The new dynamics of strategic management

How we are shifting from hierarchical to dynamic strategic management

Things are not what they used to be
The general dynamics of strategic management have not changed much over the last few decades. As long as we can remember we have been relying on a “waterfall approach” to manage large and small organizations. The strategic direction of the organization has always been the responsibility of top management, with the objective to describe the purpose of the organization and communicate its path. And that approach is fundamentally still valid – the responsibility of the vision and the general direction of the organization still lies with the top management team. Their duty is to set strategic direction, which means they need to use strategic intelligence to find smarter ways to beat the competition; the same principle as is warfare.

But things are progressing.

The great issue is that the world is now overflowing with information and the amount of change and the speed to market today has never been seen before. So how on earth is a top management team supposed to keep up with all this change and make the most appropriate and timely adjustments to the strategic path they have set? The simple answer is, they can’t and they shouldn’t. Let me motivate this argument.

How things have changed
Traditionally things have worked just the way I describe above. Top management sets the strategic direction and path for the organization – not too rarely on a three-year basis. This overall organizational business strategy is then communicated to the rest of the organization to conform to, and to form their own sub-strategies, supporting the business strategy in achieving its goals. After three years the business strategy is revisited and renewed, possibly with minor adjustments. Then the sub-strategies are adjusted accordingly.

This is where things are not working out any more.

For instance, assume that the top management team communicates a certain strategic direction to the CIO. The CIO then creates an IT strategy to support the business strategy. This puts the business strategy in the driver’s seat and the IT strategy in the passenger’s seat. Then suddenly new machine learning algorithms appear alongside a new positioning solution resulting in new delivery models that together disrupt the industry while new startups are entering the market with millions in venture capital to pursue this new technology-driven business model. There is no way the CIO of that company can sit around for another two years and wait for the next version of the business strategy to arrive while the company is being overturned. (S)he needs to be proactive, analyze and evaluate how these new technologies can be incorporated in the current business, update his/her strategy, and act accordingly. And fast! The same goes with new user patterns in the market and how the CMO needs to react and respond to them. And so on.

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The implications on current strategic management models
So strategic direction can no longer follow the traditional top-down, hierarchical “waterfall” model where the main business strategy sets direction and the rest of the organization follows. All of the strategies need to be incorporated into a dynamic ecosystem of specialized strategies, where the change signals come from the latest market- or technology updates in each area and are then communicated and adapted throughout the business system of the organization. (See the infographic at the bottom of this article.) Whenever a new technology is released, a new patent is approved, a new user pattern is starting to take place, a new startup has received a large funding scheme, etc., then every strategy in the organization needs to be re-evaluated. Because the new reality is that A STRATEGY IS VALID ONLY UNTIL THE NEXT PIECE OF INFORMATION IS RELEASED TO THE MARKET. This is the new era of strategic management. Now we have to cope with this new reality and build a dynamic, sensory intelligence system that continuously feeds our strategic intelligence function(s), analyzes and evaluates the implications of this new information, establishes a new direction, and correspondingly updates all of our other strategies.

Strategic management is no longer what it used to be.

As project management has become more and more agile, strategic management needs to become more and more adaptive. Because face it, what is a strategy really, if not a long-term overarching “project plan”. And by the same logic as with agile project management, where the purpose is to adjust when new situations arise, strategic management is now facing the same reality. But possibly with more severe consequences if managed poorly. If a project fails, it can cost dearly. If a strategy fails, it can be devastating. So as with project agility, strategic adaptivity needs to become the new standard for corporate planning. The strategy process needs to perpetually scan, connect, absorb and adapt, for the business to survive. Systematic strategic intelligence has never been as important as it is today. And it will never have been as negligible as it is today.

So how is this relevant for innovation and digitalization?
The short response is that it is crucial to both functions. These days strategic intelligence cannot be an ad hoc activity that happens when some employee occasionally visits an industry fair. It needs to be organized, structured, and continuous, constantly feeding the organization with the newest and most relevant data into its decision-making process. Those responsible for innovation management and digitalization in the organization need to be on top of this to ensure that all units of the organization are fully compliant with this dynamic ecosystem. Else their mission will fail. They must be an integral part of the system that feeds the intelligence into their evaluation process. The innovation leaders and digital leaders are responsible for the infrastructure, the methodology, the tools, the analysis procedures, the data storage, the availability and communication of information found, etc. The CIO and CINO are together responsible for the effectiveness of the strategic intelligence system, but also for turning the input into competitive digital innovations. Because without digital innovation, dynamic strategic intelligence is nothing but a mirage.

This infographic visually summarizes some of the content in this article. You can use it freely (under a Creative Commons licence) by just clicking and downloading it.