What is strategic management? Definitions vary, but the general consensus in business literature is that it’s about managing business resources strategically to achieve an organization’s goals and objectives. It’s a top-down, linear affair: Executives create the strategy, formulate the plan, ensure employees execute the plan, and then conduct a postmortem.
Dynamic Planning: Rapidly Refocus, Reprioritize, and ReallocateWatch the webinar: Dynamic Planning: Rapidly Refocus, Reprioritize, and Reallocate
Dynamic Planning: 5 Steps to Rapidly Replan, Reprioritize, and Effectively ExecuteView the eBook: Dynamic Planning: 5 Steps to Rapidly Replan, Reprioritize, and Effectively Execute
What’s missing in this traditional approach to strategic management is how to adjust quickly to disruptions, at scale. Business conditions can and do shift overnight, requiring new strategies and priorities. Organizations that cannot react fast enough to the slings and arrows of today’s turbulent business environments risk getting left behind.
A new approach to strategic management is required to account for this increasing pace of change as well as new ways of delivering work and funding investments. Executives, finance teams, and enterprise portfolio management offices (EPMOs) must be able to rapidly refocus business resources on revised strategies and priorities.
Facing a Permanent Storm
Recent events have put organizations into overdrive. The global pandemic has forced companies to pivot swiftly to survive. Intel CEO Bob Swan told The Wall Street Journal that he is asking his company: “…how is it in moments of crisis we are able to get so much done so fast? How do we continue that pace in a more normal environment?”
These are key questions that may determine the winners and losers over the next decade. A “more normal environment” is a relative term. Organizations were already dealing with compounding stressors: competitive moves, government regulation, shifting customer demands, climate change, digital transformation, and much more.
Companies that were already utilizing strategic management to adapt well to this increasing onslaught of disruptions were better prepared for the pandemic. For example, companies that had started agile transformations before COVID-19 performed better and moved faster after it hit compared to those that had not, according to a study by McKinsey and the Harvard Business School. The researchers explained:
“Agile organizations had an edge because they already had processes and structures available to them, such as cross-functional teams, quarterly business reviews, empowered frontline teams, and clear data on outputs and outcomes, that proved critical to adapting to the COVID-19 crisis…The same was true within companies: those business units that had gone agile before the pandemic performed better than those that had not on customer satisfaction, employee engagement, and operational performance.”
Leaders at these organizations exemplify a new strategic management mindset. Extending practices of Agile teams across their organizations could yield significant benefits. These small, interdisciplinary teams work independently, fail fast, focus on delivering business value, and are flexible enough to change course on the fly.
The new, dynamic approach to strategic management facilitates this way of operating on an organization-wide scale. The pandemic will eventually subside, but a permanent storm will remain in this business environment, hurtling disruptions in greater numbers and at faster speeds.
Organizations need the agility to constantly adjust to swiftly changing conditions. What is holding them back?
The Trouble with Typical Strategic Management and Planning Practices
The annual planning process prevents many organizations from adapting quickly to change. Management teams lock ingenuity and flexibility behind set plans and budgets. When employees make a breakthrough, need to change direction or encounter a roadblock, resources cannot be easily reallocated.
Another drawback of this traditional annual planning approach to strategic management is a tenuous link between strategy and execution. Executives and managers don’t clearly communicate the strategy and plan, or connect them to each employee’s work. As a result, 67 percent of strategies fail due to poor execution, according to an article in Harvard Business Review. Employees may be doing work that does not even track to the annual plan.
Even executive teams that initially establish a clear connection between planning and delivery often cannot sustain it; one reason is limited visibility into execution.
Limited visibility means that leaders cannot easily see program status, funding levels or resource constraints. They lack the data and analyses required to make speedy course corrections and informed decisions. For example, it’s difficult to quickly determine how a shift in resources or cutting all contractor spend may impact the organization.
As circumstances evolve, the plan that was created as part of this traditional strategic management construct becomes outdated. In some organizations, half of the work delivered in a typical year is not on the strategic plan. When new demand comes in, capacity constraints and conflicting priorities slow the organization down.
Managers are often stuck in the middle, held responsible not only for projects and goals outlined in the original plan but also new ones. Executive teams, EPMOs, and finance departments that fail to work together and make disciplined priority decisions risk delayed projects, work that is no longer on strategy, and burned out employees.
Disruptions Drag Companies and Leaders Further Off Course
Disruptions magnify the consequences of these conventional strategic management processes. It’s extremely difficult to shift the entire organization at speed without a grasp of factors such as:
- What programs and projects can be put on hold or cancelled based on financial and strategic impact?
- What’s the status of our new customer-facing app and can we fast-track it?
- Can we shift funding quickly enough?
- Who is working on which projects? What are their skills and experience?
- Where, when, and how do we shift employees based on new priorities?
- How do we ensure our remote workforce is delivering on strategy?
Without this kind of data and analytics, here’s what leaders CANNOT do in strategic management:
Executives – C-Suite, Chief Strategy Officer, Heads of Business Units: We lack the business agility to respond to change. We don’t have enough visibility and governance into our investments. What are we spending money on and what are we getting?
EPMOs/Strategic Planning Offices: We can’t react quickly to new demand, shifts in priorities, and the need to rebalance portfolio funding. We don’t have the ability to provide C-level performance visibility and governance. It’s difficult to reallocate resources across the portfolio to respond to change.
Finance: We do not have strategic management processes that allow for flexible funding models while staying within budgetary constraints. We spend so much time collecting and consolidating data that by the time we forecast, it’s out of date. New delivery models are creating new challenges in getting financial information.
Program Manager / PMO: We can’t easily roll up progress and status, including actuals spent to date, to provide up-to-date forecasts. It’s difficult to shift funds, resources, or sequencing based on priority changes. We can’t break down work into smaller increments to give our teams autonomy to make decisions on what to deliver based on desired outcomes.
Time to Evolve Strategic Management
Legacy processes have hindered organizations for years as leaders try to continuously connect strategy to delivery, embrace new work methodologies, and incorporate digital into their businesses. Some organizations have transitioned to more frequent planning processes done every quarter, for instance, but that is not enough during a crisis or disruption.
Instead of revamping their strategic management processes, organizations tend to work around them. In a report about adapting to remote work, Forrester wrote: “Processes that were just inefficient last month don’t work at all today.”
As disruptions burgeon, this modus operandi is untenable. Gartner addressed the need for a more dynamic approach to management in a research paper focused on digital business, “Leverage a Strategy Realization Office to Execute the Strategy.” The analysts wrote:
“Previous transformation programs could take a ‘once and done’ approach, but transformation in the digital age involves continuous delivery and requires adaptive planning and execution approaches.”
It’s time to evolve strategic management and create the agility required when disruption strikes, or new opportunities present themselves.
A Strategic Management Framework for the 21st Century
A new strategic management framework embraces change and uncertainty as a constant. Leaders don’t just plan for disruptions – they use them to get ahead of the competition.
The power to pivot provides the freedom to try new things, fail fast, and iterate. The organization can adapt rapidly while continuously delivering on strategy, even as the strategy changes.
Modern strategic management requires not only a different mentality but also access to the right data and insights. Leaders need the ability to do quick, integrated analyses of strategies, impacts, priorities, funding, staffing, and other resources. This is what set companies apart in the study by McKinsey and the Harvard Business School:
“…among the most successful agile companies we reviewed, an outcome-based, digital, and automated tracking system gave them daily transparency on their performance. An agile leader of a telco operator described knowing, for example, exactly what the impact was going to be in product delays if it was shifting people around, since everything was so transparent on a priority level.”
Most organizations don’t have this level of sophistication but can start with the data they have on hand. Ideally, executive teams have constant feedback mechanisms and an adaptable culture that facilitate a dynamic approach to strategy and planning.
This new strategic management framework is an eight-step, continuous process that enables organizations to:
1. Plan dynamically: Plans are still critical, but not set in stone. Leaders can change and adjust them as needed instead of waiting once a year or quarter.
2. Tie planning tightly to execution: Strategies and plans are not vague propositions but tangible entities for teams and employees. Executive teams translate strategic objectives into measurable goals, actionable roadmaps, and coordinated delivery across the enterprise.
3. Revisit strategic direction: Strategies are adaptive. Disruptions are an opportunity to reassess each strategic initiative. In this new strategic management framework, leaders make adjustments to ensure the organization can manage these disruptions or new opportunities.
4. Conduct scenario planning: Teams can swiftly model the effects of changes, such as the reallocation of resources and funding across portfolios and over different timelines. EPMOs can use it to decide which investments to fund and which to cancel or delay based on targets and capacity. By understanding the risks and balancing tradeoffs, leaders can make educated decisions.
5. Reallocate funding: A shift in strategy prompts an analysis of portfolio funding. Knowing the current spending on each strategic initiative provides a baseline for determining changes to support the new direction.
Teams can determine new funding levels for each portfolio based on the updated strategy. This strategic management process encourages finance to create more flexible funding approaches to easily reallocate as circumstances require.
6. Reprioritize investments: In line with the updated funding, EPMOs can create new portfolio priorities that will best achieve the revised strategy. They can reprioritize in context with the entire portfolio, balancing work that needs to be done immediately and over the next few months and quarters. EMPOs can then update the strategic roadmaps to set the stage for execution.
7. Realign teams and work: This is where the new strategic management ties into execution, enabling leaders to operationalize the new strategy with the modified and reprioritized programs. Integrated roadmaps ensure two-way communication across the organization: Teams can easily see revised timeframes, milestones, and releases. Executives and portfolio owners can understand the impact of capacity planning realities and make updates as required.
8. Review performance: Leaders constantly measure results rather than waiting until after a project is completed or a set period of time has passed. They measure performance against objectives, communicate progress to stakeholders, and adjust as needed.
In the McKinsey and the Harvard Business School report, the researchers found that companies without an enterprise-wide performance-tracking system felt the consequences:
“The transformation lead of a European bank mentioned that it was almost blind about performance during the pandemic. Automated dashboards, the lead said, would have helped the bank identify the key issues and focus on what mattered most during the crisis.”
The strategic management process is a cycle with feedback loops: Leaders continually monitor their internal and external environments to determine if and how to pivot.
Transition to Strategic Management
Organizations that are not actively evolving and growing their strategic management processes and digital operations will find it increasingly difficult to compete in today’s business climate. Enterprises need to plan for change, create organizational focus on the outcomes that matter, and enable on-strategy delivery.
What is the new strategic management definition? It’s continuously delivering on strategy by planning dynamically and swiftly realigning the entire organization as circumstances require.
Working together, executives, finance, business leaders, and EPMOs can quickly shift strategies, priorities, funding, and resources to accomplish their strategic objectives. By modernizing strategic management today, organizations can outrun the competition tomorrow.