In the more than 40 interviews we conducted with senior executives, we started to notice that a pattern was emerging when CEOs and CFOs talked about their work of implementing strategy. We identified two major dimensions describing this pattern:
- What is the degree of people impact this strategy initiative will have? For example, will this be a radical or incremental change to peoples jobs? Is this going to challenge our current understanding of our business, or slightly modify what we already know?
- What is the degree of uncertainty our strategy initiative faces? For example, is this based on exploiting mature technologies or forcefully maturing emergent technologies? Is there a clear market, or do we create a new type of demand and customer? And finally: Have we done this before, or is this completely new to our organization?
When we plotted the type of strategy implementation activities and strategy work the executives talked about in this space, 4 quadrants emerged:
- Discovery: This type of strategy work is characterized by a high degree of impact on people, as well as significant uncertainties. It aims to explore significant and often disruptive changes to current business models, for example by incorporating advanced technologies such as AI.
- Prototyping: The people impact of these types of strategy initiatives is lower, as they typically only affect a smaller circle of people that have already embraced a new technology or business model. The goal is to reduce critical uncertainties, for example regarding technology readiness, market uncertainties, or the organizations ability to operationalize the new strategic direction.
- Transformation: Difficult because of their high degree of impact on people, but typically relatively low on uncertainty, transformative activities clearly define a new and ambitious goals for the organization, and change the organization accordingly. Critical uncertainties, such as technological feasibility or unclear market needs, have been reduced prior to starting the transformation of the organization (and betting its future on the success of the transformation)
- Operational Excellence: Both people impact as well as uncertainties are low in implementing strategies focusing on operational excellence: They typically encompass small, but relentless, improvements to the organization along a path that is well understood.
What is important to note is that these quadrants describe a portfolio of activities. From what we have seen so far, we argue that organizations need to execute strategy work in all quadrants, all the time.
Particularly interesting is the challenge of transitioning a strategy activity from one quadrant to another, and in what order: How do you, for example, decide which one of the high-risk option you “discovered” to “prototype” and for what duration and at what cost? When is your “prototype” ready to be rolled out in a company wide “transformation”? And at what point do you give your organization a break, and shift focus to the calmer waters of “operational excellence”? These are some of the questions that we explore in our research on design thinking based agile tools, as well as in our research on decision making heuristics.