Crafting an actionable and effective strategy is critical to going above and beyond the market, achieving organizational goals, and running a profitable business.
One of the prerequisites for this is fostering a culture of strategic thinking across the whole organization and effectively harnessing it to accomplish goals. Once this has been accomplished, the company becomes better equipped to develop a powerful strategy.
It can be helpful to think of business strategies as systems, especially when it comes to strategy management. By viewing each strategic initiative as a system of objectives and projects, we can zoom out and recognize how each element fits into the bigger picture of the overall strategy.
This insight will explore how systems thinking can be applied to business strategy planning, management, and implementation.
Many organizations confuse strategic planning with regular business planning.
A strategy is generally far more complex: it is a long-term plan of action that businesses can implement to reach the organization's overarching goals. Strategies also help companies focus their resources on areas likely to bring the highest returns in terms of profits, market share, and other goals.
A crucial — but often ignored — aspect of strategy is that it prioritizes gaining deep insight into the company before coming up with goals and the steps needed to achieve them. Business leaders must analyze their organization and identify its SWOTs (strengths, weaknesses, opportunities, and threats) while simultaneously thinking of ways to capitalize on the positive factors while minimizing the negatives.
Strategic thinking, applied throughout every stage of business planning, is the ability to ensure that the plan of action is always in alignment with the ultimate goal. It requires steering organizational thinking (among everyone in the company!) towards longer-term objectives. This benefits the overall strategy and helps the business be better positioned to implement it by generating deeper insight and feedback.
As companies seek ways to effectively strategize, innovate, and flourish in a dynamic business ecosystem, various best practices for thinking are rising in popularity.
One of these is systems thinking: an approach to problem-solving that focuses on understanding the interactions and relationships between elements of a system rather than looking only at individual units. Systems thinking can help interpret patterns and structures in a project or task, as it requires gaining awareness of the whole rather than a singular unit or event.
Strategies can also be laid out as systems.
Viewing strategy through a systems-thinking lens helps identify the key components required for the strategic plan and outline the steps needed for completion. On a larger scale, this can also help leaders and strategists pinpoint the guidelines, trends, patterns, and structures underlying the business itself.
Systems thinking also makes strategy easier to define: seeing how business elements are interrelated can simplify complex systems and structures. For example, business blueprinting allows one to audit the business structure as a whole by breaking it down into components, then working backward to identify areas of improvement and actionable steps to achieve success.
In short, mastering systems thinking enables companies to create a holistic view of both their business and strategy, and then identify clear steps toward its execution.
Now that we’ve established that a strategy is its own extensive system, how can systems thinking be applied to strategic development?
In strategies as systems, each element of the system corresponds to every resource or action required to implement the strategy. Generally, a strategy considers several key components of the company: differentiation, the market, finances, and operations. Crafting a strategic plan involves identifying each component's characteristics within a business and then coming up with tactics — the individual steps required to achieve strategic objectives.
Just like business blueprinting, systems thinking frames strategy through a broader lens and can help to identify important stakeholders, resources for implementation, and timelines. This approach supports strategic planning by opening up a wider perspective and the possibility of many different outcomes.
So, viewing strategies as systems is a way for companies to think through all the components of their business and understand how they interact and connect — internally and with external factors.
Learning how the pieces of the strategy (system) work together also shows how each of them affects the overall behavior of the business and its performance in the market. This is important because every element can impact the others within a strategy; i.e., changing one aspect of the strategy requires a thorough consideration of all its parts.
For example, a business might decide to launch a new product as part of its larger strategic goal, which could be gaining a better position in the market and increasing profits. To bring this product to life, though, the company must invest time in resources into production, distribution, marketing, and several other areas. Like that, one new strategic decision (and its resulting changes) requires shifts within the entire system. Recognizing this interconnectedness allows businesses to make smarter decisions, anticipate potential issues, and be better prepared to tackle challenges.
Applying systems thinking to strategy implies a thorough understanding of and preparation for a dynamic strategy that is effective both short- and long-term. To tackle this, Deloitte has developed a helpful but unconventional approach to time-conscious strategic planning — zoom out/zoom in.
This technique allows teams to focus simultaneously on two different timelines or strategic horizons:
Zooming out opens a far-reaching view, expanding businesses’ horizons. It encourages leaders and their teams to build an aligned, shared vision of the company’s future while considering the evolution of customer needs and the market, and then use these informed assumptions to plan for the future.
On the other hand, zooming in enables businesses to find and identify opportunities for near-term improvement and growth while eliminating inefficiencies. Being well-prepared for a 6-12 month period further sets the stage for long-lasting success in the 10-20 year horizon.
This approach to strategy benefits both planning and execution, as it demands businesses to set objectives with clearer timelines and truly commit to achieving them. In combination with this, framing strategy as a system enables more efficient planning for each element of the strategy — even if their capacities for change vary.
The belief behind this technique is that getting the 10 to 20-year and the 6 to 12-month horizons right ensures that everything in-between will take care of itself.
In times of rapid transformation, uncertainty is often the only constant, so it can be invaluable for businesses to experiment with more innovative strategic planning methods.
For one, reframing strategy through a systems thinking approach can be a powerful tool to set companies on track for a successful future. Strategies can be laid out as systems composed of interconnected elements interacting internally and externally. In that way, systems thinking can help to craft an effective strategic plan by providing a bigger-picture framework for understanding the relationships between its elements.
Additionally, what systems thinking and a zoom-out/zoom-in framework afford for businesses is the ability to focus on both shorter and longer-term time frames in parallel and find an ideal equilibrium. This is crucial for developing a great strategy that consistently proves successful — not just within an undefined timeline.
While it’s undeniable that business strategy has to be flexible and adaptable, it must also have a stable, grounding goal that guides the company’s decision-making to avoid negative disruptions. This prevents strategy from becoming overly reactive to certain events and trends, keeping it resilient and sustainable in the long run.
If you’re interested in enhancing your company’s business strategy through digital transformation and better processes, don’t hesitate to reach out to us at hi@mad.co.
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