The 3 Choices of Good Strategy Making

Most good strategists will tell you that creating and implementing an effective strategy is all about making choices. I agree with that but I know that this is easier said than done. And, while it’s no surprise that determining what steps your organization must take to be a successful business is important, it may surprise you to know that deciding what your business will do less of or won’t do at all is equally, if not more, important for strategy execution success and business performance results achievement.

So what are these choices and what do they look like in action?

 

Choice 1: Focus your Strategic Reach

The first choice involves deciding what business your company is in, what you make or do, who your specific customers are, and what niche your organization is playing in. Though counter-intuitive, time and time again, successful organizations show us that making clear choices in these areas translates into greater organizational focus and better business results. The bottom line is that it can actually be bad for business to try to do everything and be all things to all people because it stretches organizational capacity too thinly. Often, choosing to specialize in and dominate a focused market space results in better business performance and exceptional business results.

 

Choice 2: Identify the Value Drivers Critical for Strategic Success

The next important opportunity to make choices comes during the strategic planning process when creating your organization’s strategy map. The goal during strategy mapping is to identify the focused set of mission critical value-drivers within your business (in the form of strategic objectives) that allow you to achieve the business results you desire. The key to doing this successfully is to really think about what (and how) your organization truly needs to work on to produce results and achieve your organization’s mission and vision. Take my advice - forget the extraneous stuff!

This can be a very difficult exercise for organizations and leaders to do effectively - it’s only natural to want to include everything in the strategy picture. Why? That’s because it’s hard to know what to leave in and what to leave out, and making choices feels risky. Making decisions about critical strategic objectives requires a really good understanding of how your business works to produce results and, unfortunately, most companies do not have reliable information available to help them validate their theory of how their business works and to identify key results drivers.

For most organizations, strategic planning via the strategy map begins the process of learning about the critical business drivers in their organization. When this is the case, making the choices required during the strategy mapping process can feel a bit like a chicken and egg situation. How can you make choices about the critical business drivers when you don’t have data telling you what really drives business success? The answer to moving forward is to leverage organizational wisdom about your business, make educated choices about what you think really drives the success of your organization, and begin working with that. Over time, as you learn (via the balanced scorecard and strategy review discussions) about the true value drivers in your business, and the cause and effect relationships between them, you and your team will have the opportunity to refine your strategy map. Knowing that your first choices aren’t set in stone often helps business leaders feel more comfortable choosing a focused set of strategic objectives for their strategy map.

 

Choice 3: Prioritize Work Efforts Strategically for Exceptional Results

Even with a goal of limiting the strategic objectives on their strategy map to a vital few selection, most organizations begin with 15 to 20 strategic objectives on their first one. It is largely impractical for organizations to focus equally on this many strategic objectives for a sustained period of time. Successful strategy execution requires focus and prioritization. As a result, your organization should prioritize your strategy map/strategic objectives and make decisions about which components of your value creation strategy your organization will focus on over a defined period of time. Known as strategy map weighting, taking this approach provides your organization with: a method of defining and communicating the relative business priorities to employees and stakeholders; and a means to guiding operational decision making over the short to medium term.

The focus of strategy map weighting is to establish the relative priority of each strategic objective over, customarily, the upcoming twelve to eighteen months. The first step in this process is to weight your strategy map perspectives. This is done by taking 100% and applying it over the various perspectives. The next step is to weight each of the strategic objectives. The best way to do this is to take one strategy map perspective, look at the percentage weighting for that perspective, and distribute that percentage across all of the strategic objectives assigned to the perspective. The percentages applied to all of the strategic objectives in this perspective combined should add up to the percentage weighting for the strategy map perspective. This process should be repeated for each strategy map perspective. The result is a weighted strategy map.

A weighted strategy map is an important tool that clearly shows the relative priority of strategic objectives, and the supporting work effort, over a defined period of time. When clearly communicated to managers and employees, it provides a valuable tool that helps them achieve focus in their work efforts and maintain strategic priorities in the face of changing, and often challenging, operational demands. Successful organizations will encourage managers and employees to use the weighted strategy map as a tool to help them filter work requests, prioritize day to day work efforts, and make important decisions.

Essentially, the choices communicated via the weighted strategy map help employees make their own choices about prioritizing their work and guides them in using their resources and organizational capacity in a way that will help the organization achieve desired business results in the short run without sacrificing the longer term business strategy and goals of your organization.

 

Good strategy making is fundamentally about leveraging information and knowledge, and having the courage to make choices about what to focus on, what to do less of, and what to walk away from. Basically, good strategy making is an ongoing exercise in focus and prioritization – something that most businesses have difficulty doing. However, to be able to execute your strategy successfully, your organization must first excel at good strategy making – your ability to achieve the business results you want is depending on it!

Comments

[Sandy Richardson]

Hi Jesus:
unfortunately, I do not speak spanish (though I wish I could!). If you have any specfic questions you would like me to comment on, perhaps I could respond in english and then you could have it translated into spanish. Just an idea!
Sandy

[Jesus Peral]

Dear Sandy

I am spanish native and I created some time ago a blog about Strategic Management (sorry it is in Spanish)
If you can read spanish your comments would be very useful for me.
thanks
regards
jesus

[Sandy Richardson]

Hi Lisa:
I have never experienced push-back on perspective weighting. This was likely due to the fact that everyone involved understood the objective of the exercise: to help prioritize work efforts and not to assign value to the various strategic objectives (SO's). It is important for all involved to understand that all of the strategic objectives on the strategy map (SM)make an important contribution to mission and vision achievement.
That being said, I usually see two distinct approaches to SO weighting. In one of these situations, higher weighting is given to the outcome-oriented perspectives (e.g. the financial perspective in the private sector) - largely due to their high visibility. In the other case, the highest weighting is usually given to the perspective that is closest to the bottom of the SM with the biggest gaps in SO capability (often the people or organizational capabilities perspective). The thinking here is that, based on cause and effect thinking, gaps closer to the base of the SM must be addressed first if the organization hopes to achieve its desired outcomes.
At the end of the day, it's important for each organization to resolve these differences when doing SM weighting.
The bottom line is that it's critical for all involved with the organization to understand the purpose of SM weighting - to prioritize work effort, not to communicate the value of the SO"s on the strategy map.

[Lisa Hobart]

Interesting ideas, Sandy. I haven't seen weights applied to Strategy Maps before (more often they seem to crop up on Scorecards). Anything that can help force organizational focus on a few critical things at one time is great. One question, though. Do you ever run into push-back on the idea of weighting the perspectives? I can see that doing so could raise concern about the message that could be sent by applying a lower weight to, say, the "people" perspective. Thoughts?

[Sandy Richardson]

Hi Robert:
thank you for the positive feedback and thank you for your valuable insights on this topic.
Defining (and sticking to) business priorities is the one thing I see organizations struggling with the most. The reward for those companies that push through the challenge is increased capacity and greater efficiency. Congratulations to you and your team for your tenacity in working through this challenge!

[Robert Samuel]

Great article Sandy. As a business owner I can really appreciate these strategies, especially #3. Prioritizing was something that my team and I lacked in the beginning. Once we got that straight, it was almost like an overnight difference in terms of productivity. :-)