The Strategy Elastic

A good way to visualize how you’re doing with the six dilemmas is to create what I call a 'strategy elastic' . Creating strategic stretch is very much like working with an elastic band. If you only pull it from one side, the other side will move in the same direction. You can only stretch it if you pull from both sides. And the harder you pull in multiple directions at the same time, the more space you create, which is the objective of strategic management.

The metaphor of an elastic band is particularly appropriate because it implies that you can't stop pulling, otherwise it goes back to its neutral position. It’s the same with strategy; you need to keep working on creating strategic stretch, otherwise the organization will fall back to average results.

Let's take the example of a small European financial services firm. Its strategy elastic is shown in Exhibit 3.

Exhibit 3: Strategy Elastic of a small European financial services firm

See a larger view of Exhibit 3

Perhaps as a result of economic stresses (the survey was taken during the latter part of 2009), the short-term focus of this company is relatively extreme. However, focus and alignment are very high. The strategic objectives of the company are known to everyone (see the high score for top-down) and employees understand how their daily work contributes to those objectives.

The wide stretch between creating customer value and maximizing profitability is also remarkable. For any small financial institution — an upscale private bank, for example — this actually should be the basis of the business model: it can charge relatively high, but transparent, fees and commissions, while increasing the wealth of its customers.

As is often typical of small organizations, this firm doesn't pay a lot of attention to its processes. It borders on being strategically stuck here. Probably whatever optimization does take place is based on regulations and compliance. The products that the firm offers are not particularly innovative, but the company distinguishes itself by being close to its customers. Its strategic bias here is clear.

Solutions to Dilemmas

In the literature, there are solutions for every one of the six dilemmas. Until Dealing with Dilemmas, to my knowledge, there has never been any study that provides a comprehensive overview of all of the solutions. Here are some that I have identified:

• Value and profit. Providing a transparent price structure and transparent terms and conditions makes it easy to create a clear value proposition for customers. Transparency can be a competitive differentiator, leading to higher market shares and profit.

• Long-term and short-term. Adopt an "options-based" strategy. When assessing your strategy, don’t think just in terms of whether it’s right or wrong; consider whether it helps you adapt to changing circumstances. Take decisions that address today's issues, while keeping your options open for future change.

• Top-down and bottom-up. On the tactical level, align financial top-down planning with operational forecasting, linking resources to activities and financial results. On the strategic level, let go of the idea of a financial portfolio of activities, and focus only on activities that contribute to the brand.

• Inside-out and outside-in. Many organizations seem almost to cherish the conflict between back office and front office, and treat their needs as trade-offs. However, there’s no contradiction between the need for administrative efficiency and the need for sales flexibility. Customer self-service models bring more efficiency to the back-office, while improving the customer value proposition.

• Optimize and innovate. Create aspirational goals that cannot be met by optimizing existing processes and ways of working. Disturb existing processes on purpose with new and different inputs to see how people react to them and to ensure that your teams will be ready if external conditions change.

• Listen and lead. Why not lead your customers while listening to them? If you’re able to detect the question behind the question or understand customer behavior better than your peers, you can develop a great source of competitive differentiation.

Now what?

Performance management professionals need to rethink their best practices. Many of these methods have proven to work perfectly when solving linear and tactical problems, but they’re not useful for strategic decision-making processes. You need to bring a bigger toolbox to that job, and it must include an understanding of the dilemmas that executives have to deal with, the various ways your company tends to deal with them, and the practical solutions that have evolved in other companies, times and industries.

It’s time we had fewer people calling themselves analysts, and more people seeing themselves as synthesists.

Frank Buytendijk, a Vice President and Fellow at Oracle Corp., is a recognized thought leader in strategy, performance management and organizational behavior. His latest book, Dealing with Dilemmas (Wiley, 2010) outlines the art and science of synthesis, the opposite of analysis. The book has been called "inspiring", "thought provoking", and "truly out-of-the-box"; it’s a must-read for every professional in decision-making. For more information, go to www.frankbuytendijk.com