Strategic Conversation

A New Approach To Strategic Planning

ABSTRACTA Contemporary Variation on Strategic Planning, which supports rapid cycle organizational response to changes in the internal and external environment. It promotes continuous conversation by Key Players on the Present Condition of the organization and the changes that must occur to achieve the future Intended Condition. Dr. Ed L. Hansen

THE EXECUTIVE LEADERSHIP SYSTEMS (ELS) STRATEGIC CONVERSATION MODEL

The Strategic Conversation is a contemporary variation on the historical strategic planning process. It provides an organization a fluid and easily evolved tool for managing Time, Material, People, and Money (TMPM) to achieve its Mission and Vision on the Strategic Level. At the same time, it drives performance related to achieving Goals and Objectives on the Tactical level.

Most important, Strategic Conversation creates a culture of action and performance within the organization. It becomes the basis for professional interpersonal relations within and between the leadership, management, and staff.

A traditional Strategic Plan is often completed only to sit on a shelf, an unused “finished” product. The products of the Strategic Conversation Workshop become tools of daily use in the organization. They generate personal commitment and action toward achieving shared Strategic Intention on the part of the organization, its leadership and staff. This commitment drives day-to-day internal and external professional interactions.

The process becomes the product, establishing the basis and structure for continuous evaluation of the cause and effect implications of any internal and external factors impacting

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the organization. The Strategic Conversation Model for strategic planning and execution demonstrates that achieving a Desired Future Condition (DFC) is the result of clear initial direction coupled with adroit analysis of an ever-changing environment. Leadership, management, and staff learn to discuss what is happing in the internal and external environments, to develop scenarios to analyze what is happening, to effect action plans to adjust – real time – to what is occurring and to monitor continuously for implications.

On the other hand, the implementation of more traditional Strategic Plans is often impeded by the static nature (once and done) of the process. A Plan is developed, approved, and effected. However, any consideration of the dynamic nature of environment and the likelihood change in it will impact the published Plan suggests a cumbersome process of revising or redoing the Annual Strategic Plan. This being too much work or too costly, the Plan is left on the shelf and forgotten.

Strategic Conversations are dynamic, vibrant, real, and highly useful on a day-to-day basis. Since the process requires minimal hard product and there is never a Finished Plan, it is easy to change direction based on changes in the internal and external environments. Strategic Conversation is about continuous active environmental monitoring, assessment, planning, and execution. This occurs out of an inculcated culture of dialog within the organization once oriented to the process.

The Strategic Conversation Model is introduced to an individual leader or an organization in a formal process activity that is referred to as a Workshop. The Workshop is a rigorous intellectual exercise that is far different from a traditional Strategic Planning or Organizational Development exercise that might be construed as “touchy-feely”. There are no get-to-know-yourself -and-others exercises. The Strategic Conversation Workshop depends upon structured exchanges of ideas, information, understanding, and expertise between carefully selected participants and the process facilitator. In some cases, Workshop is conducted with one person (usually the Chairman of the Board or the CEO). This is often followed by a second Workshop with a broader representation from the organization. More often, the first Workshop is conducted with a participant groups comprised of Board representation, senior leaders, key managers, and selected staff. The optimal size of a participant group is less than fifteen (15) people, though the process has been successfully conducted with groups as large as thirty (30) people.

The Workshop and the Ten Steps that comprise it take participants through stages of increased environmental and situational awareness that, like building blocks, move the

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process toward a set of Intended Action Plans. Participants often comment after the Workshop that the process causes them to “Think Differently”. It is intended to do just that.

The Strategic Conversation Model used by Executive Leadership Systems (ELS) is drawn from the work of Clem Sunter, www.mindofafox.com. Clem, who is from South Africa, has the distinction of being part of a team that worked with Nelson Mandala prior to his release from prison in 1990 following twenty-seven years of incarceration. The team developed scenarios for numerous possibilities as Mandala steeped out into society at a time of escalating civil strife. Mandala and his African National Congress (ANC) used the principles of Strategic Conversation in participating to abolish apartheid and establish multiracial elections in 1994. After he became President on May 10, 1994, Mandala followed a scenario to meet with former senior figures of the apartheid regime to pull off a Strategic Coup. He convinced black South African to support the previously hated national rugby team, the Springboks, as South Africa hosted the 1995 Rugby World Cup. Arguably, this strategy was a major step in the reconciliation of white and black South Africans. The ANC government, in its early days, relied heavily upon Strategic Conversation. However, to be fair, it isn’t novel or innovative. It certainly isn’t hard to understand or implement. It is just good process, that when applied with discipline and consistency creates a culture of focused action.

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This model is a two-phase, process involving ten steps. The first phase, “Defining the Game”, has six steps. The second phase, “Playing the Game”, has four steps. The Workshop is usually a two-day exercise of six hours per day. “Defining The Game” is Day One. “Playing The Game” is Day Two. Working through the Ten Steps requires a minimum twelve (12) hours. That cannot be shortened. It is possible to do the twelve hours in shorter chunks of less than two full days. Some continuity is lost from session to session if the time intervals between sessions are too long. If the process is undertaken in increments of less than six hours per session, some additional time must be allowed for overall.

The Workshop works on two levels. On one level, participants are taken through the process to complete their first Strategic Conversation and the related Action Plans to move the organization’s new Strategic Agenda forward. At the same time, on another level, participants are taught the model. They learn how to use it to promote Strategic Conversation globally within the organization following the Workshop.

Defining the Game

The first step in Defining the Game is Context. It involves reviewing the Environment (internal and external) impacting an organization. The process looks at the evolution of these entities (individual and/or organization) over time and where they stand in the present. This is done from the organizations’ perspective as a Player in that Environment. Scope, the second step, has to do with Strategy. Choosing the Game the entities want to play in the future is equivalent to choosing the direction of the business. Steps 3, 4 and 5 address the interplay between

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Strategy and Environmental Factors. Step 6, Building Scenarios, provides for possible outcomes and stimulates construction of the possible tactics for working toward and through them.

1) Context: How has the Game in your field or industry changed? Where is it heading? Has it become more international or more competitive? Has there been consolidation in the industry? How have you fared as a Player? These questions are designed to take the Workshop participants over familiar territory and they act as a warm-up for the harder questions ahead.

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2) Scope: What is the current Playing Field of your organization? What lies inside and outside its boundaries? Should the Field be wider or more focused? Where is there scope to extend the field into new, profitable activities? Should the individual or the organization change their Game completely because it has become so unattractive?

Scope can be divided into:

Product Range - (a horizontal range of goods and services);

Product Chain - (a vertical chain from raw materials to customers);

Geographical Footprint - (the locales where you want to market your product/service or own businesses); and,

Market Segment - (a profile of your customers in terms of age, income, industry where you have industrial clients).

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In considering Scope, you reflect on your Brand, Culture, Core Competencies, Organizational Structure, Business Model, Resources, and Location. Where they must change to accommodate a modification in Scope, suitable tactics will be considered under Options below.

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For example, going downstream in the Product Chain or entering new locales may require competencies you don't possess. Tactics may therefore include joint ventures/alliances with companies that have competencies in the areas being targeted. Scope at this point of the conversation is considered provisional, since it may be altered by important issues raised later in the process.

3) Players: Who are the players that can significantly change the outcome of the Game you've chosen? Who are the ones for you, that want you to win; who are against you and want you to lose; and, who are neutral and liable to swing either way? Name your primary competitors. What are their strengths and weaknesses? How “big” they are in relation to you? You can just as easily be killed by a big gorilla with greater economies of scale as by a swarm of bees with no overheads. It is essential to do a SWOT Analysis on your competitors in this step.

Who are your key suppliers? Are they assisting you in winning the game? How about your customers? How do they regard you? When did you last do a customer survey? Are your employees for you or are they neutral? What about trade unions, communities around your areas of operation, the government, shareholders, and the media? Where do they stand?

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4) Rules of the Game: Every Game has rules. You must know the Rules of your Game and how to make the most of them. However, the Rule of business can change significantly over time. Have the Rules changed on you? Do you know: what you know; what you don’t know; what you know that you don’t know; and, what you don’t know that you don’t know?

There are three kinds of Rules that you need to establish in order to understand the DNA of your Game:

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a) Descriptive Rules, which give you a basic license to operate wherever you are located. These rules can differ from locale to locale. Descriptive Rules include those which describe the long-term forces governing your market or industry in the future;

b) Normative Rules, which cover ethics, corporate governance, the environment, health, safety and corporate social investment. These rules should be somewhat universal; and,

c) Aspirational Rules, which will give you the edge to win the Game. These are usually few in number but they are crucial to the sustainability of the business. For example, in a manufacturing industry, cost leadership and the highest quality of raw materials are Rules to Win By. In many service industries a Rule to Win By is: the establishment of long-term relationships with clients based on trust and value for money.

Options (below) should include Tactics to lead you toward closer compliance with the Rules, especially the Rules to Win By. In other words, how you act in accordance with the Rules is within your control, whereas the Rules themselves are part and parcel of the Game.

5) Key Uncertainties: What are the main uncertainties that can have a major impact on your business and affect the outcome of the Game? Uncertainties can be economic, political, social, technological, and legal, or revolve around your market or your competitors'

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strategies. They can be international, national, local, related to your specific industry, or internal (e.g. CEO succession). They are the predictable surprises that may necessitate a change in Strategy or Tactics. Whereas external uncertainties are usually beyond your control, your response to alleviate the impact of these uncertainties is within your control. Your responses constitute Tactics.

Good examples of Key Uncertainties are:

- a stock market meltdown (shock event);- the uncertainty around global warming (gradual threat); and,- the level of oil prices in the future (volatile parameter).

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6) Scenarios: What are the two principal variables affecting your company from which you can construct a 2x2 Matrix or Scenario Game Board, giving you a Best-case Scenario, a Worst-case scenario, as well as two Intermediate-case scenarios? Many companies choose the state of the market as the horizontal axis and competitiveness as the vertical axis. Which Scenario are you in at present? Where have you come from and where do you want to be in, say, a year, and looking further ahead? Equally important, what is the current position of your competitors on the Game Board, and where do you expect they will be in the next few years? Drilling down, where would you put your individual business units or products on the Game Board?

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Playing the Game

Step 7 is a realistic assessment of your own profile and situation before looking at Strategic Choices (Direction) and Tactics (How to Get There) in steps 8 and 9. Step 10 gives you a concrete Strategic and Tactical Mission Statement (may differ from your organization’s Mission statement) for the next five years.

This process is designed to produce Measurable Outcomes. These means for achieving them are sometimes referred to as SMART Objectives. To effectively move into Playing the Game, you must have an Intended Result (How about the Intended Result of just winning the Game?).

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Your Game Plan must reflect a set of Smart Objectives that define the elements of winning the Game. Smart Objectives are:

- Specific; - Measureable; - Attainable; - Relevant; and - Time-specific.

Why undertake a Strategic Conversation if you are not going to define a Desired Future Condition (DFC) and describe how you’ll know when you have achieved it? In this sense, Strategic Conversations are very different from the traditional Strategic Planning Workshops, which can end-up in a haze of hot air and are often soon forgotten. People don't normally do things unless they are measured and, in order to measure them, you need Metrics and Measureable Elements.

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7) SWOT: What are your internal Strengths and Weaknesses, and the external Opportunities and Threats in Playing the Game? How do you measure up to your rivals in this regard? In what way does your SWOT change as you move around the scenario Game Board? Most companies already do SWOT Analyses. In this Model, it is done in the context of the Game after profiling your Competitors. Thus, it is usually more accurate than one done in isolation. This SWOT Analysis gives you an idea about Tactics that play to your Strengths, overcome your Weaknesses, take advantage of Opportunities and counter (mitigate) Threats.

8) Options: What are your strategic and tactical Options (things that you can realistically do, that are within your control) to take the negative scenarios as far as possible out of play and allow you to thrive in the good ones? How do you get closer to the Rules to Win? Given a company has finite resources, Options need to be prioritized on the basis of importance/urgency, leverage (output to input ratio) and risk versus reward. Options can be exclusive where you can do either this or that; or be inclusive where you can do this and that. Normally the greater the magnitude of resources required, the more exclusive the option becomes. The most frequent trap a company falls into is to select a change in Scope (i.e. Strategic Direction) and then to not allocate sufficient resources to make it happen because do so falls outside the comfort zone of 'business as usual'.

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9) Decisions: What are the preferred options that, right now, are 'go' and can be turned into Decisions and actions? What is the initial action associated with each Decision. Who is going to do what, by when, and at what cost? What Options do you want to defer, either because they are lower priority or they will only be triggered by other Scenarios coming into play? Which Options are too risky or unethical and should be rejected? The difference between Options and Decisions is that in the former case you can be as wild as you like because you're not making a commitment. In the latter case, you are committed. Where an Option is exclusive, its selection will always carry the 'opportunity costs' associated with the Options refused. The Decision may therefore be harder to take than for an inclusive Option.

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10) The Meaning of Winning. What is your personal criterion by which you will judge whether the company (or you) has won or lost the Game in five years’ time? This should be expressed, as far as possible, as a Measurable Outcome.

Different people give different answers. For example, the Human Resources Director may well want the company to be the 'employer of choice' in the industry, one to which all smart graduates thinking of joining the field will apply. The Technical Director may want at least three revolutionary breakthroughs in product design so that the company is seen as cutting-edge in the industry. The CEO generally wants the share price to triple.

The result can be treated as the Mission Statement or Balanced Scorecard for the company over the next five years. It is a much more useful tool than the homilies that pass as Vision/Mission Statements in many companies.

The Workshop is completed only when the participants have completed the process of articulating for themselves, in individual statements, the Meaning of Winning. If the Strategic Conversation is occurring between multiple leaders in the same organization, the last action in the step is to convert individual statements into a single, shared statement of the Meaning of Winning for the organization.

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Conducting Strategic Conversations

The product of this Workshop is the process and the likelihood that Strategic Conversation will become routine within the organization and/or for the individual. However, the process produces a number of tangible physical products, which are developed on the Flipcharts that are used during the Workshop to record the responses and thoughts of the participants. The Flipchart pages are, post-Workshop, compiled in a Corporate Memory that is often referred to in subsequent Strategic Conversations.

There is no formula for the appropriate use of Strategic Conversation by an individual or an organization. There is no appropriate frequency. Some organizations will have a one-off conversation on strategy and only review it when the external environment changes to the point that it becomes obvious a review is required. Obviously, any Tactical Decisions taken during a Strategic Conversation, along with their associated Measurable Outcomes, are regularly monitored. The Game Board is continually updated to keep the organization’s Players aware of their competitive position. Other organizations like to review Strategy once a year before a new round of Operational Planning and Budgeting occurs.

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