Open strategy: managing disruption from outside the C-suite
by Christian Stadler, Julia Hautz, Kurt Matzler and Stephan Friedrich von den Eichen (MIT Press, 2021)
In July 2019, José María Álvarez-Pallete, the chairman and CEO of Telefónica, asked his 115,000 employees a simple question: what would you do to improve the company? The answer was loud and clear: develop a new strategy. Four months later, he agreed and launched the biggest turnaround in the company’s history. Álvarez-Pallete broadcast the company’s entire “executive Summit” live to all employees and invited comment and response. The engagement continued on a large scale – that year it saw 11.5 million posts, comments and reactions from employees on the digital platform. He also participated as a sign of his commitment. This was more than a one-off exercise in seeking input.
Opening the strategy process in this way gives rise to better ideas, more realistic plans and more effective execution than a traditional closed approach, say professors Christian Stadler (Warwick University), Julia Hautz (University of Innsbruck), Kurt Matzler (University of Innsbruck ), and Stephan Friedrich von den Eichen (University of Bremen) in their substantive and eloquent book, open strategy. It certainly takes a lot of courage and skill to make it happen.
Traditionally, a small group of executives develop a strategy behind closed doors and then broadcast it to the organization. When leaders invite others to contribute, it is often seen as a sign of weakness, which diminishes the status, authority and control of the leaders. However, the reality is that leaders often find it difficult to develop imaginative ideas on their own, shackled as they are by their conventional wisdom and groupthink. It is even more difficult to encourage their employees to sign up for a newly developed strategy, as they have not been given a say in how the strategy should be implemented. It is therefore no surprise that between 50% and 90% of strategies fail (including well-known examples at giant companies such as Nokia, GE and Daimler). The authors boldly state that a lack of openness is a greater obstacle to success than a wrong strategic framework, a lack of intelligence or bad advisors.
Open strategy is more than a set of tactics or adjustments to an existing strategy. It requires leaders to believe that strategy is likely to be more distinctive and actionable when more people are involved. Open leaders show vulnerability by admitting what they don’t know. They respond to unfamiliar ideas with a “yes, and” mindset:Yes, this is a great idea, and to make it work in our company, we have to do X.”
Frontline workers, closest to customers’ needs and concerns, should be given a prominent platform to share their ideas. Barclays’ retail bank has taken this approach in refining its strategic plan. Outsiders, especially those from other industries, can help mitigate the impact of cognitive biases that hinder insiders’ ability to detect early signs of emerging trends, as long as those outsiders are sufficiently vocal, abundant and sponsored. Outsiders are also fighting the lack of cross-fertilization of ideas in large organizations, a problem that plagued Microsoft when it tried to create a competitor for the iPhone and BP when poor communication between the technical team monitoring security and the operations team in BP’s Deepwater Horizon contributed to the catastrophic oil spill of 2010.
But you should not confuse an open strategy process with a ‘free-for-all’ process. “To do open strategy right, you can’t just jump right in,” the authors write. There are important nuances of when, how and by how much to open the process. Early on, use digital platforms to crowdsource as many ideas as possible – using contests and ‘jams’. In 2007, Cisco Systems launched I-Prize, a global competition to help the company build its next multi-billion dollar business; out of 2,500 external entries, it awarded the US$250,000 prize to a German company that proposed a sensor-enabled smart power grid using Cisco’s IP technology.
You should not confuse an open strategy process with a ‘free-for-all’ process.
In person, convene a smaller group as you move to the next stage of strategy formulation. This makes it easier for participants to share more information, go into more detail, and pick up non-verbal cues in discussions. Open the process back up to implementation, such as through communities, when you need the people charged with the work to get involved in the design. Don’t play it safe: “Try to host a competition when you’re faced with a complex or new strategic challenge, when best practices don’t exist, and when you don’t know what kind of skills or expertise you need,” the authors advise.
The goal is not democracy. Leaders must act vigorously, and sometimes unilaterally, to formulate the strategic question. In the case of Saxonia Systems, a German software company, that meant asking people, “Where do we want to go and how do we get there?” Leaders must then choose who to involve, establish the rules and incentives for engagement, select the platform for participation, and ultimately make the decisions. Transparency is fundamental: employees need to understand how their contributions have been assessed and put into practice; otherwise their participation is seen as strategic ‘theatre’.
Openness should not be confused with sharing confidential information. Even at Bridgewater Associates, a US investment management firm known for radical transparency, some information remains proprietary and highly restricted. The same goes for the military. The US Navy invited contributions to several questions it was considering that didn’t require sharing sensitive operational details, such as: What new assets could turn the tide in the Somali pirate situation? Or: what new risks could arise that would change the Somali pirate situation?
The authors have set out the approach in such detail and clearly that immediate action can be taken. The visuals are fantastic and vividly bring the concepts and frameworks to life. Two of the authors, Matzler and von den Eichen, are partners with IMP Consulting, which runs a program called Nightmare Competitor Challenge. It is especially effective in helping organizations think in detail about disruptors before deciding whether to fight them or become one. The scope and depth of case studies – in business (particularly from German-speaking countries to complement the more well-known American examples), in the military, and in science today and throughout history – demonstrate the effectiveness of the approach.
There’s more to be said about developing and implementing a strategy when your organization relies heavily on other participants (as orchestrators, partners, or complementors) in ecosystems. Nevertheless, this is a must-read strategy book for any executive, investor, consultant or academic seeking a fresh, dynamic and inclusive approach to strategy in a world of complexity and uncertainty.
Along with a diagnosis, the authors pose seven questions to test your openness before you begin — my favorite is “do you prefer Miles Davis or Johann Sebastian Bach?” (If you like improvisation, you’re more likely to be open to an open strategy.) They also recommend opening gradually, identifying which companies are most prone to disruption, and amplifying outside voices.
If leaders want to rethink their organization’s strategy to compete in a changed world, sticking to what and who they know can be a safe bet. But when faced with disruptive threats, they must take the bold step to open up their strategy process. They may find legions of collaborators and outsiders willing, able, and willing to help develop plans that are “fresher, more innovative, better informed, and easier to execute” than the ones they would get through the traditional process.
Better, Easier Strategy: A Values-Based Guide to Exceptional Performance
by Felix Oberholzer-Gee (Harvard Business Review Press, 2021)
This book delivers on the promise of its title by distilling strategy into a beautifully simple premise: winning organizations create value by increasing customers’ willingness to pay (for products and services) and the willingness of employees and suppliers to sell (their services to customers). the organisation). The gap between the two is the length of the ‘value stick’. Oberholzer-Gee demonstrates the power of this tool to describe the strategies of a diverse group of companies, including Best Buy, Michelin and Uber.
Love as a business strategy: resilience, belonging and success
by Mohammad F. Anwar, Frank E. Danna, Jeffrey F. Ma and Christopher J. Pitre (Lioncrest Publishing, 2021)
Many companies advocate a strategy that puts people first. Few do them well. Fewer still use the power of love. The authors use the transformation of Softway, a human resources consultancy where they work, to describe how to create a culture that is truly empowering and human. The stories are authentic and candid, which makes this book more accessible and action-oriented than many others.
- David Lancefield is a strategist and coach who has advised more than 35 CEOs and led 15 digital transformations. He is a contributing editor of strategy+business, and he also presents the interview series Lancefield on the line and publishes the newsletter Flashing+sparks.