Strategic Development

 

Strategic Planning:
A Learning Approach to Organisational Adaptability

There is no doubt that the uncertain, highly changeable, and very risky conditions under which Australian businesses and statutory authorities have had to operate over the past decades or so, is set to continue for decades to come. These very significant changes in the conditions which such organisations have to operate, have led them to appreciate the absolute necessity to learn how to be much more adaptable than they have traditionally been, and to increase their capabilities at managing the new, volatile risks that they face.

This in turn has led to a number of significant new ideas about strategies and about the process of strategic planning as a key aspect of risk management.

The more traditional picture of strategy is well captured in the following quotation by Kenneth Andrews:

Strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organisation it intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities.

This is very much an ‘inside-out’ approach, with a key underlying assumption that companies have considerable control over their own destinies and that they can therefore create their own desirable futures. The logic is also based on the acceptance of an image (or metaphor) of the organisation as single coherent entity that can be operated and managed, and most importantly, ‘steered’ in directions that are regarded, by those doing the operating, managing, and ‘steering’, as most desirable to fulfil a stated vision for the organisation.

Many advantages have flowed to organisations which have seen strategy in these terms. The processes of strategy formulation and planning that have reflected such a logic, have led to considerable improvements in key performances through increased clarity of purpose, more refined statements of specific objectives, improved understanding of performance and output standards. They have also allowed a general increase in understanding among employees and customers alike, of the nature of the business, and how it can be best achieved.

Strategic planning in this mode typically allow clear visions about the future to be developed, clear mission statements about the actual intentions of how the organisation intends to pursue the vision to be stated, and wide ranges of policies, strategies, goals and specific objectives to be planned as a ‘cascade’ down from the level of the organisation as a whole, right down to particular business units and even individuals.

Regrettably however, as the levels of uncertainty about the future continue to rise, the level of riskiness continues to grow, the extent to which conditions in the ‘outside environment’ seems to change continues to increase, and the range of stakeholders with crucial interests in the present and future plans of the organisation continues to expand, the inadequacies of this conventional strategic approach are becoming increasingly evident.

There is now a much clearer realisation that the key to organisational success lies more in the ability to be adaptable to changing conditions, with strategies that allow this to occur, than to persevere with visions and missions and plans that are ‘written in blood’.

A new image of organisations is emerging through all of this. The conventional view is somewhat akin to the organisation as a ‘coherent’ entity that can be managed and ‘strategically steered’ as if it were a ship on a predetermined and unchangeable voyage across in a vast and open ocean (Model One in Figure 1 below). The emerging view sees the organisation as an integrated network or system of diverse human activities, the directions of which are determined in large part by the inter-relationships between the people within the organisation (and who essentially comprise it) and the broader (and highly changeable) environments in which their ‘organisation’ has to operate (Model Two in Figure 1).

Figure 1 Models of Organisation

Rather than an objective ‘thing’ which is relatively remote from the world in which it operates and is set on achieving a fixed mission to follow a desired vision of the future, an organisation is now increasingly being portrayed as a ‘system’ that is ‘open’ to the environments within which it must operate, with a high capability to adapt to whatever the future might bring.

Rather than being a spasmodic activity conducted only by a handful of ‘specialist’ strategists whose job it is to generate THE strategic plan on behalf of the organisation, strategic planning becomes an on-going activity to which everyone in the organisation needs to commit themselves, as they attempt to collectively ‘learn their way forward’ into ever-changing futures.

In this model of strategic planning, everyone is a strategist, and responsible for helping the organisation continue to adapt to the ever-changing circumstances in which it finds itself (and may well find itself in the future).

The essence of the process is to attempt to maintain ‘an alignment’ or network of connections between the key ‘domains’ of the organisation itself (the ‘system’) -
(i) the strategic intent (what the fundamental purpose of the organisation is seen to be),
(ii) the value and belief ‘set’ that prevails within the organisation as its ‘culture’,
(iii) the set of ‘core competencies’ that represent what those in the organisation are ‘best’ at doing,
(iv) the capacity of the organisation including its infrastructure, resources, and degree of ‘innovativeness’,
(v) the nature and quality of the operations that are actually conducted to enable the organisational purpose to be achieved, and
(vi) the quality of the leadership in terms of the facilitation of all of the previous functions – and the changing nature of the environment.

All of these ‘domains’ of the organisation are intimately inter-related with each other, and need to be appreciated from this ‘systemic’ perspective (Figure 2). Each influences the other, and changes in one will almost certainly dictate the need for changes in the others.

Figure 2: The nature of and Organisational System

The following definition from Richard Hames, captures well the emerging perspective on strategy:

"Strategy is the capability of the system to respond and adapt to changes in the environment, in addition to provoking such changes to occur. It is collaborative, dynamic and co-evolutionary in that it depends on energy of learning, confidence for action and intensity in time framing".

The new approach to strategic planning is essentially an ‘outside-in’ process, through which the various key-stakeholders in the organisation continually learn about the nature of the world in which their organisation has to operate (and most significantly, might plausibly have to operate in the future) and then design and implement action plans that will allow them, through their own spheres of influence within the organisation to help it to adapt to such changes, and wherever possible, to even influence them in a manner that is considered desirable.

A key matter here is that it cannot be sensibly assumed that the future is either controllable or predictable, and so the central strategic focus now has to be on the relationships at the inter-face between the organisation and such environmental states as might plausibly occur in the future.

The idea of thinking about different scenarios of the future becomes a central idea as a context for thinking about, and planning strategic adaptations.

Thus the strategic intent of the organisation, and the nature of the five system domains, will need to remain as adaptable as possible to allow ‘the system’ to benefit from whatever particular scenario or set of circumstances might arise in the future. The system will need to ‘move in the direction’ being dictated by the particular set of circumstances that are actually occurring in the environment, and those most likely to occur, from a number of possibilities (as illustrated in Figure 3 below), which, most profitably, have already been foreseen. The object here is not to try and predict the future, nor rely on a preferred one, but to be able to deal with it, come what may: Not to get the future right (because that is essentially impossible) but to avoid getting it wrong.

Fig 3: Scenario-determined Directions for the Organisational System

There are number of characteristics and activities that are key to this learning approach to strategising:

• It is a collaborative activity typically involving a wide range of stakeholders both from within and beyond the organisation;
  
• The key activity is that of ‘strategic conversation’: Open discussions (which lead to actions) between stakeholders about the nature of the system, of the environment in which it operates (and may well have to operate in the future), and the relationships between the system and environment, and how these might well have to change as the environment changes;
• It is therefore typically an activity that is facilitated (rather than exclusively ‘owned’) by so-called strategists;
• The essential focus is on the relationship between the organisation and its external environment within a context of the plausible future states of that environment;
• It is a recurring and iterative process which is complex, because of the matter of relationships, and often ambiguous, because of the matter of the profound uncertainty of the future;
• It is essentially a cyclical process that involves a series of different activities each of which informs the others. In other words, as things are learned about, and changes occur in, each ‘domain’ within the system, the knowledge gained can be used to learn about and indeed change, the other domains.
• The strategic ‘learning cycle’ involves:
  
  (i) an investigation of the ‘key purpose’ and strategic intention of the organisation as it currently operates,
  (ii) an investigation
  (iii) the construction of ‘scenarios’ of a number of different states of the environment which might plausibly occur as a function of different changes in the various key variables,
  (iv) the exposure of these scenarios to as broad a range of the organisation’s stakeholders as practicable,
  (v) the collection and collation of the responses of these stakeholders to the scenarios with respect to the rigour of their logic and their plausibility as potential future states of the environment,
  (vi) the collection and collation of ‘issues’ that are raised in the course of further strategic conversations about the scenarios and their potential implications for the organisation, among the stakeholders,
  (vii) the interpretation of these strategic issues into strategic intentions (as adaptations of the ‘system’ to the (actual or potential) changing circumstances in its environment),
  (viii) the presentation of these intentions, within the context of the scenarios, as strategic options for strategic choices to be selected, and
  (ix) the cascading of these choices into strategies and action plans within each of the system domains.
• And in true systemic fashion, the implications of any of these changes in environment or ‘system domains’, need to be investigated with respect to each of the other domains. In other words, a change in the environment might dictate the need for new competencies within the organisation which in turn might determine the need for new HR training activities, some budget reallocations, and a even a change in the worldviews that prevail within the organisation. It might also dictate a need for a new style of leadership.

Under these circumstances, the strategic plan is a much more ‘open’ and ‘conversational’ document than the prescriptive statements of the past. It is more a statement of ‘directions’ than a set of highly detailed action plans. The business writer Robert Waterman puts it well when he states that:

"Successful organisations comprehend uncertainty. They set direction not detailed strategy. They are the best strategists precisely because they are suspicious of forecasts and open to surprise. They think planning is great as long as no one takes the plans too seriously".

In other words, the primary focus shifts from the plan to the process of planning.