By: Ignacio Barros
In the traditional strategic-planning model, managers attempt to forecast how markets will evolve and competitors will respond, and then define a multiyear plan to position their company to win in this future state. That worked well when markets were more stable and the primary factors influencing future growth and profitability were easier to forecast. But the world is now changing so quickly that no business can plan for every eventuality.
The world is now changing so quickly that no business can plan for every eventuality. Scholars and practitioners have spent years crafting tools and frameworks for strategy development under uncertainty—including, most notably, scenario planning, Monte Carlo simulation, and real options analysis. But none of those techniques has caught on widely. Fewer than a quarter of large organizations regularly apply them in capital budgeting, fewer still in strategic planning.
We believe that business leaders need to reconsider what good strategy looks like in turbulent times—and to think of strategy-making as a continuous process that generates a living, dynamic plan.
What DELL decided to do
Dell Technologies is one company that has made the shift. In 2014, shortly after Michael Dell took his company private, its leaders put in place a new, continuous approach to strategy development and resource allocation. At its core is the “Dell agenda,” a backlog of strategic issues and opportunities that must be addressed to improve the long-term performance and intrinsic value of the company. Rather than devise a “strategic plan” to address the agenda, Dell’s executive leadership team defines a multiyear outlook (MYO) for each of the company’s businesses.
The MYO establishes a forecast for the performance trajectory of each business on the basis of decisions leadership has already made; it does not incorporate decisions that leaders might make in the future.
The MYO is compared with a multiyear performance goal that is defined separately and tied to leadership’s strategic and financial aspirations for the company. Invariably a gap exists between the MYO and those aspirations. This is helpful and a cornerstone of the approach: The Dell agenda focuses the company’s executives on making the decisions necessary to close that gap. Moreover, the Dell agenda is evergreen: as soon as one issue has effectively been addressed (and the MYO updated to reflect the resulting performance commitments), a new issue is added to the agenda from the backlog. As a result, Dell has a “living plan”—which captures all decisions that have been made—and a process focused on making decisions to drive better performance.
Thinking of strategy-making as continuous and generating a living plan enables executives to build on what’s best about existing tools for coping with uncertainty—leading to more-flexible strategies and more-agile strategy-making.
Although many promising tools have been developed to help cope with uncertainty, most executives struggle in consistently applying them to make better decisions. Winning in uncertain times requires a new model for strategy development. Companies that move quickly to adopt the more dynamic approach we’ve set out will pull ahead—and stay ahead—in the coming decades. Those that stick with their “plan then do” ways risk falling irreparably behind.
- Strategy-making in turbulent times – Harvard Business Review (Set-Oct 2022)
- Why DELL’s new developer-focused strategy is a “smart play” – www.crn.com (May 2022)
- How to confront uncertainty in your strategy – McKinsey & Co (Mar 2018)
- SYNERGOS internal cases