Refreshing or refining your business’ strategy should not be daunting. It doesn’t need to be a major management distraction. Good strategy always involves being clear up front on the most important questions your organization is facing and then making evidence-based, objective choices.
At a time of upheaval, it is just as important for your strategy to be clear about the opportunities your business will not pursue as well as the things you decide you will. And at every stage, robust analysis and business modelling will help you to better assess your choices under different external scenarios, soundly ruling options in or out.
So where should I start?
When Berkeley helps our clients with a strategy refresh, we work closely with them to break down their thinking into first order questions about their target market, products and services; and second order questions about how their businesses operates (also known as their “operating model”).
The impacts of black swan events such as Covid-19 may well change your market, and the relative value of your products or services in the eyes of your current and prospective customers. Many organizations are facing up to this reality and adapting their strategies to reflect - and guard against - that.
Q. What is a black swan event?
A. A black swan event is one that is unexpected, has high impact and, though less relevant for our purposes here, can be rationalized as unsurprising in hindsight."
We have seen media distributors bypass cinema and deliver content via paid home streaming and B2B food wholesalers establish direct to consumer offerings. Simultaneously, we have seen pharmaceutical firms enter new commercial tie-ups on R&D and manufacturing, and retailers plan expansion into markets vacated by distressed competitors.
As you think about your strategy, you need to consider how different medium-term scenarios will affect your target market, your value proposition to your customers and the capabilities your organization requires in order to respond. When doing this it helps to supplement your understanding of your business with a view of the wider external environment, and lessons you can learn from other industries.
No strategy can be developed in isolation from your market environment. Covid-19 changed external dynamics for most industries and other black swan events will no doubt have impacts on regulation, politics, consumer behavior, technology adoption, labor markets, etc. All of these will affect local economies in different ways.
For every organization, it is worth considering how your medium-term strategy will serve you under different macro-economic scenarios. Your strategy will need to adapt now, and then remain adaptable as the macro-economic situation evolves – being clear on the leading indicators for which scenario you are in.
Consideration of how your plans will be implemented and embedded is essential as you go through a strategy refresh process. This is paramount to ensure you can reap the benefits, it gives you a strategy that is “ready to go.” You need to create strategy that not only has clear medium-term direction, but is also owned and is immediately actionable.
In any context, good strategy is about making evidence-based choices, having a clear plan on how your organization can deliver them and all the while being mindful of the external environment and how your strategy may need to adapt over time.
Whilst no one can predict with certainty when the next black swan event will rear its head and what the impact will be, you can prepare your business now in order to be in the best position possible for the medium-term.
Tom Parkin, Partner
The Berkeley Partnership LLP
20 Farringdon Street
London, EC4A 4AB