Two Questions to Ask Before Setting Your Strategy

Education often biases us towards immediately trying to solve well-framed problems. An algebra test poses solvable algebra problems, and a physics test poses solvable physics problems. Real world problems are much more ambiguous — it may not even be clear that there is a problem to be solved. Even if it is, it may not be clear what sort of problem it is, it may not come with sufficient information to be solvable, or in some cases it may not be solvable as given. For this reason, it is important that strategy makers postpone the urge to immediately start analyzing and deciding and instead begin by asking two basic questions: Is there a problem to solve and what sort of problem is it? Is there a problem to be solved? Many companies get started on strategy-making too late because of a lack of awareness or sense of urgency that there is a challenge to be addressed. This happens for several reasons. If there is no obvious threat to current performance, it may appear that there is no challenge to be solved. This can be reinforced by common accounting metrics like sales, growth, profitability, and productivity which provide delayed views of past performance, but indicate nothing of future potential. In a dynamic environment where current success can be entirely uncorrelated with future success, it may even be the case that high levels of profitability are an indicator of insufficient levels of investment in future success. It takes active work to break the mirage and see reality as it is. Mental models are sticky and tend to persist without conscious efforts to challenge them. Our current model of what a business is and how it works may come to be seen as a fact rather than a choice, even though there are always alternatives. The antidote is to be aware of and continually challenge the hidden assumptions underpinning past success. Jeff Bezos has often stressed that Amazon will fail one day and has written about the importance of maintaining the humility and hunger of a “Day 1” mentality. Other companies constantly “Red Team” by having a group dedicated to challenging current strategies and proposals. Cyber security is often tested by hiring a group of hackers to probe and attack a company’s defenses. The passive default is towards complacency and consensus — therefore an active hand is required to create and protect critical dissension. Some CEOs personally play a role in protecting mavericks and skeptics, who otherwise tend to attrit through active removal by line managers or through lack of appreciation for the contentious role they play. Finally, strategy processes can become rote and ritualized — in some cases little more than exercises in financial planning or negotiation of performance targets. The freshness and essence of the strategy process can be restored by involving outsiders, by deliberately exploring alternative viewpoints, or by leveraging executive games designed to stretch the imagination. In short, it’s unlikely you’ll identify the problem to be address or take it seriously when you do, unless you actively seek it out. What sort of problem is it? Before a problem can be solved it must first be framed. Business problems in their initial conception are almost always ill-framed and strategy can be seen as a process of iterative reframing. The initial problem’s framing should not therefore be the same as the eventual problem’s framing. Each attempt to frame the problem directs the data gathering and analysis that leads to a better framing. We apply the idea in our book Your Strategy Needs a Strategy, when we proposed five distinct approaches to strategy (Classical, Adaptive, Shaping, Visionary and Renewing), each of which is appropriate in a different competitive context, as a function of its predictability, malleability and harshness. Before developing a strategy, it is necessary to understand the nature of the competitive context, and then to develop the right sort of strategy to match. For example, the analyze-plan-execute algorithm of the classical planning process has little in common with the vary-select-amplify algorithm of adaptive strategy. To get at what kind of problem we’re facing, therefore, is an exercise in framing, which scientific research shows is actually a natural human approach to solving problems. For example, in trying to find a path through a maze, people will remove structures which do not affect the solution, but which simplify the representation of the problem to be solved. Despite this natural propensity to reframe, however, the tools and techniques of strategy often tempt us to immediately apply them rather than go through that framing process of asking what the problem to be solved is and then selecting the right tools. Of course, there is a tradeoff between investing time in problem framing vs. problem solving. On the one hand, by investing more time in framing, we can be surer that we are solving the right problem and the problem is posed in a tractable manner. Attempting to solve an unsolvable problem or deftly solving the wrong problem will only result in frustration and wasted effort. On the other hand, perpetual reframing comes at the expense of time and resources which may not be necessary for the simple problems. While imbalance is possible in both directions, our experience is that most businesses under-invest in framing, and that they have been doing so for some time. Back in 2012, responses from a BCG survey of 120 companies around the world in 10 major industry sectors showed that although executives in volatile, dynamic industries knew they needed to match strategy-making processes to the specific demands of their competitive environment they often still relied on more familiar approaches better suited to predictable, stable environments. More recent research found that 85% of organizations were not good at reframing. The recent book Framers by Kenneth Cukier, Viktor Mayer-Schönberger, and Francis de Véricourt makes the case for the importance of framing and offers rich practical advice on how to do this by expanding the repertoire of frames, by repurposing existing frames, and by creating new ones. As the authors point out, framing is a uniquely human capability — today’s machine learning algorithms cannot create either causal or counterfactual models, being instead grounded in correlations. The highest value added for a human strategist is therefore in this framing step. In practice, increasing the emphasis on framing can be achieved by adding one additional step into any problem-solving process: simply posing the question, “What sort of problem is this?” The leading hedge fund Bridgewater, for example, first requires that what they call “the machine” (the process, resources, and tools) to solve the problem is clearly and uniquely defined before launching into problem solving itself. *** Having established that there is a problem to be solved and what sort of problem it is, one can then launch into the more familiar process of actually solving it. Strategy is not just about thinking strategically about business. It also involves thinking strategically about thinking strategically. And reflecting on the nature of the problem before addressing it, will result in more economical, relevant, and robust solutions.

Two Questions to Ask Before Setting Your Strategy

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