The widely accepted view that strategy and execution are separable activities sets companies up for failure in a fast-paced world.
Your Strategy Should Be a Hypothesis You Constantly Adjust
Strategies must be constantly adjusted to incorporate information from operations and the market. Research on recent dramatic cases of strategic failure in different industries and involving vastly different business models and strategies shows a common pattern: What started as small gaps in execution spiraled into business failures when initial strategies were not altered based on new information provided by experience. These companies’ strategies were viewed by their top executives as analytically sound; performance gaps were blamed on execution. An alternative perspective on strategy and execution — one that is more in tune with the nature of value creation in a world marked by volatility, uncertainty, complexity, and ambiguity — conceives of strategy as a hypothesis rather than a plan. Like all hypotheses, it starts with situation assessment and analysis — strategy’s classic tools. Also like all hypotheses, it must be tested through action. With this lens, encounters with customers provide data that is of ongoing interest to senior executives — vital inputs to dynamic strategy formulation. The authors call this approach strategy as learning, which contrasts sharply with the view of strategy as a stable, analytically rigorous plan for execution in the market. Strategy as learning is an executive activity characterized by ongoing cycles of testing and adjusting, fueled by data that can only be obtained through execution.