STRATEGIC DESIGN IS MORE THAN STRATEGIC PLANNING

Every organization of every size has eight separate strategic design elements.  Each element strategically shapes the organization.  By this I mean it provides guidance to the people in the organization on what to do and what not to do; what direction to head in and which ones not to head in; how to do things and how not to do things; how to behave and how not to behave.  The organization’s plans and policies or rules are the most obvious elements which provide this guidance but there are seven other elements—often giving subtle but strong guidance.

 

When the organization is small and young it is characteristic that few if any of these design elements are written or formal.  This is a real benefit at this stage in the organization’s life, since it  does not have the time or resources to formalize these elements.  Even if it did it is not experienced enough to design them well.  Additionaly they are in a constant state of flux as the young organization discovers it’s self!  They are likely to change frequently as the organization learns.  As the organization grows in size these elements start to become written and/or formalized.  This allows the organization to grow with out the leader being involved in every decision.  Unfortunately as these become formalized two significant problems arise.

 

MISALIGNMENT

The first is that each of the elements tends to evolve on its own without coordination and integration with the others.              Thus senior leaders create strategy in response to the environment, while HR struggles with the structure, and Accounting with the information system and no one bothers with the culture.  Thus it is more common than not to find organizations where these eight elements are not in alignment.  In fact they often give conflicting information to employees.  For example, our new strategy says focus on customers and their needs, yet everyone knows you get promoted for taking actions which save money or are brilliantly creative.  This; sort of misalignment between strategy, structure, systems, culture and rewards results in tremendous inefficiency and low organizational productivity.  It is like a car whose wheels are all misaligned and pointing in slightly different directions.  You can drive the car, but it takes more energy (gas), burns up more resources (tires) and if you go too fast the whole thing shakes so you better not take your hands off the wheel.  Few leaders are sufficiently skilled or interested in all the eight elements to give them the focus that is required for alignment.  In a sense the higher in the hierarchy you are the less the factors constrain you.  Thus the leaders are often unaware of the misalignment.

 

AUTOPILOTS

The second problem as these elements become formalized is that they become rigidified and resist change.  Two decades ago we began  to think of them as autopilots on a supertanker.  They kept the ship on course.  If the captain changed course with the steering wheel (strong leadership) the ship would start to turn—slowly.  But if the captain left them helm for a second, the auto pilots hidden in the depths of the ship would whirr away and put the ship back on its original course.  Change requires that each and every ofn the eight auto pilots (strategic design element) must be changed to the new course.  Not bringing all eight into alignment with a new direction is a major reason that change fails.

 THE EIGHT STRATEGIC DESIGN ELEMENTS Although the eight elements are distinctively defined below, in reality they overlap and shade into one another.  Because of this the eight factors interact in such a way that you can never design just one perfectly.  As you design one and go on to the next one your explorations will frequently lead you back to fine tune the first one now that its implications on the second one are clearer.  Thus one cycles through the eight elements over and over again—adjusting and fine tuning. In this process it generally helps to start at the top of the list and work down wards rather than start at any other spot.  This is so because more likely than not you need decisions in all the elements above the one being worked on to design the one at hand. 

For ease in remembering the eight elements we have chosen a word that begins with ‘S’ for each.  The ‘S’ system also pays homage to the Seven S’s that McKinsey Consultants

Developed in the ‘70’s.

 

1-Scan: A well articulated description of the key opporthreats in your business environment.

 

2-Spirit: Begins with CEO’s values and expands to organization’s culture, attitudes, beliefs about customers, how people relate to one another and the community.  In the mature business the culture can become larger than any CEO and is a strong provide of continuity from CEO to CEO.

 

3-Strategy: Purpose, direction and broad choices on how to achieve them. Especially relevant are the basic strategies for growth, profit and competitive advanatage in a business.  These in sum might be called the business model.

 

4-Structure: How the work is divided up; who reports to whom. Who is responsible for what.  Who has what authority?  Centralization vs. decentralization. Degree of delegation.

 

5-Staffing: The match of individual knowledge, skills, desire and style to the job requirements.

 

6-Systems: What we measure, monitor and control. And the mechanisms for doing this.

 

7-Support: How we allocate resources.  Budgeting in most cases.

 

8-Sanctions: The formal and informal  rewards and recognitions; both intrinsic and extrinsic.

  

 NEW BUSINESSES REQUIRE DIFFERENT ALIGNMENTS

 

Each business has a set of these eight elements which will favor the growth and health and efficiency of the business.  Add a new product/service and their will be significant misalignment if only because the new product/service is developmentally new.  If it has a different market or different set of success drivers or different strategy, the misalignment will be even greater.  This is why innovation may fail.  Christensen’s recent book the Innovator’s Dilemma presents strong data for this long established principle of strategic alignment with a new directin as a critical success factor.

 

In my work in reviewing why dozens of collaborations fell apart or achieved only modest success, the lack of alignment of the collaboration project with the parent organization’s strategic elements always played a critical role.

 

Ichak Adizes seminal work on the developmental stages of organizations (Corporate Life Cycles by Ichak Adizez: Prentice Hall.) points out that each developmental stage requires a resetting of the eight autopilots as well as their integration.  For over a decade methods for quantitatively assessing misalignment have existed and have begun to create a respectable data base.

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