Strategic Context

Strategy

We once attended a symphony in which the orchestra wasn’t the main act. The star of the show was Tim Minchin. Mid-way through the performance Tim mentioned that he had written a new song that, regrettably, he’d not had a lot of time to rehearse, but one that he wanted to perform anyway. The song was called Cont and as he began several audience members sitting nearby were visibly concerned as the lyrics unfolded. In typical Minchin style this was hard-hitting commentary, but this time it was over the top.

Half way through the piece, Minchin stops, ‘realising’ that he has made a mistake. He apologises, saying, “That's the trouble with trying out new stuff, it's...I had half the lyrics covered up. I think we should probably do it again. I think if we leave it there I might run the risk of being misconstrued. It's not even called Cont, it’s called Context".

He starts over and his real message immediately becomes clear. It’s still hard-hitting and pushes boundaries, as Minchin does, but now it makes more sense and his message is clear.

Running the risk of being misconstrued can happen in strategy if only half the story is told. That is, if the context within which the strategy has been framed is not clearly enunciated. Strategy is always developed within settings both internal and external to the organisation. But in presenting their plans, executives often neglect the context, believing that those being told of the strategy, such as a board, will immediately ‘get it’. They won’t if the background and rationale are not made clear in the first place.

There are several tools that can assist in explaining the external environment such as Porter’s Five Forces and PESTEL analysis.

The Porter model captures competitive rivalry, supplier power, buyer power, threat of new entrants and threat of substitutes. It is a competitive analysis of the environment in which a firm operates and where power resides, or may shift to, and therefore where the greatest profitability can be extracted now or in the future.

PESTEL is an acronym that summarises the external environment in terms of political, economic, social, technological, environmental and legal factors.

Tools such as Five Forces and PESTEL enable a comprehensive outward review to be completed and must be complemented by internal analyses of the firm’s strengths and weaknesses.

A tool to understand the internal factors that drive performance is value chain analysis. This considers the activities of the firm in relation to inbound logistics, operations, outbound logistics, sales and marketing and after sales service, along with the supporting areas of firm infrastructure, human resource management, technology development and procurement.

The insights gleaned through the use of these and other analytical techniques informs the strategy development process to give the best possible opportunity of success.

The point here is not to provide an expose of analytical tools. Rather, it is to make the point that, whatever frameworks are used, effective strategy communication requires a context to be set so the listener can understand the rationale, the ‘why’, a particular strategy has been chosen.

In our experience, strategies are often presented to boards without the strategic context being made clear. The rationale for a particular course of action may be clear in an executive’s mind, or they think it may be clear in their mind, but this does not translate to understanding by others.

Failure to effectively tell the story of why a strategy has been selected, based on sound analysis, often results in frustration, delays and heightened risk of implementation failure.

If your board or line management doesn’t ‘get it’, give some thought to the context within which you have developed and presented the plan.

For more information, please feel free to email me at john.barrington@barrington.com.au.

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