Strategy, strategy and strategy

... or shall we call it an action agenda? 

I loved the conversation between Professor Richard Rumelt and Lenny Rachitsky at Lenny's Newsletter.

Goals, ambitions, visions, missions, values, wished-for end states - none of these things are a strategy.

And it's not true that these things have to be in place before you can have a strategy. Strategies are fundamentally about what you’ll do in response to a challenge. Strategy is problem solving, and you cannot solve a problem you don't understand. 

As understanding deepens, the strategist seeks the crux - the one challenge that both is critical and appears to be solvable.

What makes up a good strategy?

A diagnosis of the situation. Figure out what's going on here and understand the challenge you face. The challenge can be to deal with change and competition, it can be triggered by a large opportunity or it can be internal like outdated routines, bureaucracy, or lack of collaboration.

A guiding policy, i.e. what will you do and what will you not do with the challenge. It is "guiding" because it channels actions in certain directions without defining exactly what shall be done.

A set of coherent actions that will carry out the guiding policy. This part is so easy to leave out because people like to think of strategy as a high level conceptual thing. Strategy is about action. There must be enough clarity about action to bring concepts down to earth.

When deciding what you will do with the challenge, find your source of advantage. Do you know something that others don't? Do you have a skill that others don't have? Do you have a reputation, brand or existing market system that others cannot replicate? Do you have scale, technology, experience or other resources that others don't have?

A bad strategy is fluff and fails to face the challenge, it lacks the diagnosis. If you don't frame the challenge it is difficult to assess the quality of the strategy.

Another mistake is to treat goals as a strategy. Many bad strategies are just statements of desire rather than plans for overcoming obstacles. Good strategic objectives are the outcome of a strategy, not its input.

Bad strategy is the active avoidance of the hard work of crafting a good strategy. One common reason for choosing avoidance is the pain or difficulty of choice.

Good strategy requires leaders who are willing to and able to say no to a wide variety of actions and interests.

Strategy is not mysterious. It is about solving the most important problem you are facing. You need to be focused on something doable and be consistent about it.

How do you deal with complexity?

When we are going to do something we have done before, we know what we don't know. 

We know where and why delays are likely to occur and we usually know what to do if something goes wrong. We can plan the steps ahead. In this world, clarity and process optimization is good.

Wicked or complex problems on the other hand are different. There is no one right answer. There are no agreement on what the problem really is. 

You face many stakeholders with conflicting objectives. No solutions are right or wrong. You can make the outcome better or worse, but you are never done. Forcing clarity in this world will inevitably hinder innovation.

Getting married is not complex, but having a happy marriage is. There is a manual for getting married. But there is no "best practice" for a happy marriage. It's the sum of many small parts which makes it difficult to make a detailed plan. You cannot copy someone else's work and expect the same results because no two complex problems are alike.

All the analysis, plans and methodologies used to build a car are useless if your problem is car traffic. A car slowing down will cause ripple effects in the traffic difficult to predict. The issue with traffic is not the cars, the buses, the bicycles, or the pedestrians. It is in the relationship between them.

Building the Titanic out of LEGO bricks is not complex. You can simply follow the instructions. The whole equals the sum of the parts.

What about development of digital products that you haven't built before, either at all or in your context?

Market conditions change. Technology is changing. People's behavior change. We don't quite know how we are going to do it. We don't know what people want. You don't know what you don't know until you do something and get feedback. That's when the actual development starts.

Leading in complexity calls for something other than plans and best practices. Sense what's happening. Get some data. Take small actions based on the data and see what happens. Learn from it. Do more of what works, and less of what don't. Find the small changes that have a large positive effect.

Easier said then done. We are humans and we fear uncertainty. When we face uncertainty, we often manufacture excuses for not getting started. We don't start walking until we find an approach that's guaranteed to work.

It's hard to say to your stakeholders that you don't know exactly if it will be a success, when it will be finished and what it will cost.

What we can do is to deliver something early and often and let people try it and give feedback. 

We can also share what we believe (our hypothesis), what we will do to verify it, how we will measure it, what we observed, what we learned from it and what we will do next based on that.

In complexity, how do you measure success? You get what you measure you know ...


Beyond Budgeting

Believing that Beyond Budgeting is just about budgets is as wrong as believing that agile is just about software.

How do we define performance and how can we best enable the organization to deliver that performance? That's what Beyond Budgeting boils down to.

It addresses both leadership principles and management processes, and the importance of the coherence between the two.

Beyond Budgeting separates the budgeting purposes and solve them in three different processes because they are about different things. We can then let each process run on a rhythm much better suited to each purpose and to the kind of business we are in.

Target

An aspiration, what we want to happen. Difficult when there is a lot of uncertainty. You must make assumptions. 

It doesn't help to hit 12.7% if most competitors are delivering better. What we want is the best possible performance, given the circumstances. 

A football team will not state that the ambition for the next season is to score 45 goals and reach 39 points. It is all about performing well against, and hopefully better than, the other teams.

Forecast

What we think will happen, whether we like what we see or not. 

The purpose is to support decision making. The further ahead we look in forecasting, the more uncertainty there is. We then need to forget precision and think more in terms of scenarios and ranges. 

Sometimes we must also accept that we don't have a clue about what lies ahead. Focus on creating options and agility so that we can move fast when the fog clears.

Resource allocation

Optimization of scarce resources, what does it take to make it happen? 

We want to move from questions like "Do I have a budget for this?" towards "How much value will this create?" and "Can we afford this as things look today?". 

Leave behind a myopic focus on low cost in favor of a more value-oriented thinking. There are both "good" and "bad" costs. Good costs create value, and bad costs don't. Spending is fine, wasting is not.

Separating target setting, forecasting and resource allocation should never be done sequentially. It must happen simultaneously.

How do we evaluate performance?

Performance evaluation must be holistic. Not everything that counts can be counted, and not everything that can be counted counts. 

The "I" in KPI stands for "Indicator", not "Truth". 
  • How did we achieve our results? 
  • How ambitious were the targets? 
  • Was there a headwind or tailwind? 
  • Which risks were taken? 
  • How sustainable are the results? 

These evaluation questions require more effort than comparing two numbers.

Hitting a target does not necessarily mean that this was the best performance possible because it assumes that the "right" target was set.

Beyond Budgeting is a journey where the direction is clearer than the destination, if there is one.

Changing what we do helps little unless we also change how we think. That is the hardest part.

"This is Beyond Budgeting" by Bjarte Bogsnes

A letter to my younger self taking the role as a first-time leader

What advice do you wish you had when you pursued your first leadership role?

Steffan, you will now go from the guy making recommendations to the guy making decisions. You go from being an individual contributor to delivering through others. You now lead a team of people doing what you used to be good at, that got you promoted in the first place.

That's a big change. How to make good decisions, facilitate a meeting, craft a strategy or delegate work is not something that everyone naturally just know how to do. If you think they are natural abilities, then you might feel there's something wrong with you if you don't have them. Please don't. It's a skill you can learn. You will do mistakes, but over time you will nail it. Leadership is an education.

People is your work now. Invest time in them, be present, be available. Listen. Ask how you can help all the time. Then comes communication, communication, communication, setting budgets, performance reviews, 1:1 meetings, meetings with stakeholders, recruitment, setting goals, prioritize, help finding solutions on complex problems, solving conflicts.

Don't forget to take care of yourself. What gives you energy? What drains you for energy? What do you need to do yourself, and what can you delegate to others? Do one thing at a time. Use your team. Create a support system around you, and use it. Block time in your calendar to think and reflect.

Never create a bunch of tasks that you assign to your team for execution. Provide context, intent. Let your brilliant team and problem solvers define and own their tasks and actions. A good plan developed and understood by the team is better than a "brilliant" plan by you.

Don't stress if you don't have a vision on the first day. You are not Steve Jobs. Visions can be found. Find it together with your team and let it be the compass in everything you do. What would you like to achieve together? What's the future we are trying to create? How do we plan to accomplish that? Let it become theirs, not only yours.

Watch out for compromises in this process. If you try to come up with something that pleases everyone, you end up pleasing no one.

Steffan, you are not a super human and don't pretend to be one. You have your strengths, but also your weaknesses and gaps. Your job is to build a team and surround yourself with people closing those gaps. Your job is not to know everything.

There will be periods where you doubt yourself and question everything, but suddenly you will see someone on your team achieve more than they thought they were capable of.

You will see your team come together to solve impossible problems. You will see a team that would do anything to help each other out. Impact. That's the joy of leadership. That's your reward. That's the reason why you became a leader.

Good luck my friend!

Best Regards,

Steffan Sørenes, a year older and (somewhat) wiser

Say Less and Ask More

That's the coaching habit. Coaching is today a commonly used term, but the actual practice of coaching doesn't seem to be occurring that often. And when it does, it doesn't seem to work.

The essence of coaching lies in helping others and unlocking their potential, but we all have a deeply ingrained habit of slipping into the advice-giver/expert/answer-it/solve-it/fix-it mode.

There is still a place for your advice and answer as a leader, you should just try to slow down the rush to it as your default behavior.

A little more asking people questions and a little less telling people what to do. Here are the seven magic questions to ask.

What's on your mind?

An open question that invites people to get to the heart of the matter and share what's most important to them.

And what else?

A question that creates more wisdom, more insights, and more options because the first answer someone gives you is almost always never the only answer, and it's rarely the best answer. When someone says "there is nothing else" you have succeeded.

What's the real challenge here for you?

It's time to focus. When people start talking to you about the challenge at hand, what they are laying out for you is rarely the actual problem. The "for you" pins the question to the person you are talking to.

What do you want?

This one is difficult to answer. We often don't know what we actually want. The illusion that both parties to the conversation know what the other party wants is pervasive, and it sets the stage for plenty of frustrating exchanges.

How can I help?

This question is forcing your colleague to make a direct and clear request. That may be useful because she might not be sure why she started this conversation with you. 

Second, this question stops you from rushing into "rescuer" mode where you offer advice or start to take over responsibilities.

If you are saying yes to this, what are you saying no to?

This question is more complex than it sounds, which accounts for its potential. It puts the spotlight on how to create the space and focus, energy and resources that you'll need to truly do that 'Yes'. 

It's all too easy to shove another 'Yes' into the bag of our overcommitted lives.

What was most useful for you? / What did you find most valuable about this chat?

This one gives you feedback, it will give you guidance on what to do more of next time. It gives your colleague a chance to recall and reflect on key takeaways from the conversation. That's when we start learning.

Drop the "Why?" questions

In a coaching conversation, don't ask the 'Why' questions. You put them on the defensive. Rather than "Why did you do that?", try "What where you hoping for there?" or "What made you choose this course of action?".

And by the way, don't forget to ask the questions with genuine interest and curiosity and acknowledge the answers.

"The Coaching Habit" by Michael Bungay Stanier.