ArticleAugust 25, 2022 · 6 min read time
At the beginning of a new decade, we like to make predictions for the next one. The 2020s were named “the roaring twenties” marked with optimism after the instability and uncertainty of the 2010s. Two years later, we have experienced two unforeseeable crises, impacting us both in private and business: a global pandemic and a war in Europe. The expected optimism has turned from shock into thinking about how to better adapt to the changing circumstances and thrive in an unpredictable environment – tools that adaptive strategies provide.
Traditionally, businesses have had rigid strategy planning processes. Typically, the business vision has been built on a three-to-five-year time horizon, with more specific business strategy plans on a yearly level. Leadership teams gathered yearly in an offsite to brainstorm what kind of trends could impact the business in the next few years and how to prepare for those.
Heads of functions and departments introduced factors that could impact the business – Sales talked about changes in the customer and competitor landscape, IT talked about digitalization and system renewals, HR about attracting talent, and Finance about profitability. The majority of the scenarios were long-term forecastable events or smaller everyday annoyances that could in the worst case grow into bigger issues.
After the leadership team’s strategy session, the communications department visualized the strategy into a couple of slides, which were then communicated throughout the organization with each team implementing the strategy into their daily work. Yearly employee surveys asked whether everyone understood what the company’s strategy was, and most checked the box after remembering seeing those couple of strategy slides.
This type of strategic planning and action followed year after year. It worked to some extent, as the business environment did not see much turbulence – the market positions tended to be stable and outcomes predictable.
You can’t predict the future, but you can succeed in it
The past years have taught us that it is no longer enough for a business to make a plan and stick to it. Instead, we should learn to set a direction and make adaptations when circumstances change. Change as such is nothing new.
What has changed over time is interconnectivity. Events that take place outside of our immediate business environment could have a major impact on us because we are connected through different value chains.
Adaptive strategy is based on the idea that in unpredictable environments, the focus should be on continuous experimentation and adjustment rather than on long-term planning and analysis. This type of strategic approach is not for everyone, and it naturally varies from industry to industry how adaptive strategy approaches can be implemented. Often the examples we hear with adaptive strategies come from the software business or other industries with low-scale of economies, meaning they typically do not carry large fixed costs irrespective of the number of units produced. It is true that the way adaptive strategies are pursued differs from industry to industry and in terms of how much turbulence the business environment is experiencing.
The generic principle still stays the same: in the changing business environment, it is better to think broadly and to grow a portfolio of different strategies through iterative experimentation rather than to push rigid strategies that assume predictability. In other words, you cannot control the future, but you can impact the means of getting there.
Involve, experiment (and fail), while continuously improving
Part of the adaptive strategy is letting go of the illusion of being able to control the business environment and outcome. It is a different type of mindset that is based on reshaping the company through a managed evolution. The catalyst for the strategy is not the management, but the whole organization that collaborates during the strategy process. It starts with jointly acknowledging the challenges and opportunities that come with uncertainty and then finding the means to surf on the waves of change.
There are no shortcuts on how to turn the wheel when the waves of change are hitting hard. Yet, these principles set adaptive strategies apart from traditional strategic planning:
1. Do not just collect data, but collect the right data and utilize it
First, it is important to acknowledge what kind of changes are taking place in the business environment, how you are tracking those changes, and what is your response to them. According to Seagate (2020), 44% of all data available to companies goes uncaptured, and out of the data that is captured, 43% remains unused. This is not only a security risk companies are collecting data, that they are not actively using, but also there is a lot of potential and resources wasted. By taking the first steps of understanding what data is useful for the organization to track the business environment, and how to use that information in decision making, companies make sure that their full potential is utilized.
Learn more about how to make the most of your data from here.
2. Experiment (and fail)
Embracing uncertainty requires an experimentation culture. In adaptive strategy, failing is seen as a natural part of the iterative process, where you are constantly exploring the best possible route to success. When the organization learns what does not work, it can change its direction. Having a culture of experimentation allows room for innovations and ideas, which otherwise would not see daylight.
Read more thoughts on how to embrace uncertainty from here.
3. Continuously improve
Adaptive strategy is a strategy that is always in progress. The rate of business target review should match the rate of change in the business environment. In the past, the cycle of target review could have been a year, now the speed of change might call for quarterly reviews. Competitive advantage is acquired through quickly spotting changes in the business environment and making necessary adjustments in the face of change.
Learn how Posti utilized objectives and key results (OKR) goal setting framework to speed up their strategy execution from here.
4. Build cognitive diversity and inclusivity
In today’s fast-paced world, it is a mission impossible for a small leadership team to formulate a good strategy and its implementation. The leadership team may note some of the changes in the business environment, but it would be unfeasible to expect them to spot all the changes in the growing complexity. Instead, the whole organization needs to be involved and collaborate. The management still makes the final decisions, but there is a culture of involving people, especially in terms of bringing a broader range of perspectives into the process. This not only fully utilizes the skill set of the whole organization, but it also encourages ownership and engagement.
Read more on how YIT broke down their old, silo-based operating models and created a more agile model of working together from here.
5. Make the strategy actionable at all levels of the organization
In traditional strategy planning, the distance between management who formulates the strategy and the operative level who executes the strategy is high. The more time you spend on creating a perfect strategy, the less time there is to execute it as the world around you keeps on changing, and soon you notice that the strategy has been outdated. The adaptive strategy does not require complete information to start the execution – you can use the information available to you to start taking the first steps and then adapt along the way as more information emerges.
Learn more about tools that can be used to make your strategy actionable from here.