Strategy - First Formulate, THEN Deploy

First things first, as they say. It's hard to argue with such simple wisdom. That notion applies to strategy deployment, a.k.a. policy deployment, strategic deployment, hoshin kanri, hoshin planning, etc.

Yes, some folks jump right into the x-matrix with little or no strategy formulation. They're itching for the "operationalization" of the strategy and the related focus, PDCA rigor, horizontal and vertical alignment and anticipated results that strategy deployment can bring (that, or they just want to check the lean implementation checklist item marked "strategy deployment").

The problem is that this kind of haste or superficiality can get the organization into trouble.  Do we really want to be good at executing or trying to execute a flawed strategy? Of course not.

Whether or not your process uses strategy A3's, there's some basic strategy formulation building blocks that should be used to lay your foundation:

  • Core ideology. Articulate the company's guiding principles. This includes the fundamental reasons for the company's existence beyond just making a buck. The core ideology is typically captured in a statement of core values and purpose.
  • Vision. The vision statement should be a concise and vivid image of what the company's stakeholders aspire the company to become. Often the vision statement contains a BHAG's (big hairy audacious goals). BHAG's can be quantitative or qualitative (for example, Wal-Mart's 1990 era BHAG was to become a $125 billion company by the year 2000), qualitative, common-enemy (Nike's used to be something like, "crush Adidas"), role model related, etc..
  • Mission. The company should create a concise and vivid formula of approach for HOW the company will fulfill the vision.
  • Long range performance objectives. Here think breakthrough objectives that, if/when achieved will propel the company - hopefully well beyond its competitors. Long range for strategy deployment purposes is typically in the three to five year category.
  • Strategy analysis. This analysis should encompass and leverage the following:
    • Customer. The company needs to identify the existing customer set and their needs, expand the view of "customer" beyond the current limitations (understand the extended value streams, customers' customers, etc.), profile key existing and potential customers, segment existing and potential customers and assess segment attractiveness.
    • Competitors. Good analysis includes identifying the existing and potential competitors (the obvious players, plus suppliers, buyers, substitute products and services and other potential entrants), as well as profiling key existing/potential competitors, analyzing market share, conducting SWOT analyses, understanding buyer and supplier group power and anticipating possible competitive responses to different possible company actions.
    • Company. The strategy analysis must apply a rigorous self-examination. This should include the characterization of the gaps between current state and the targets reflected in the core ideology, vision, mission and long range performance objectives. Competitive gaps must be considered as well and should make use of primary customer and industry feedback through interviews, focus group, surveys and the like. A company SWOT and critical review of the company's fundamental resources (capabilities, brand reputation, key holdings, etc. to understand if they are difficult for competitors to replicate/imitate...or not).
    • Environment. The company must understand the current and anticipated environment and the possible business implications of various factors and trends, be they cultural, regulatory, technological, etc. in nature.

This certainly is not a comprehensive list, but it should make one think about the context within which strategy deployment should be conducted. Lean leaders can use all the x-matrices that they want and play catch-ball night and day, but they still need a firm foundation for good strategy formulation.

What has been your experience?

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