Nicholas Gruen continues his essay on strategy, exploring the preconditions of good strategic thinking for organisations. If the organisation is to sensibly set itself goals, its strategic thinking must comprehend the dialectical relationship between the means and the ends — each influencing the other in an endless search for inspiration, improvement, optimisation and mutual accommodation.
Strategy is crucial for organisations. But as I’ve previously argued, a great deal of what passes for strategic thinking is a kind of anti-thinking. Typically strategy begins by determining some overarching objective – the end – with the rest of the process ‘drilling down’ to the means of getting there in progressively greater detail (which these days we’ve taken to calling ‘granularity’). 1 Surely that’s just commonsense? After all, how can you plan to go somewhere if you don’t know where you’re going? But that’s the problem. It only seems commonsensical because, right at the outset we’ve got the wrong metaphor – essentially one of the commander navigating the ship to a destination that’s knowable in advance. But the flimsiness of our enactment of this metaphor starts to give the game away. What’s striking about apex statements (whether of the ‘mission’, ‘vision’ or the ‘where do we want to be in future’ type) is how little they imply for the details of the organisation’s strategy.
Organisations of any reasonable size are complex. There’s a lot to coordinate just to function tolerably. In addition to the constellation of existing capabilities that must be maintained, there are myriad problems and opportunities big and small, a range of new capabilities one needs to nurture as a result (with others needing to be cut back), and an assemblage of other organisations with which one interacts directly and indirectly. In that world, if the organisation is to sensibly set itself ends or goals, they will be a function of that context – of the means by which it might achieve them. In other words strategic thinking must comprehend the dialectical relationship between the ends the organisation might decide on and the means by which it will pursue those ends – with each influencing the other in an endless search for inspiration, improvement, optimisation and mutual accommodation. For instance, Google started advertising (somewhat reluctantly) to monetise its search engine and in doing so developed capabilities that became a launching pad for all manner of new objectives the firm gave itself as it grew.
In what follows I try to summarise into a summary checklist of principles, the preconditions of good strategic thinking. I’m thinking as I prepare to do so that the end result will also be no more than commonsense. And yet I can’t recall being part of any kind of ‘strategy work’ that resembles at all closely what I’ll outline.
Note, I’ve been deliberately provocative in placing the first three items on the list in order of importance though I have difficulty asserting this for the remaining points below them. Strategic work should be:
Non-obvious insights can be discovered at every level of the organisation, and something which is currently minor may become major. For instance, a specific capability built to support one activity might become the feature for whole new incarnations of the company – as Google’s and Amazon’s growing prowess with server technology were for them as they built G-mail and AWS.2
One might distinguish between two uses of critical intelligence. The first being critical imagination. This emerges from critical engagement. To develop their critical imagination, those seeking to think strategically must cultivate their curiosity and so awareness of the problems and opportunities large and small facing the organisation.
Secondly, critical evaluation must be deployed throughout the process – for instance the ordering and winnowing of ideas according to their merit (the next requirement below) requires the use of critical intelligence.
Good strategic thinking surfaces all ideas worthy of consideration 3 and then develops the best. As I’ve argued elsewhere, although we love ‘peer production’ for instance as occurs on Wikipedia, for how ‘democratic’ or open it is, on closer inspection the real secret source here is a new kind of emergent meritocracy in which the most respected and substantial contributors gain the greatest say in the project. By contrast with successful peer-production, getting strategic planning within an organisation to reflect the merit of the ideas put forward is fraught.
The difficulty of meritocracy
On the one hand, everyone should feel respected and encouraged to participate, particularly the naturally reticent (many of whom will be junior, and possibly more junior than they deserve to be). However, some people will overestimate the value of their contributions and should ideally be reined in. Ideally, everyone will have an instinctive understanding of the extent to which they can and should contribute, with group pressure helping to protect the quality of discussion. But that requires great subtlety and judgement. And egos are involved. With intelligence and its successful simulation being key determinants and signifiers of social status, it’s a huge challenge to foster well structured, truly meritocratic discussion, especially in organisations with a strong, established hierarchy. In your organisation do the best ideas and arguments win, or those of the most powerful people?
Meritocratic discourse as an ethical quest
This underscores something else that’s rarely pondered. Encouraging thinking and decision making on the merits, rather than on the status or power of the participants and guarding against the gravitational pull of groupthink and myriad foibles and biases is best understood as an adventure in in our ethical life in which progress is cognate with our natural aspirations to virtue, with our individual and collective endeavours in that regard both reinforcing one another.
Knowledge and intelligence – in both senses of the latter word – turn up in all sorts of places within and indeed beyond the organisation. The perspectives and needs of customers, suppliers and wider stakeholders can be important inputs to strategy.4 I originally titled this section ‘Democratic’, but this is subtly wrong because democracy is (ideally) rule by everyone. Where we are seeking to optimise the interests of an organisation’s mission and only secondarily the interests of those within it, what we’re after is meritocratic openness – which is what we see in successful peer production like Linux and Wikipedia. Once there’s an effective meritocratic system of prioritising activity, the wider we cast the net for contributions the better.5
Socrates died believing that the one thing he learned from life was how little he knew. That’s why, when people talk about getting strategy ‘right’, they’re applying for the role of hero, when what’s needed is humility. As Charlie Munger, Warren Buffett’s business partner puts it “Knowing what you don’t know is more useful than being brilliant.” Socratic humility is a mode of being that’s far better attuned to individual and collective learning than its alternative – competition for status marked by ‘big-noting’ and the cognitive biases to which it is an open invitation. As Munger puts it “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
Socratic humility as an ethical value
And like meritocracy Socratic humility is also a profound ethical value – worthy of all those in an organisation and the organisation itself. As Munger puts it “Acknowledging what you don’t know is the dawning of wisdom.” That’s why in his book The Lean Start-up, Ivor Rees offers the metaphor of the start-up as a vehicle for learning – for moving beyond one’s ignorance of the market by being in the market which enables one to experiment to see what works and why. As I will argue in the next section, there are some ways of providing some institutional support for Socratic humility.
It’s not my purpose here to specify some process which will embody the considerations set out above. Suffice it to say that if these principles are taken seriously, pretty much any strategic planning process could be adapted accordingly. But the steps of strategic planning within an organisation should normally be formalised. Ideas should come from all parts of the organisation and beyond it. Many important ideas and issues will originate from senior managers and board members. Ideas of apparently smaller significance may be relegated to discussion in business units, though the aim should always be to keep the organization’s collective mind as aware as possible of small things that could have large significance, and/or help inform the context within which high-level objectives will be agreed on. And the common themes between business units may portend some broader, and so strategic, significance.
As appropriate to any given issue that is surfaced, the strategic planning system may encourage some initial period of divergent thinking or ‘brainstorming’ followed by discussion, refinement, attempting to bring ideas that may have relevance to each other into that discussion before winnowing occurs to leave ideas that find their way into the unitary intent of the organisation – its strategy. It is likely that much of this development and discussion should occur outside of meetings of large numbers of people, and given this, it seems appropriate not to impose timetables on it. However, as they reach a level of maturity, it may make sense for such discussions to be considered to flow as tributaries into a regular process of formal escalation up the line – perhaps corresponding to the cycle of relevant senior management and/or board meetings.6
Socratic humility for an organisation: formalising self-subversion within the system
I’ve observed twice so far in this essay how I see my aspirations for good practice being an expression of the ethical life. In this regard, the system itself can embrace Socratic humility. In this regard provision for self-directed time and like schemes are worth close attention. The best-known program of its type – Google’s 20% time – allows employees to take one day a week to work on a project of their choice. Its principal rationale is not, as it’s so often taken to be, to encourage new ideas or validate the creativity and ingenuity of all those qualifying for the policy, though that is nevertheless understood to be valuable. Its central motivation is to introduce a modest interdiction of control from the top. Just as one of the strengths of markets is that they allow experiments by anyone within them, so, as two very senior Google executives Eric Schmidt and Jonathan Rosenberg stress “It’s not about time, it’s about freedom”:
Twenty percent time is a check and balance on imperial managers, a way to give people permission to work on stuff they aren’t supposed to work on. It helps to bring to life the Steve Jobs maxim that “you have to be run by ideas, not hierarchy”.
20% time drives a counter-cultural intelligence – a wisdom of the crowd – throughout the organisation operating in parallel to the official, hierarchical system. Coming up with an idea is pretty easy.
Getting a few of your colleagues to join your project and add their 20% time to your 20% time is a lot harder. That is where the Darwinian process begins.7
Here are some practical implications of these principles:
- One common practice in large meetings and ‘off-site’ or ‘away-days’ is to break a large group into smaller groups which then consider some issue each then bringing summaries of their deliberations back to the larger group. Unless these groups have been meritocratically established and perhaps specialise in areas of special knowledge, this process will often be anti-meritocratic sifting out ‘lowest common denominator’ ideas, rather than ones that surprise, and perhaps even provoke unease, with their insight.
- Substantial deliberations on strategy should usually be preceded ‘offline’ by groups seeking to surface ideas and explore issues. Where there are credible differences, those differences might be explored in preparation so that research (including ‘action research’ like A/B testing) can be done to better understand the choices available, to explore for common ground and more clearly delineate irresolvable disagreement for further discussion in a larger or more senior group.
- Where a ‘traditional’ approach will often involve large meetings of all people conceivably involved, the approach being proposed is more likely to work well involving only those who want to be involved, whether through enthusiasm or obligation given their responsibilities.8 However this will work best where work is transparent to others who wish to know about it, even if they do not participate.
- This discussion of strategy and strategic thinking has focused on the cognitive and the deliberative. Another important dimension in an organisation will be social. I am not seeking to ignore this fact in my discussion, only to clearly distinguish it from the thinking and deliberative process. Once this has occurred, further steps to involve others and seek their buy-in and/or objections should be considered.
- Various online tools can be useful for encouraging and tracking ideas. It is now common for large firms to seek ways of maximising serendipitous connection and engagement. Employees are now often related to each other in the firm by way of a social network.9 Encouraging employees wishing to blog can also help this process. It can also accelerate self-selection for debate and discussion about ideas which can take place in each employee’s time and outside of bandwidth sapping meetings. A frequently overlooked advantage of such activity is the way in which it can improve talent spotting horizontally and vertically within the organisation.
- An intriguing possibility is that online discussion and debate may offer a means of cultivating high-quality discussion with analytic tools to detect and reward the most productive behaviour in that discussion.10
Where to start
Amidst all these scruples about the difficulty of real strategic thinking, it’s important to simply make a start. One way would be to identify and begin structuring deliberation on important decisions that will need to be made in the foreseeable future. Should we scale up a new product, build or scale down some physical or professional capability? Should we enter the European market? How should we react to some threat? There are worse ways to start as these questions must be answered in any event, and the dilemmas they invoke will draw in much of what must be considered in a coherent strategy. One could also extend this to particular passions for the organisation by those involved in it at any level, based on their experience. Some people in an organisation may want to argue for some realignment of the organisation or one of its important activities whether that realignment is a subtle reframing opening up important new perspectives or it amounts to a ‘pivot’ – a new beginning building on existing capabilities.
Note that in each case, there’s nothing artificial about the questions being asked – in the way the initial search for an apex statement or objective so often is. Intrinsic interest in the context of the organisation’s current situation drives the process. And as the discussion draws in the implications of different arguments and approaches, it may well uncover the need to resolve some larger question – at which time the stage is then set to determine whether or not that larger question needs to be definitively resolved, the potential costs and benefits of doing so and the steps that might be taken to understand how to answer it better. If some theoretical question like “What is it that we really do?” gets asked that will be because it came up ‘on the merits’ not because it met the faux commonsense of the latest management fad.
Postscript: An interview structured around this essay can be found here.
1. An ‘apex statement’ usually kicks this off whether it’s a mission or vision statement or some summary answer to the question “Where do we want to be in ten year’s time?” or “What does success look like?” (I’ll leave demonstrating the idiocy of deciding on some Big Hairy Audacious Goal as the fulcrum of your strategy as an exercise for the reader.) ↩
3. for which the next point on the checklist is relevant … ↩
4. I illustrated this in my previous article with the example of Toyota which engaged both its customers and its suppliers in its quest to improve. ↩
5. Or as the chronicler laureate of open source software, Eric S. Raymond, put it famously, “many eyeballs make all bugs shallow”. ↩
6. It is possible that some regular – say annual – off-site get together could contribute to this process, where there’s benefit in getting away from the grind to prevent the urgent from displacing the important. But the reader will not have misinterpreted me if she thinks I’d proceed sceptically (I have been known to feign death to avoid such retreats though these were very much in the mould that I’ve critiqued previously.) The test is using such events to genuinely take opportunities not otherwise available and to integrate such things into a capability for the continuous review of strategy. And if we are in search of serendipity there might be something worthwhile in reverting to an older conception of such events as being rooted more in sociality and celebration of fun than too conspicuous displays of worthiness. ↩
7. Schmidt, Eric, and Rosenberg, Jonathan, 2015. How Google Works, John Murray, London, p. 227-9. Note that self-directed time is still time spent for the organisation and is reviewed in performance management. So spending that time on frivolous or obviously self-centred activities is not in employees’ interest. Note: firms that have succeeded with self-directed time tend to be highly innovative firms that enjoy such status in their industries that they hire only the very best, brightest and most ambitious. This helps explain their success where they have succeeded. There are some examples of similar programs being run as pilots within the public sector but so far there is little evidence on which one could base the claim that, adopted in its entirety, 20% time would lead to more benefits than costs. On the other hand it’s likely to be a worthwhile part of the public service’s repertoire if used more selectively – for instance as one means to reward good performance and give proven good performers more autonomy in the expectation that, it will be used in ways that are beneficial for the organisation at the margin. ↩
8. John Burnheim’s The Demarchy Manifesto has been influential in my thinking here, where the ideal is discussion amongst people with an interest (though ideally without a conflict of interest). The putative subject of the book is public policy, but the ideas can be applied profitably to organisations, particularly large ones. ↩
9. Likewise the architecture of many knowledge working firms now emphasises engineering for serendipity. In one top-tier law firm I was dealing with recently, moving to five floors in a CBD office block, the five floors contained coffee shops on the second and fourth of five floors they occupied with emphasis given to maximising the amount of serendipitous interaction. Evaluating a similar move in another city, far more connections were made, the number of meetings fell, partners said they spent less time supervising others work, but those supervised reported more worthwhile engagement with partners. ↩