In the last article, Raman had a brilliant idea to launch a brand new product line. However, he was a bit dicey about its implementation as it was a high-budget project. When he discussed his plans with his friend Ajay, he got a clear picture of the stepwise process of testing his strategy before producing the actual product.
After indulging in multiple tests and creating prototypes, he finally had a handful of alternatives to choose the best. He was thorough and confident about the next step in the process. He knew there are different methods through which he can make the final choice. Raman, like any other dynamic entrepreneur, was open to both external and internal environments while narrowing it down to one strategic choice.
Strategic choice is a decision that determines the future strategy of any organization. It focuses on evaluating and generating alternatives to pursue the selected strategy. It seeks to identify the alternative course of action to enable the organization to achieve its desired goals and objectives.
The external and internal audit information with the organization’s current objectives, strategies, and mission statements provide a basis to evaluate and generate feasible alternative strategies. The role of the alternate strategies is to take the organization from its current position to the envisioned future.
Debunking The Myth Of Strategy Schedules
Running a business might be a challenge to accomplish without a plan. Nevertheless, many organizations overlook the main ingredient to success: strategic planning. Imagine constructing a building from the ground up without a blueprint. Organizations envisioning success without strategic planning resemble a construction team planning to build a skyscraper from the ground up without a blueprint. Having a proper plan requires a fresh pair of eyes to get past the myths and find the treasure of underlying truth about strategic planning.
Myth – Planning is the job responsibility of managers or executives.
Truth – A well-executed planning process involves every employee.
Myth – We just have to cope with it for a few days and planning will be done.
Truth – Strategic planning is an ongoing process.
Myth – A strategic plan should be kept a secret.
Truth – A successful strategic plan includes communicating strategies and goals with every employee.
Ideally, every employee in an organization should be aware of the strategic plan. Each employee has to understand how their position fits into the overall plan of your organization. Their annual performance assessments should be based on how well they have met their goals, which should directly support some aspect of the strategy. Everything needs to be a tightly knit web of information flow.
How Does A Design Thinker Make Better Strategic Choices?
Companies lacking a strong sense of priorities frequently allocate resources evenly across numerous projects rather than concentrating on a small number of high-potential initiatives. Companies trying to get away from the decreasing growth in their core operations endanger themselves by pursuing new markets without first determining whether or how they will succeed.
Design Thinking Practitioners make strategic choices using a sieve of DFV – desirability, feasibility, and viability. The strategic choices should fairly match the frequency of all three aspects, also, it must have the following crucial elements:
- A desirable solution, one that your client actually needs.
- A feasible answer that capitalizes on your existing operational strengths.
- A viable solution with a long-term business plan.
Once they have desirable insights based upon DFV, they move forward in the process. When the strategic decisions qualify the grounds of DFV, it’s time to evaluate them using four crucial interdependent lenses—the company’s financial performance, market prospects, competitive advantage, and operating model. Design Thinkers identify and prioritize the key moves that will drive businesses to new markets and growth prospects, or the actions they can take to consolidate the core, by analyzing strategy decisions through all four lenses.
The Financial Lens
The majority of businesses always start their strategy development procedures by assessing their financial performance. The financial lens can assist them in bringing an outside perspective to these discussions and in creating an objective baseline for determining whether or not long-term goals are realistic.
Standard valuation techniques can be used by a corporation to determine the performance levels to be attained over the long run to maintain today’s worth. Strategy and finance professionals can equip themselves with the knowledge necessary to begin fruitful, unbiased dialogues on value creation by evaluating indicated performance, ambitions for performance, and the MMC (market-momentum case): How should a business generate higher profits, and how would the business operate in a stable state?
The Market Lens
By using the market lens, businesses can find growth opportunities both within and outside of their current market segments and compare them to potential strategic options. Granularity is key in this situation; Design Thinkers quantify and confirm changes in profit pools in pertinent markets given current trends. For instance, one customer apparel company looked at absolute growth in the product categories it served. It evaluated regional and channel growth.
For at least five years, it was predicted that demand would increase largely in brick-and-mortar stores in some regions, with high-end goods commanding a sizable price premium. Online channels were generating income in other regions faster than anticipated. The Design Thinkers understood the need to divide resources between more localized, less expensive products into some regions and high-end items in brick-and-mortar stores in other regions by using the market lens for product creation and marketing. This comprehensive analysis allowed for higher profit margins across all regions, resulting in growth that was above average.
The Competitive Advantage Lens
The Design Thinkers use a competitive advantage lens in determining a significant change to capture value or whether the company has what it takes to succeed in both the present and future markets. How the company decides to play in its markets, as well as any alliances or acquisitions that may be required, should be informed by an honest evaluation of current capabilities.
The competitive advantage lens is more crucial than ever in light of new realities like digitization and the fact that many industries are approaching their capacity for consolidation. Consider the idea of creating a digital platform, a target that many executives have these days: What kind of competitive edge will the platform offer? What percentage of the market does it need to control in order to be deemed a “winner” as opposed to just “average”? Does the success of the digital platform depend on an ecosystem of outside parties, or can it be achieved organically? Can we do this rapidly enough to become our clients’ preferred platform?
The Operating Model Lens
Companies frequently ignore how their operating models affect the choices they make in terms of strategy. Instead of examining whether they possess the personnel, systems, tools, and other vital elements needed to make significant advancements, they choose to keep things as they are. Therefore, the operating-model lens is crucial for determining whether the business is positioned for future success. Indeed, a company’s methods for allocating resources, managing personnel, designing its organizational structure, and managing performance can either support or undermine its strategic goals.
A pharmaceutical company predicted that within five to seven years, Asia would account for more than one-third of its cash flow. That result, however, never came to pass since senior management only assigned less than 10% of the company’s sales representatives to Asia, all of whom were more concerned with preserving current sales and profits than with increasing sales in line with the strategic plan. The amount of underinvestment was determined by comparing the growth opportunity at stake to the number of full-time employees distributed among the areas over the previous five years. Executives made the decision to hire aggressively in Asia.
What Are The Tools To Make Strategic Choices?
It seems sensible that various tools have been created to standardize the process since strategic decision-making necessitates a rigorous approach to problem-solving. Here are four that you might think about applying the next time you have to make a decision.
OODA Loop
Observe, Orient, Decide, and Act is referred to as OODA. Information collecting is required for the loop’s observation phase. In a business, this could include information about the performance of the company and the whole industry. Orienting entails organizing the data and evaluating it in light of the issue. Once a choice has been made, it is time to act!
Ladder of Inference
We frequently make decisions without fully understanding how or why. The Ladder of Inference is a tool for exposing the presumptions and ideas that guide decision-making. By exposing them, we can investigate them and make sure we aren’t drawing judgments without sufficient evidence. We can use the Ladder of Inference to evaluate our thinking and make sure that our choices are based on reality.
Logic Tree
An ideal tool for design thinkers is a logic tree. It enables you to visualize in a simple, understandable diagram all of the various factors that will affect your choice. Your problem is the tree’s trunk, and each thought becomes a branch. Additionally, these primary branches may split off into several smaller branches. You might discover that the brainstorming process necessary to create your logic tree reveals some significant elements that earlier were uncharted territory.
Decision Matrix
A decision matrix employs particular criteria to assess the value of several potential options after you have a range of them. These criteria are determined by you, and each one is given a variable weight based on how important it is to you. High compensation, the ability to work remotely, the chance for promotion, and diversity of workloads could be considerations while selecting between several professional options, for instance. A decision matrix enables logical, numerical evaluation and comparison of various decisions.
These tools can be used to make wise business choices, however, they are also applicable in other spheres of life. Making sure that our decisions are supported by facts, well-considered, and in line with our larger goals will help us make better choices strategically.
A strategic thinking approach is necessary for carrying out a successful strategic choice because it allows us to concentrate more on problem-solving, execution, and greater alignment with corporate objectives.
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https://www.markarnold.com/2017/11/debunking-three-strategic-planning-myths/
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Written By: Jimmy Jain
Edited By: Afreen Fatima
Society of Design Thinking Professionals
