What is the most effective way for leadership teams to successfully create aligned business strategy?
I recently helped a 12-member team of an $110m biotech set priorities. In two hours, they narrowed their priorities down to about 7. The CFO later reported that the budgeting process was the easiest ever. There were no turf wars. Everybody knew the priorities.
I’ll share here an overview of the approach that made this possible.
Aligning business strategy across a leadership team does not start with strategy. It ends there. There are four conditions, when optimized, make aligned business strategy possible.
There’s a hierarchy here. If the team culture is messed up, if leadership mindset is ineffective or if the system of roles is broken, formulating strategy is a plagued process. Trash bins around the world are filled with evidence to support this.
I. Effective Mindset: Leaders have to understand what business strategy is.
Leaders have to define a target and a process. We started here with our biotech client. The leader came to see that successful strategy starts with the right culture.
It's a vast conversation. Overwhelming, like clouds of tundra mosquitos. "Business strategy" alone provokes 1B links on google. Here are some clarify thoughts from The Source: Read Michael Porter's treatise.
And here is one guiding idea that I like:
- Business strategy creates a clear line of sight between the enterprise and each role’s goals and objectives.
II. A Complete System of Roles is essential to create an inherently strategic team culture.
What is a strategic culture (a.k.a. a culture of innovation)? Lots of organizations fall down on this point.
Our biotech client, still in startup mode, had defined roles for everyone, but individuals had not yet focused on how they were supposed to work with others in order to be successful. Without being wired together, most people played for themselves. Only when each member could envision their role within a complete system of roles, could they begin to line up their strategies.
Here's the theory, and the commonly missed point. Without strong, clear advocacy from every role, teams fail to foster the creative tension that truly vets strategies, and hence that drives innovation. When every perspective is on the table, and people are playing full-out, it becomes possible to create an inherently strategic team culture. That's a Big Deal.
III. Aligned Strategies require the right tools: strategy templates.
Teams often simply don't know how to have structured, creative conversations that are focused on the right strategic issues. Obviously, lots of bad things can and do happen at this point.
Tools called strategy templates enable teams to design, present and peer review strategies. Without shared tools, leaders are left comparing apples and oranges.
One of the most common templates is the Balanced Score Card. The BSC, and its many offspring, dominates the world of strategy templates.
Balanced score cards guide teams to integrate a hierarchy of perspectives (learning, process, customer, financial). Best thing since Roman military strategy.
But, here are two important concerns with this approach:
- How do you ensure that you are picking the right strategies to put on your score card?
- How do you know, when you compare the strategies across perspectives, that the same criteria have been used? How do you know you are not comparing apples and oranges?
Enter Key Condition #4.
IV. Strategies have to be designed to create Competitive Advantage
Any strategy template that simply asks you to fill in the blank, “what is your strategy for X?” will lead a team astray.
In other words, strategies have to be litmus tested. We ask, "what is your strategy for X and how will it increase competitive advantage?"
Competitive advantage is made up of four factors. Each can be measured: market potential, scalability, sustainability and return. Simply testing how each proposed strategy contributes to each of these four factors enables the team to discern if the strategy is the right one. It also enables teams to weigh different strategies (e.g., marketing vs sales, sales vs delivery) on the same scale. Apples to apples.
The upshot for our biotech client was simple. We worked with each team member before the team meeting, asking them to formulate strategies -- from the perspective of their role. That way, when the team had to set priorities, everyone had done their homework.
As it turned out, we didn't need to review all the individual strategies, as we often do. By getting the culture right enough and by giving the team a shared business strategy language, the team could think strategically together, the priorities popped right into view.
Here is the strategy template I use with clients. It offers a mini-course in strategy mapping, a presentation template, and the competitive advantage analysis.
This article explains the four factors that contribute to creating competitive advantage.