Practical Guide: Implementing Strategic Planning in Complex Environment
Any organization has its unique approach to strategy. With increasing complexity of challenges that we face today, many organizations find their existing approach insufficient and are looking for more effective ways to discuss and execute their strategies.
In this article, we’ll discuss practical steps to adapt strategic planning to the environments defined by growing complexity, scale, and uncertainty. Here are the key parts of the article:
Stakeholders. Three types of stakeholders are directly involved in the strategic planning process.
Let’s discuss four early-sign indicators that an organization needs to revise their strategy planning approach and adapt to the growing complexity of the external and internal environment.
Goals are the quanta of any strategy. They help formulate the aspirations of the organization. In a more complex environment, the goals start behaving in a different way.
Here are some signs that complexity of the environment affects the goals of the organization:
You have many strategic goals, but some of them are unclear and vague, there is no 100% agreement about their meaning
Sometimes, it’s hard to explain if/how specific goals contribute to the overall strategy
The cause and effect connections between the goals are not obvious
Challenge 2. Misalignment Between Performance Measurement and Value Creation
Under normal conditions, most of the problems related to the goals can be solved by finding a way to quantify them, e.g., finding performance indicators. With increasing complexity of the challenges, it’s hard to do quantification properly, and even when the observations are mapped into numerical form, their connection to the value created for the stakeholders is not obvious.
Here are the challenges that organizations see in this case:
Many goals have not been properly quantified
Your team tracks KPIs, but it’s not clear if you actually create any value for the stakeholders
The root cause is not clear – there are indicators in the red zone on the dashboard, but it’s not clear what your team can do about them
Challenge 3. Readiness for Future Challenges
Increasing uncertainty and complexity of the external environment impacts the way the organizations deal with future changes:
The analysis of external factors and competitors is irregular and not aligned with what you do daily
Your organization recognizes the need to be more resilient, but there is no formal scenario and risk mitigation planning
Your team don’t have specific strategies for new challenges like cybersecurity or digital transformation
Challenge 4. Creating a Single Source of Truth About Strategy
Another way to perceive the impact of increasing complexity is to look at how the strategy is discussed and reported.
Your organization needs to adapt its approach to strategic planning if you see one of these challenges:
Strategy reporting and review is time consuming; you review strategy once a year, it feels outdated most of the time
No formal strategy – there are many opinions about where your organization is, what you should do and why; those opinions are not consistent
No contextual information – there is always something important about the goal that only few people understand and can explain
The Role of Business Frameworks
With these challenges in mind, how should we organize strategic planning?
Any strategy is about satisfying the needs of the stakeholders. Ideally, we should formulate strategic ambitions using the inputs from the stakeholders and convert them into high-level goals for our strategy.
In practice, it is not that straightforward…
The inputs from the stakeholders are typically ambiguous and contradictory. One of many business frameworks will help with this challenge. In this article we compared the frameworks and their role in strategic planning.
Using automation software like BSC Designer helps to get started easier as strategy teams can adapt existing strategy templates to their needs.
Before moving ahead with strategy implementation, let’s have a look at a typical strategy workspace.
From outside, a strategy might look like a monolith, but from inside, we will see many interconnected strategy and functional scorecards.
Typically, we’ll see:
Main strategy scorecard
Some scorecards for local offices
Functional scorecards that focus on specific challenges, such as scenario planning, digital transformation, corporate governance, cybersecurity, quality
The strategy workspace needs to be configured according to the strategic planning workflow used in the organization:
How can we introduce a high-level goal into a strategy workspace?
We can try aligning it directly with the existing strategy scorecard, but the chance for success is low, as high-level aspirational goals are ambiguous by definition.
A better option would be to move the goal to a group called strategy sandbox. A place in our workspace where the strategy team can transform vague high-level goals into something more specific.
In simple words, value-based decomposition is the way to break down complex goals into small, independent sub-goals quantified by the value created for the stakeholders.
Involve the key people of your team into the strategic planning process by asking them to create functional scorecards for their areas of responsibility. That’s where they will need to practice value-based decomposition and use their knowledge of the strategic planning process.
They will need to work on the triangle Goals-KPIs-Initiatives:
Goals: Breakdown complex goals into small, independent parts
KPIs: Quantify goals by the value created for the stakeholders
Initiatives: Formulate action plans for the goals
In this way, we address Challenge 1 and Challenge 2 mentioned above – converting complex and ambiguous goals into measurable and actionable sub-goals.
An experienced facilitator should review the created functional scorecards to find improvement points. Users of BSC Designer have a built-in automatic quality control tool for this purpose. By clicking on the quality score, users can get some improvement suggestions:
At the end of scorecard design, the strategy team uses various tools to automate data input:
The functional scorecards created in the previous step are disconnected parts of strategy that make sense for the specific teams only.
Link those functional scorecards to form a comprehensive strategy.
The linkage might be indirect by giving required contextual information or direct by contributing performance data.
Once the functional and strategy scorecards are connected, use them for regular strategy presentation and reviews. This will address Challenge 4 mentioned above.
Cascading or Alignment of Strategy Scorecards in BSC Designer
An indicator of successful alignment is that members of your team consider their strategy scorecards to be a valuable source of knowledge about strategy.
As we discussed in another article, strategy scorecards created in Excel spreadsheets are acceptable on the prototype stage only. When the scale and complexity increase, the automation of the strategic planning needs to be migrated to a professional strategy execution software, like our BSC Designer.
A dashboard in BSC Designer that visualises the key stages of automation of strategic planning with key metrics, initiatives, and risks.
Source: Implementing Strategic Planning.
Among our clients, we see these three typical implementation stages:
1. Testing waters
2. Building prototypes
3. Scaling
1. Testing Waters
BSC Designer is shortlisted by some members of the strategy team. The software is tested under the free plan. Most of the users master the key mechanics of the software during first use sessions.
On the next stage, we see users upgrade to the paid plan with 1-3 power users and 3-8 data input users.
Users unlock the key function of the software at their own pace by experimenting with the software, strategy wizard, and using onboarding tutorials. BSC Designer team resolves doubts via helpdesk and live training sessions.
Time horizon: 1-2 months.
3. Scaling
The number of power and data input users increases according to the expected use of the software in organization.
Strategy team involves other stakeholders to create strategy and functional scorecards. The cascading function for the scorecards is used actively.
Operation team reports their progress directly in the software via updates of KPIs and comments on the performance change.
Senior stakeholders track the strategy execution via the performance dashboard and scheduled reports.
Time horizon: 6-12 months.
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Practical Guide to Implementing Strategic Planning in Complex Environment by BSC Designer
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