented and maintained.
Style 1 - Historic strategy:
This describes rational strategic processes that expect the world to be predictable. Leaders and managers have a goal to be ‘in control’. The budget becomes ‘the plan’ and is set and fixed, and the plan is implemented and maintained by adhering to policy manuals, operating manuals, and budget sheets. Rational strategy is broken down into hierarchy-relevant components to maximise control. Such close supervision has many disadvantages, e.g. 1) the opportunity costs of the hours spent on supervision, and 2) only the supervisor is thinking while subordinates follow instructions. With downsizing and elimination of middle-management numbers, there are no longer enough managers to do that. Higher managers complain of being 'dumbed down' as they perform the roles of the missing layers.
Rational processes allow a unified, coordinated response from the top, but when something goes very wrong for this entity, the rational response is typically bankruptcy or downsizing. Of companies surveyed in 1988, 39% reacted to environmental pressure by downsizing. A crippling limitation of this style is the decreased ability to respond quickly to market changes, or any changes for that matter. People take responsibility for their job, less for their roles, and none for the firm. Genuine strategic conversation is unlikely outside the executive suite, and when used, will be of low quality - being reactive and lacking diversity.
Small entities also follow this style, relying on budgets and costs rather than developing markets.
Style 2 - Evolutionary strategy:
This describes non-existent strategy. Although such an organisation may claim credit for successful business outcomes, people tend to make sense of what happened after it happens. Since there is no actual strategy, it can't fail. It also can't succeed, so these folks blame conditions when things go wrong. This strategy is based on the past for guidance about current decisions. It means that there is a lack of ability to respond to the changing environment with any judgement. Without planning, without thinking and strategising, nothing is learned.
There is one exception where ‘evolutionary’ strategy does becomes effective. If a formal learning mechanism is operating, then managed evolution can occur. In other words, evolutionary strategy without organisational learning is the same as no strategy, but if there is a deliberate and systematic approach to organisational learning and applying that learning, then it becomes strategic.
The relevance of this point becomes noticeable when considering the type of conversation that may occur within an organisation immediately following discovery of a mistake. Is someone (habitually) punished? Do we look for a scapegoat - someone to blame? Or does learning (habitually) occur? Conversation within a systematised learning organisation, when something goes wrong, will obviously sound very different from conversation in an organisation without a learning culture and instead searches for someone to blame. Which organisation has more likelihood of being more effective? Which organisation has more likelihood of attracting and keeping quality employees?
Style 3 - Emergent strategy:
This describes the receptivity of an organisation to sudden information or ideas that emerge spontaneously from anywhere, including the shop floor, and for the organisation to be ready and able to process that information and adjust strategies on the fly. This does not include knee-jerk responses. For the emergent strategy to be quickly recognised and assessed requires open communication and other characteristics often associated with transformational leadership. Maintenance of emergent strategy capability is through the multiple official and unofficial communication channels. When something goes wrong with emergent strategies, there is anecdotal evidence that organisations are tempted to assume a defensive posture and revert to rational processes to try to regain a sense of control. Fortunately, that's not universal because researchers have also found that during stressful economic times, failed organisations had focused on creditors (reverted to historic/rational strategies) while survivors in the same industry focused on customers (emergent strategies).
An interesting aspect of this style is in the nature of opportunities in which emergent conversation can occur, and the wide range of people who might be participants. It seems that anyone capable of generating an idea, or participating in discussing one, is capable of strategic conversation. In other words, every organisational member, even if his or her conversation is normally administrative or operational, is capable of engaging in some level of strategic conversation. Therefore, the extent of penetration of strategic conversation throughout an organisation is an indicator of an organisation's emergent strategic prowess.
This sounds like the preferred style – but is it? Can emergent strategies ever be the wrong style?
Style 4 - Future or processual strategy:
The existence of this strategy style within an organisation usually suggests transformational leadership. In this case the strategic plan is developed by including a process that involves multiple people and multiple information sources. It’s not planning by committee so much as using diverse information sources. Such a process may include scenario planning. It compares the ‘fit’ of the organisation against three time contexts of the business environment - now, as predicted (expected), and as possible but equally unlikely. When something goes wrong in the environment, this organisation should more easily adopt an opportunistic posture because it is prepared for various scenarios. This organisation has both fast (immediate) and slow (long term) strategy loops, and open communication that makes it personally ‘safe’ to convey bad news. The style of conversation is clearly different from the other strategy styles.
Which style is best?
The currently favoured of all the well-considered opinions, is that there isn’t 'a' best style. Like situational leadership, strategic leaders will exploit the benefits of each style in a flexible manner and select a mix that best suits both the current and emergent environment, and organisational context. Over-emphasis on any style may be inappropriate. The selection of the ratio of styles is a highly strategic choice in itself.
- Notice must be taken of history
- Evolutionary strategies are relevant when change is gradual.
- Emergent strategy shines when change is rapid
- Future strategy may lead to ‘revolutionary’ changes (adaptations of 'fit') that mix with the 'evolutionary' ones.
Strategy texts now provide tables that list optimal strategic mix given context – but they continue to omit the importance of conversation even though effective communication is the one element that is common to all excellent strategic systems.
Why bother with improving strategic conversation
– what’s the payoff
The pay-off from SC is whatever you aim for. If you desire organisational growth – then that’s your pay-off. If you want innovation, how will you get it? How did you decide on 'innovation' from all the admirable and honourable potential goals? With whom was it discussed? Isn't that simply another instance of strategic conversation? And then when you discuss innovation as a goal, and if you manage to change structures, systems and behaviours so you get more innovation, then you must have engaged in yet more conversation that was strategic, and your pay-off is 'elevated innovation'.
It's a bit more complex than that because before you can have innovation, the climate of the organisation must be conducive to innovation – or it won’t happen. So the climate change to prepare for innovation becomes a preparatory strategic topic. First things first. The pay-off from strategic conversation and innovation may therefore ultimately include unexpected spin-off benefits such as lower employee turnover, less absenteeism, higher performance and so on. In other words, careful development and use of strategic conversation is an investment that works by itself, but also as a lever within other mechanisms such as SWOT, strategic planning, risk analysis, market analysis and so on.
Strategic Conversation – what it is.
Hamel & Prahalad enriched management language and our understanding of the subtleties within the strategic process when they introduced the term 'strategic intent' in 1989. They claimed that it included (required) Strategic Conversation, but they didn’t clarify what Strategic Conversation was. They believed that the conversation is not strategic unless it is about the desired ends (goals) rather than about the means (operational). Others disagreed about the ends and means. Some regard Strategic Conversation as the continuous to-and-fro between scenario and action, and about the to and fro between ends and means. Yet others think it is more about the ‘why’ than either the ‘what’ (ends) or ‘how’ (means). But all the researchers and observers of organisational performance agree that whatever Strategic Conversation is, organisational capabilities without it yields organisational rigidity. In the interests of flexibility and adaptability, Strategic Conversation is worth cultivating – and throughout the entire organisation.
Strategic Conversation is always based on (starts with) a question, the topic of which may include topics like entrepreneurial invention, unique activity, competitive advantage, strategic investments, and distinctive competencies etc. It always concerns unknowns and ambiguity, and always leads to an improved level of strategic organisational knowledge.
Strategic Conversation can be considered in either macro or micro views. Macro refers to a big picture shared by managers and executives, while micro refers to SC examined at the level of micro-skills used by each participant of the conversation. The macro view of SC concerns ‘where’, ‘when’, ‘why’, and the focus of the topic. The macro view also places great importance on the 'systems' of the organisation, with strategic processes integrating with other system processes to provide a strategic learning capability. The micro view, on the other hand, looks at SC as being interpersonal communication – using open conversation rather than closed. It looks at conversation styles like dialogue, debate, discuss, and decide, and when they should be used.
Which view is correct – Macro or Micro? We (myself and various 'expert' panels that discussed this) believe that SC is about both. Strategic conversation uses the correct style to suit the topic and context. In our own thorough research of the subject, using expert strategic panels and literature from both academic and practitioner sources, we have clarified Strategic Conversation further.
As a basic test to see if the conversation is strategic (rather than not strategic), it must be about:
- setting, altering, attaining, measuring or assessing organisational purpose, goals, or risk – and that the conversation will generate a decision that will cause action.
Clearly there’s more to it, but that definition is a lightening-quick way to assess any particular conversation you may engage in, or overhear.
Breaking it down, to be ‘strategic conversation the conversation must both:
- have a topic that is related to goals (setting, altering, attaining, measuring or assessing)
- be part of a sequence that leads to action. The sequence typically starts with information, and then goes through interpretation, planning, implementation, measurement, and starts again with interpretation. The sequence forms the ‘strategic loop’, and usually is of 12 months duration.
Therefore to 'be strategic', a business must at a minimum be able to say that each person in the organisation knows the purpose and relevant goals of the organisation, how their activities relate to those goals, and that there is a strategic loop ‘system’ that is always running. People should be able to say “it always works this way - we have a system”. If there is no strategic loop, then no matter how strategic a conversation may sound, it's just noise.
Behaviours that indicate high or low strategic activity
There will always be some level of quantity and quality of strategic conversation within an organisation. The quality and quantity will depend upon how seriously the organisation attends to these individual aspects of strategy-related matters. If your organisation has a well-known mission statement that is actively adhered to, uses trend analysis, has public long and short term goals, and conducts ongoing evaluations on the strategic processes, then the quantity of strategic behaviours will probably be high. The same information does not guarantee the quality of conversation and action. Quality is a separate issue and is assessed by the earlier measures.
Performance indicators of strategic advantage
Organisational performance is often measured by profit alone, but profit chasing is usually a shortsighted view that doesn’t help strategic planning. Furthermore, any assessment of your organisation's performance will depend upon whom you ask – your supplier, customer/client, employee, investor and so on. Performance assessment and management therefore becomes a balance of the interests of those stakeholders and the organisation itself. Usually, people within the organisation produce inaccurate estimates of multi-stakeholder opinions of performance unless they have collected relevant evidence. Members may have opinions or feelings about how other stakeholders regard performance, but opinions and feelings result from impressions that have been formed via complex social messages, and are notoriously inaccurate.
For that reason, our performance questionnaires include columns relating to the ‘evidence’ of the performance estimates you gave. It's important to evaluate the source of your information when assessing strategic conversation, so we asked whether your response was based on ‘feeling’ or on supporting evidence. The ‘Strength of evidence’ therefore refers to the validity of the information upon which your strategic decisions are being made.
What now?
This is only part of the information we provide to help you understand the possibilities of Strategic Conversation. Your personal report shows the scores you gave your organisation. Another report "Initial report on both studies" shows the scores obtained by each organisation (organisations are not identified - just numbered) and describes what each score means, and allows you to compare the scores you gave to your organisation with organisation-wide scores. So armed with this, you have choices - all or some of:
- If your choice is to use all this information as the basis of ramping up your skills and activities in strategic conversation, you can start by cruising the information on the website - it's free, plentiful, and helpful (http://www.strategic-conversation.com.au/).
- From these notes and your scores you have the information you need for a 'gap' analysis. Go through the scores and rather than saying good or bad, decide what would be a useful set of scores for you - and it won't be 100% on each. Some of the scores will suggest areas that need more attention than do others. Ideally, with improved skills you should be better able to engage in strategic conversation. Here is a suggested sequence for self-skilling
- Start with defining the purpose of your organisation - clarify it in terms of your customers
- List goals that support that purpose
- List strategies that support each goal
- Work out how you will measure success of each strategy - at the end and along the way
- What are the unintended consequences - and the risk levels for each strategy
- Compare goals, strategies and risks to decide on the very few to focus on
- Learn more about strategic conversation - E.g. http://www.strategic-conversation.com.au/
- Form a group to follow a program - working together to develop these skills. Our 'skills acquisition' research program showed that the results were worth the effort - according to the participants. They 'felt' more knowledgable and worthwhile themselves. You can view the plan of that program on - http://www.strategic-conversation.com.au/
- Learn it - teach it - be a role model - take it elsewhere - take it everywhere.
|
