The important thing is not how much we don’t know,
as how wrong we are in what we think we do know.

Mark Twain

Making the strategic conversation a process

Mikael Paltschik|Monday, 12 October 2020

Managers tend to be rational decision makers. Their rationality is mostly bounded by the recognized options available. The preference for rationality is well supported by the corporate calculus machinery. Net present value, or metrics alike, is looked at when considering the next steps in the strategic dance around the competitive equilibrium. Actors are supposed to move in a predictable way. And, as long as predictability reigns, things are very well.


Unfortunately, uncertainty has become the new norm.
The options available become both vaguer, and more options might appear on the strategic radar screen. In the preface to the second edition to his seminal book on scenarios, Kees van der Heijden writes ‘Uncertainty has the effect of moving the key to organizational success from the “optimal strategy” to the “more skillful strategy process”’. The subtitle of the book is “The art of the strategic conversation”. Today, more than ever, when a lot of decision processes are highly influenced, not to say paralyzed, by the consequences of Covid-19, managers are well advised to move away from the sphere of illusionistic predictability and adopt another approach to cope with navigation and decision making.

Strategic conversations are about how to find a fit between plausible futures that might come at the organization, and what repertoire of activities the organization can mobilize.  Well designed they bring a multitude of perspectives making the conversation very rich. But the richness will turn into information chaos if there is no way to structure it. The scenario practice has proven to be a very powerful tool to cope with vast amounts of information and uncertainty. Scenarios not only bring structure, they engage in an inspiring way with plausible futures, allowing managers to make journeys into the future, and back. Decision making in the present is then informed by their “memories of the future”.

We see very notable examples how organizations use scenarios as a central ingredient in making the strategic conversation a process. A classical design is to have scenarios informing the strategy review at the beginning of an annual strategy process, and then evaluate the strategy proposal against the scenarios before decisions are taken. Another way to engage with scenarios is to have scenarios to inspire the generation of strategic options. Most scenarios are built on key uncertainties. Another use to stage the strategic conversation based on scenarios is to have a series of workshops, or alike, around the uncertainties, and perhaps, letting the learning not only inform the strategic conversation, but also the scenarios, potentially calling for revisions. We do also see how business intelligence systems are used to track and inform on signals connected to the uncertainties encapsulated in the scenarios.

The turbulence managerial decision makers must cope with, will probably not diminish. To live in a world of predictability is to call for trouble. To design a proper process for the strategic conversation, supported by e.g. scenario thinking, is a way to increase the probability of making intelligent choices in an uncertain world, and sleep well at night.

 

 

Mikael Paltschik
Senior Advisor
050 344 6953
mikael.paltschik(at)capful.fi

 

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Master’s Thesis: Generation of strategic growth alternatives – Empirical evidence from large companies listed on NASDAQ OMX Helsinki

Tuomas Paananen, Aalto University School of Business|Thursday, 22 December 2016

“The investor of today does not profit from yesterday’s growth.” – Warren Buffett

In order to serve the underlying purpose of any business, to make a profit for its shareholders, companies regardless of size, industry or geographical location need to consider and seek growth. However, creating growth is not a simple task but requires thorough thinking and decision making from top executives steering their businesses.

Objective of the study

The objective of this study is to find out the factors or approaches that companies take into consideration when generating strategic growth alternatives. Also the sources of these inputs are examined. In addition, the study aims to address the ways in which the growth alternatives are communicated to the decision makers.

Methodology

The theoretical foundation of this thesis lies on rational strategic decision making and strategic growth alternatives. The empirical data for the study was gathered from 13 semi-structured thematic interviews with top level executives responsible for strategy in their organizations. At the time of the research, all the companies were listed on NASDAQ OMX Helsinki and had a market capitalization in excess of 250 million euros. The interviewed strategy executives represented the following companies: TeliaSonera, Neste Oil, Elisa, Cargotec, Valmet, Tieto, Sanoma, Aktia, Oriola-KD, Basware, F-Secure, Finnair and Lemminkäinen. The interviews were interpreted through thematic analysis using a systematic coding process. Data collection and data analysis were conducted as an iterative process building on the theoretical framework constructed based on earlier research on the topic.

Findings

Generation of strategic growth alternatives is a multi-dimensional process including various inputs. Based on the findings, the outside-in approach, in which external operating environment is essential, is emphasized when creating strategic growth alternatives. Especially customers are seen as an invaluable source for growth opportunities. High priority factors from the external environment are also market growth and the competitive field. In addition, the relevance of widely discussed static positioning strategies seems to be eroding. Core competencies, capabilities and even organizational culture are replacing the older underpinnings when it comes to new business development. Growth generation needs to be continuous – not tied to the calendar year.

 

Keywords: strategic management, strategic decision making, new business development, strategic
growth alternatives, growth, NASDAQ OMX Helsinki

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