Putting the pieces together: The intersection of strategy and agility
This post was adapted from APQC’s “Strategic Planning and Implementation Best Practices for Achieving Organizational Agility” best practices report. View an overview of the study findings or download the full report.See the full series.
This post was written by Holly Lyke-Ho-Gland, a research program manager at member-based nonprofit APQC, the world’s foremost authority in benchmarking, best practices, process and performance improvement, and knowledge management.
As I noted in the first article in this series, organizational agility is becoming more important as organizations have to deal with more turbulence in their business environment -- caused by disruptive technologies, the internet of things, more demanding customers and growing regulations, among many other developments -- than they did three years ago.
This means that organizations have not only to stay aware of changes in their business environments (strategic responsiveness), but also to be flexible enough to change direction and implement new initiatives quickly (organizational flexibility). This is both in order to avoid risks and to achieve competitive advantages.
One of the big questions we wanted to understand in this study was: what strategic planning practices improved organizations’ ability to identify, assess and plan for the ever-emerging threats and opportunities on the horizon. In other words, what strategic planning and assessment practices improve strategic responsiveness?
Setting the "right" pace"
One word you see over and over again when talking about agility is speed. Hence, it makes sense that the cadence of assessments and strategic planning activities would have a direct impact on an organization’s agility. We keep hearing that “faster is better.” But does that mean we need to be in a constant state of flux and abandon the structured planning process because it’s obsolete?
The simple answer is “no.” Having a set cadence for planning and assessment practices provides the structure that organizations need to balance long- and short-term objectives, the time to implement and test initiatives. A set cadence also creates the buy-in necessary for adoption.
So, what is the right cadence of activities (and how far off the mark are organizations)?
Generally speaking, strategic responsiveness increases with the frequency of corporate strategic-planning activities. Most of the survey respondents use an annual planning cycle. However, organizations that conduct either continuous or annual planning with quarterly rolling plans have the highest level of strategic responsiveness.
Though ongoing corporate planning has the highest level of strategic responsiveness, there is negligible improvement between ongoing planning and using an annual planning with quarterly rolling plans. Organizations that use an annual planning cycle with quarterly rolling plans have the ability to balance long- and short-term goals and ensure a structured method to review changes in the external business environment and incorporate them in the strategy as needed
In addition to the cadence of planning activities, we also asked the study’s participants about the frequency of their assessments (internal and external) they use to support the planning process.
Internal assessments include information on the organization’s people, process, systems, and performance, while external assessments include information and trends from outside the organization (e.g., business environment, social trends, and competition) to support the strategic planning process. The internal and external assessments are typically conducted at intervals that align with the regularity of strategic planning activities -- annually.
What we found was that organizations that conduct internal and external assessments on a continuous or quarterly basis tend to have the highest levels of strategic responsiveness. Continuous assessments allow organizations to make decisions based on real-time information. However, organizations need to ensure that decision makers are not overwhelmed by real-time data and that they include context for decision makers.
Building it into the process
To further explore the role of strategic planning practices, we also studied which strategic planning methods improve strategic responsiveness.
Most of the survey respondents use either budget-based planning or balanced scorecard planning methodologies. Although these two practices did not have a significant effect on strategic responsiveness, the following two, less prevalent practices did (Figure 1).
Scenario planning has a positive impact on strategic responsiveness. Scenario planning is a methodology that some organizations use to develop flexible long-term strategies. It requires organizations to:
- collect inputs (e.g., social and market trends, political or regulatory changes, and financial or operational performance data),
- draft scenario situations around potential opportunities or risks,
- disseminate the scenarios to the participants,
- facilitate a discussion on the various scenarios,
- pinpoint the scenarios’ implications, and
- ultimately create outputs (e.g., scenario triggers and mitigation or action plans).
Scenario planning, by its very nature, supports strategic responsiveness. It’s a structured practice that ensures decision makers are looking at future opportunities and risks, assessing them against organization’s needs, identifying early-warning triggers and developing contingency plans they can execute quickly.
Systems analysis has a negative impact on strategic responsiveness. Systems analysis is a method to deconstruct a business or procedure into its component parts in order to understand the overall system's effectiveness and role of each component in accomplishing goals. Systems analysis supports understanding core competencies, interactions between component parts and root causes, but it is also complex -- its multiple iterations of analysis to verify results are time-consuming. So it makes sense that the method would prolong decision making and the overall strategic responsiveness of an organization.
In addition to the planning methods, organizations need to ensure they are using the “right” inputs to maximize their responsiveness. Hence, we also explored which internal and external inputs organizations tend to use and which ones affect organizations' strategic responsiveness (Figure 2).
Generally speaking, organizations tend to use an array of traditional planning inputs: organizational performance, budget, and customer satisfaction; as well as industry, market and competitor trends. Most of these inputs focus on in-process and lagging indicators and overlook the leading indicators that can help organizations proactively react to changes in the business environment.
What we found was that there were four key inputs that helped organizations improve their strategic responsiveness. The first two, customer retention and perceptions of the brand and organization, are leading performance indicators which help organizations pinpoint opportunities and threats early and provide an opportunity to develop a contingency plan.
\The other two inputs serve additional purposes. Core competency assessments help organizations objectively understand their strengths and strategic or marketplace advantages. This information helps organizations objectively determine if an opportunity is a good fit. Finally, monitoring social trends, much like using scenario planning, allows organizations to forward for new opportunities and risks.
Overall, organizations that want to improve their strategic responsiveness should consider the following:
- Use planning methodologies such as scenario planning to create a structure for anticipating future changes and establishing contingency plans.
- Move to a quarterly schedule for planning activities, be they corporate planning or internal and external assessments. Quarterly planning activities keep plans flexible and allow organizations to adapt to new opportunities and changes in their business environment.
- Don’t focus only on lagging and financial measures. Organizations that include honest assessments of core competencies combined with leading indicators such as customer satisfaction, social trends, and brand perceptions can identify opportunities and risks earlier and assess their fit quickly.
Although organizational agility is a two-part concept, most organizations are more competent in strategic responsiveness than in organizational flexibility. This finding parallels general trends in strategic planning and transformational change. It’s typically not the redesign plans that are the source of the frustrations but, rather, the implementation practices.
In the next article we will explore the role of implementation practices on the second half of the agility equation -- organizational flexibility.
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