In summary, the advice is [1] map the firm’s operations, supply-chain and sales channels [2] list potential disruptions [3] ask ‘what if’ these happen [4] set up contingency plans. Work on risk in utilities shows several additional strategy responses are both possible and desirable.

1. Reduce the risk that an event will actually cause disruption, e.g. by investing in resilience. In utilities, critical equipment can be ‘hardened’ to make it less likely to fail if hit by a damaging event. Similar hardening investments can make supply chains, internal operations and distribution channels more resilient in other cases.
2. Reducing the damage from any disruptions that do occur, e.g. by building in ‘redundancy’. In utilities, stand-by equipment at critical points can radically cut the risk of actual power cuts for a small incremental cost. In strategy, options for alternative supply-sources or distribution channels cut risk in a similar way.
3. Minimising the time to recover, by making sure the business is not operating ‘on the edge’. In utilities, a small percentage of spare equipment or excess staff can radically cut the time needed to get service back online after a disruption. In strategy, obsessive ‘ratio management’ not only leaves business vulnerable to damage if disruptions occur, but make it that much harder to recover if they do.

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1. “sensing” to detect changes and assess their likely impact, then
2. “adjusting” policies to keep the strategy and performance on track.

Some sensible examples illustrate the approach, such as anticipating staffing needs in a cyclical business – though one wonders what on earth the companies discussed were doing before if they didn’t do this! It contrasts sense-and-adjust with reactive styles (do nothing until forced to) and programmatic change (keep changing as you planned, regardless of changed circumstances).

The article unfortunately misses the “Create” step – strong firms don’t just ‘sense’ the environment to see what might happen to them; they decide how they want their world to change and make it happen. This may be radical innovation, but is more likely to be just the relentless pursuit of known resource- and capability-building. 

Shame, too, to see these sound basics of strategy buried in more nonsense about ‘constant transformation’ with the unsubstantiated claim that “… companies must be ready to repeatedly transform themselves” and that “A review of businesses faced with burning platforms (enterprise-threatenting events) would reveal that most have failed to make the transformations required”. Sense-and-adjust is just the minimum of decent strategic management, and if properly performed would avoid most burning platforms in the first place.

strategydynamics.com

• Give the Board an explicit threat manifesto – how to assess and respond to threats to the business strategy and performance.
• Give small executive teams responsibility to scan for and evaluate known and possible threats.
• Reach out more widely, to external communities [investors, academics, customers, employees ...] to widen the scanning for threats.

I am reminded of a comment from a wise and successful CEO who told me “For any strategic initiative we might make, we always ask what is the worst that could go wrong – if that’s not too bad, or we can cope with the consequences, we go ahead; otherwise we drop it“.

strategydynamics.com

But how do we ensure that operating model is indeed rigorous? I would start from a strategy dynamics analysis, which is theoretically rigorous, encompasses resources and capabilities, and can expand to incorporate business processes of whatever level of detail is required, but I guess most EAs don’t use that approach.

The article suggests that using EA to align technology with strategy is helpful, so it would be good to hear of any sources that clarify exactly how EA experts ensure they get a rock-solid strategic architecture on which to build.

This has been hugely damaging. No-one in Accounting, Architecture, Engineering or Medicine would argue that their profession is just a ‘craft’, or that emerging young professionals have no need to master the basics of their field. They certainly would not disparage training programs that teach ‘analysis’ as being trivial and irrelevant. We have reached a point where senior leaders are trying to run their organizations’ strategy with not only no idea how to work things out themselves [which senior folk should not do in any case], but no idea either what ‘working out’ they should ask their subordinates to do. To see the damage this has done, look at what having amateurs in charge of strategy in banking, retailing and a host of other industries has done for us – thanks Henry.

He’s not wrong in everything. Of course it’s a good idea to bring real-world cases into class. His aim of helping managers do a better job, not just get one, e.g. through his Masters in Practising Management is great.  And of course he’s right that you can’t learn all about ‘management’ in class – but no other profession would take that view either. You don’t get to be good at any of them without a lot of practice.

But as ever he goes to ridiculous extremes. It simply isn’t true that we know no more about business than biologists did before they had named the species. And it’s ridiculous to argue that managers will learn more from reflecting on just their own experience and that of a small selection of peers, rather than from the accumulated wisdom of the entire profession. If that’s how engineers or doctors learned, we would still be building bridges from piles of stones and sticking leeches on sick people. 

By all means help managers Henry, but butt out of strategy.

Meanwhile, HBR offers more and more articles featuring glib slogans or ‘X ways to do Y’ and other styles of  thin journalism. Some are downright dangerous! There are still some great exceptions of course, but I wonder if their crown is slipping. 

Anyone got other favourite sources?

In spite of the tired marketing gimmick of ‘X things to do to achieve Y’, the book’s basic premise is sound. Define the ‘default future’ for your organization – the future that is coming towards you, given the current circumstances and plans and given likely external events. Then ‘re-write’ an improved future, work back to what has to happen to bring that future about, then get everyone clear on bringing that better future about.

Surely this has always been the fundamental task of strategic management? Problem until now has been that we have had no decent tools for describing either the default or improved future, or how strategic choices and decisions link to those futures [which I humbly submit is precisely what strategy dynamics does].