~ 10 MIN READ
How to manage strategy in a rapidly changing world
We’re in a time of change that many people haven’t ever experienced in their professional careers or personal lives.
As we acknowledge and adjust to our new normal (at least, normal for now), I wanted to reflect on a few lessons I learned earlier in my career about adapting to change, and how having a sound strategy in place can truly affect the decisions that you can make as an organization amidst a crisis such as the COVID-19 pandemic we’re experiencing to begin 2020.
While the work I did with financial institutions in the early 2000s was amidst a very different sort of change (the growth of the Internet), I believe the lessons learned are relevant today. I hope that sharing my experience provides hope in this time of uncertainty, and the tips for creating a strategy that enables decision making in hard times provide a roadmap for your organization’s success. I’ve concluded with six steps that you can take today (in the midst of the crisis) to help your organization see the light at the end of the tunnel, regardless of the current state of your strategic plan or how the crisis has impacted your ability to meet the goals you defined at the beginning of the year.
And please, reach out to us if there’s any way that we can help you during this time. We love talking strategy and would be happy to help guide your strategic planning process regardless of where your strategy currently stands.
Table Of Contents
Case Study: Adjusting to Change Amidst Uncertainty
In late 1994, Standard Federal Credit Union began offering online banking, utterly transforming the business landscape for banks. By 2001, Bank of America had 3 million customers banking online, despite the fact this reality was unimaginable to bank executives a few years earlier. In under ten years, there was a total sea change across the industry.
Right around that time, I was working at Balanced Scorecard Collaborative. I ran a working group with Dr. Kaplan and many banks and other traditional organizations that were having their strategy upended by a massive structural change—the Internet.
While the situation in many ways seems distant today, I find parallels to the economic upheaval caused by the COVID-19 pandemic we’re seeing now. Looking back, I recall the struggles we faced then and the strategies we put in place to adapt to the disruption. Those strategies will also be useful in helping us move forward in today’s crisis.
So, what were we up to 18 years ago? At the time, the Balanced Scorecard (BSC) concept was less than 10 years old, and one of the better case studies was Mobil (now Exxon Mobil). The debate in the strategy world was whether the BSC was just good for stable organizations, like manufacturers, or whether it would also apply to organizations that were undergoing big changes.
To find out, we gathered 8-10 organizations, and we put them through some Balanced Scorecard development workshops. Within a few months, we had scorecards for 10 internet companies. Then we started watching them use the scorecards.
So what did we learn from these new, rapidly changing businesses? First, we noticed they really struggled with identifying the right measures to track this new way of doing business. For example, the bank tried to measure cross selling the product line in an effort to improve its bottom line. Efforts to cross sell online banking to traditional banking customers, or encourage online-exclusive customers to say, visit the mortgage department, were introduced in earnest.
This made sense until it really didn’t. With new products continually coming online and the confusion of some customers moving their balances from regular banking to online banking, leaving the bank’s net holdings unchanged, it became more and more difficult to say what was cross promotion and what was just traditional growth. It also created strife within the business as different departments “took” holdings from each other. Needless to say, this change seemed to be causing a lot of stress and confusion in the organization, causing the bank to wonder what the point of adding online banking was if it was only going to cannibalize their current business and agitate its workforce.
The Balanced Scorecard, A Tool for Success
Luckily, there was a big rainbow amidst all this rain. We learned that all these organizations began to rely heavily on the strategy map piece of the Balanced Scorecard, so we started to explore what it was that made the map so important.
Before we dive deeper, let’s quickly define a strategy map. The map is the one-page picture of the strategy of an organization. It lists the goals in an organized fashion, showing how they’re linked together. If we have the right people, doing the right things, it will lead to the right products and services to make our customers happy, which will lead them to purchase more, which will help us make money. This map, when communicated well across the organization, can be the “rally map” to which we can align all our activities.
With the help of a strategy map, even if we can’t figure out the right measure for cross-promotion of products, we can still communicate our priorities to the entire organization. We want to get our clients using as many of our products as we can to increase client retention and overall profitability. We want to keep focusing on decreasing the cost to serve our clients while improving their experience (and they wanted to be online, so we need to keep improving that experience). Even if the measures weren’t perfect, we could keep the organization on track and aligned around what we were trying to do.
Further, when the strategy changed in the organization, we found these organizations would just change the strategy map and communicate the change across the entire company. So the map became the language of strategy for the organization. As the organization learned to speak that language, they became very nimble and were able to make changes quite quickly.
Weather Proofing Your Strategy
The current economic meltdown as it relates to the coronavirus is almost the opposite of an internet boom. But the uncertainty that both situations bring can be very similar, and the key takeaways from my experience during the Internet boom still apply.
1. You need a strategy that is quickly and easily understood by all in the organization.
Strategy maps are great, but they are not the only way to communicate strategy. Ask yourself and your staff, do you know what the strategy is, and can you explain it concisely? On one page? Does your organization have a language for strategy: Goals, Objectives, KPIs, Projects, Initiatives, Action Items? Whatever that language is, you must be consistent across the organization and be sure that everyone knows the strategy.
2. You need a relevant strategy.
If you were planning on 15-20% growth this year, or even 1-2% growth this year, now that Q1 2020 is over, do you need to relook at your plans? If you were relying on sales tax revenue or any kind of consumption, and the economy is in quarantine (so to speak), does that change your outlook? If you need to change your strategy, do you have a process for doing so? If you are an organization that manages a 3- or 5-year strategic plan, you must look at it more frequently, and you must think about the process for making changes.
- Does your strategy need to be approved by a board or committee? If so, can you convene out of cycle meetings?
- Can you make changes to your measures, targets, or projects? You shouldn’t be able to change these things easily, but you should have a process where the appropriate people agree to the changes, are able to communicate the changes, and understand the budgetary impact of these changes.
3. You need a working strategy review process.
If you have been reading our blogs in the past about strategy review meetings, now is the time to bring home a lot of the thinking you may have seen. You have probably read about monthly or quarterly strategy review meetings. These are important, even a necessity.
But it is not just the process of having the meetings that’s important—it’s how you prepare, conduct, and follow up from those meetings that is critical during a crisis. Most people spend their time in strategy review meetings focused on looking at the data, questioning the numbers, and talking about the gaps between target and actual. Then they move on to their next meeting. In a crisis, those gaps might be telling you whether your organization will survive to the next meeting or not. Here’s how you can get the most out of each meeting:
- Preparing for the meeting: You need to get the information about your projects and measures in advance, but you also need to figure out what that information is telling you before you show up at the meeting. If your sales of a particular product are down, then find the team that manages those sales and get their detailed analysis. Is it because the demand has dried up, the supply chain is closed, the credit markets are not functioning? What can we do about it? What are our options? All of this work needs to be done in advance of the meeting.
- During the meeting: If you’ve sent out detailed reports ahead of the meeting outlining the challenges and the options, then your leadership team can spend time during the meeting focused on making decisions to navigate the organization through the crisis. While talking about the crisis may be cathartic, actually making decisions and steering the boat is more valuable. Making decisions with the best data you have is more important than just talking about the iceberg directly in front of you. Make sure you have a clear decision-making process and that you have a facilitator at the meetings to keep the team on track. Some of these decisions will not be easy.
- After the meeting: Because you are making real decisions during these meetings, you will need to have clear communications after the meeting. If the decisions involve changing direction, everyone needs to know so that you can adapt quickly. If you are stopping or starting projects, remember to communicate rapidly to maximize savings and impact. Make sure to provide sufficient context to the decisions that were made in these communications so that the people not in the room will understand you are making good decisions with the data you have, not just randomly cutting their projects that are ½ completed.
4. You need scenario planning.
It’s okay, you don’t need to be scared off by the phrase scenario planning. Let’s quickly break it down.
You need to think about how you will react under different scenarios…before they happen. Imagine if you could spend some time with your leadership team and ask the following questions.
- What should we do if cash flow dries up in 90 days? What about 30 days?
- What should we do if revenue drops 10%? 25%? 50%?
- What if our supply chain is disrupted for 30 days or 90 days?
- What if we need to close our offices for 30 days or 120 days?
Think about some of your biggest risks and ask them in the form of questions like the ones above. Then come up with reasonable responses or plans for these scenarios. Then, and don’t forget this step, come up with an early indicator, or a trigger warning, that you are starting to see the scenario. When the trigger event happens, you will already have a play book that you can look to and draw plans from.
I grew up near New Orleans, and when Katrina hit in 2005, it was a disaster. But it was a very slow-moving disaster, and the decisions that were made during the disaster seemed to be the best decisions at the time they were being made. What if the water rose by X amount in Lake Pontchartrain? What if we lost power to our pump system? What if it rained Y amount? What if we needed to evacuate 10,000 people? It was a very powerful storm, but it moved at such a slow pace that any great scenario planning would have shown you that only a few things needed to go wrong to create the problems that happened in that city at the time.
5. You need communications.
This is a no-brainer, but it is not easy to execute. During a crisis, information is changing at every moment. How often do all sports leagues get canceled, most secondary schools and colleges close, and many restaurants and public gathering spaces get locked down…all during the same week? To add to the chaos, the TV and Internet are fighting to keep your attention 24x7, and the science in this particular crisis is changing day by day. With so much distracting your employees outside the organization, now is the time to communicate with them inside the organization.
- Be sure you are consistently communicating about the current crisis. Keep everyone informed about what you know and what decisions you’re making to keep your staff and their families safe.
- Then, communicate how this crisis is impacting the organization and, ultimately, the staff. They will listen more carefully when they how how it impacts them directly. So, the organization has a cash crisis…so what? Oh, that crisis means we’re stopping work with all vendors and canceling all unnecessary spending, and if we don’t fix the collections process, we may have to lay off staff?!? OK, now you’ve got my attention - what do you want me to do!?
- Don’t miss the opportunity to unite people on what actions they can take. In some crises, it seems like we are passengers just looking out the window at the disaster outside, but during difficult times, you need everyone working to row the boat away from the rocks. Tell people which way to row. Help guide them on which direction to take.
6 Actions for Responding Now
With full acknowledgement that this article would have been much more helpful in December than right in the middle of a crisis, let’s be practical and think about what we can do now. You might not have time to run a bunch of scenarios or have a strategy offsite in a luxury hotel. It’s either already closed or it will be next week, so here’s what I would recommend:
- Focus on the big picture. Take care of your staff and your clients.
- Review your strategy map or whatever one-page document you have. Use it to communicate, and revise it as needed. Your company knows there are a lot of changes; communicate as you make these changes. Use the map and keep a version number and date on the map to let them know. Post it online.
- Communicate frequently across the organization, even just to tell people what you are looking at and why.
- Don’t panic if your measures become less helpful; you can still drive the organization by focusing on the objectives. Some measures will actually just be bad. Communicate these results and explain what you are doing (or what the organization needs to do) to improve the measures.
- Be human. In a crisis, don’t let the idea of being a leader make you think that you are alone and need to have all the right answers all the time. You can say, I’m not sure what is going to happen, but we’ve met as a team and think this is the right course of action, given the information we have.
- Document your decisions and the reason why you came to such a conclusion. If you need to change your decisions, at least you will have the reasoning behind why you made this decision to begin with.
I know this is a hard time for every organization. Adjusting to change is never easy. Finding the new normal takes a lot of work. I hope that you now have some ideas for ensuring that your organization is on the right track and is prepared to make decisions as needed.
Good luck, be well, and let us know if we can help in any way. Online tools like ClearPoint can be helpful with communicating quickly and easily across the organization, but as you can see, it will take a lot more than a piece of software to guide your organization through a crisis.