Some reflections on how strategy is changing — especially in technology
At the end beginning of January, I left a lifelong career in banking to become Head of Strategy at additiv, a fast-growing SaaS provider to the finance industry.
This move was more than just swapping sides, going from buyer to vendor. This was about moving into a sector, and a company, at an inflection point — riding a once-in-a-generation shift in service provision fueled by digitization and demographics.
Capitalizing on this change means being bold, brave and moving fast. It’s far cry from the banking world of conservatism and incremental change. It’s fun — but, above all, it’s illuminating. Here are some of the strategic lessons I’ve learnt so far.
The 3-year plan is dead…
Everything is speeding up. Innovation cycles are accelerating because the costs and impediments to experimentation are falling continually as technology changes. And as a result, product and company life-cycles are shrinking. We simply don’t have the luxury to plan on two- or three-year horizons anymore.
…well, for most companies
That said, this is the view I now have working for a tech company. When you’re at a big, highly regulated bank, you’re at a supertanker. It’s hard to be truly agile and so these organizations will continue to have longer time-horizons. However, this puts them at a massive disadvantage. By the time you’ve started working through a 3-year plan, the world has likely moved on.
In fact, horizons have split
I think it’s probably too simplistic to say planning horizons have just shrunk. In fact, I think it’s more accurate to say that they’ve bifurcated. Even in small companies, you wouldn’t expect the company mission or business model to change every day. And it’s important to have some long terms view about how the world is changing if you’re going to place some ‘big bets’.
But the day-to-day is clearly operating at a much faster pace than in the past. And, this is again, where smaller companies — or at least more agile companies — have another advantage. If you’re a supertanker, getting the ‘big bets’ right matters disproportionately more because you can’t change direction very fast. But getting the ‘big bets’ right when you can’t divide them into hundreds of experiments makes that, paradoxically, much less likely.
The hierarchy in planning is gone
Again, this is not representative of the largest companies yet, but they’ll have to change. Strategy is not one person making decisions and dictating them to the organization — it can’t be. Statistically, the chances of the same person getting things right all the time is zero.
Instead, for the strongest ideas, it’s best to crowd-source. Not in some consensus-seeking, focus group kind of way. But by collecting multiple viewpoints, processing a lot of different data points, subjecting ideas (especially received ideas) to a lot of different filters.
But no analysis can afford to be exhaustive anymore. You must balance a desire to make the right decision alongside the risk of moving too slowly — and the ability to try many things will also mitigate this.
Strategy has got closer to innovation
In some ways, the biggest change in strategy is that it is increasingly blurring with innovation. It’s not just that we need to move faster. It’s also that the world is less binary than it used to be. The clear boundaries that separated one industry from another are dissolving fast, we are now competing in arenas rather than industries.
Similarly, we are now operating in networks, rather than hierarchical value chains, which means that most companies are potential partners rather than potential competitors. And, in this context, strategy’s job is less about making well-informed yes/no decisions and more about creating the conditions for maximum agility, imposing as few of these constraints as possible.
This doesn’t mean creating the conditions for writing more code (at least, not exclusively). The objective of strategy is to finding new business models which means experimentation at scale. This, in effect, means bringing strategy closer to innovation.
Strategy has got closer to culture
As strategy moves closer to innovation, it also becomes closer to culture — because no innovation can take place in a vacuum. If you want your organization to innovate faster, this can’t be a top-down diktat: “invent faster or you’ll be fired”. Instead, the right conditions and culture must be put in place.
In practice, this means fostering an environment that encourages new thinking; room for what we call “intellectual cowboys” — maverick thinkers who will challenge the status quo and allow everyone to see things differently.
It means trusting and empowering networks of small teams to innovate because innovation will come from neither rock star individuals nor big departments. It means following an outside-in approach, not inside-out, allowing the inputs from your network, including “innovative disobedience” in how your solution is used, to percolate into your processes and thinking. And lastly, it means you need an acceptance of risk and forgiveness for mistakes that goes beyond the platitudes and the posters; sharing the learnings from challenges and actively celebrating those who break the mold.
Beware the obsolete tools
Our CEO Michael recently issued a blog where he paraphrased Warren Buffett saying: “only when the on-premise tide goes out do you discover who’s been swimming naked!”
He was referring to the vendors who have relied on high switching costs to keep customers and are set to become exposed as technology moves to an everything-as-a-service approach. Perhaps you could say the same about the strategists who have relied for too long on overly static, reductionist frameworks?
Life can be scary for those charged with marshalling a company when everything seems to be in a state of flux. However, it offers a great opportunity for those who are prepared to do things differently. In the next few years, there will be an unprecedented shake-up in the make-up of many industries. While it is comforting to stick to what worked in the past, this will be the undoing of most. It’s time to take a fresh approach and strategists needs to lead the charge.
Which is what I plan to do at additiv: throw out the obsolete tools, the backward-looking matrixes, the three-year plan; dissolve the hierarchies and the inside-out approach; and instead become the internal orchestrator for a strategy that fosters collaboration and channels the best of everyone.