Business strategy is like a lizard

Well, the real title was going to be “Business strategy is like a lizard: It leaves behind its tail while it grows a new one,” but that was just too long.

Strategy never exists in isolation: it’s always a response, a build-up, or a pullback. It also has to be passed down to all the layers of the organization to make these chances. It’s a very reactive business.

The problem, however, is that it’s way faster to come up with a strategy than to execute said strategy, which means that new strategies sometimes collide with older ones. And that’s what we’re going to discuss today.

Fast-moving lizards

Say your company wants to move into a new market with a new developed product and decides the best way to capture ground is to go aggressively into marketing and sales. So you start a marketing heavy strategy that includes heavy investments in the marketing software, hiring new salespeople and scaling up your infrastructure to handle those new sales. The strategy gets passed down to the business and operational layers, and they get to work.

The marketing department comes up with the new campaign, the sales department sends out new vacancies for more people and makes chances for their business unit to include them, and the IT department is figuring out the new infrastructure. 

Great stuff, the strategy was a success. Everything is going very well, and we are having some nice quarterly numbers. The problem, however, is that our operational cost has also grown by a significant amount. Not surprising considering all the investments we made.

After a few quarters the new strategy is going to focus on flattening that cost curve. We made the splash in the market, we are now a named brand, and we can ease up on the marketing part. So the memo gets sent out, “try to cut costs”.

This will, however, come as a shock to the different business units that are very much still in growth mode. They are still onboarding the new vacancies, and we are still implementing the new CRM let alone the infrastructure that is still in testing. Those are not costs that we can just lower, they will be reflected in finances for the year to come.

There is also a chance that we have overshot our implementation. If nobody got the memo that the growth period was only going to last for a year (or so) we might have overinvested in our infrastructure to house said strategy. 

In other words, our strategy has shed the tail and is growing a new one, while the old tail is still very present in the organization.

Drowning in the chaos theory

You might argue that the previous example is just a bad strategy. Fully reactive and not looking at long-term development while also not really looking at what’s happening inside the organization. And that might be correct, yet this exact same scenario is what happened in so many organzations in the aftermath of the COVID crisis. 

I don’t think anyone expected a crisis like that to emerge. Also not scaling up during that period was also not an option as you would have been left behind by your competitors.

The point here is that long-term strategy is a must, but it’s also impossible to fully predict the future. There will always be curve balls that come up that you will have to react to. As Mike Tyson once said, “Everyone has a plan until they get punched in the face”.

As for not knowing what’s happening inside the organization part, enterprises are vast places with many abstractions ¹. It’s truly impossible to keep all of this in mind while making a strategy. In the above example, those three points might come up in the strategy meeting, but for those three points there might be a hundred missed, like sudden switches in the seniority of the team, market trends, laws and regulations that suddenly pop up in reaction to world events, …

Strategy is not always communicated well

Strategy is only effective if it reaches the right people. And that is often a big issue in organzations. Sure, middle management will have an idea of the current strategy, but ask the very operational people about the current strategy, and you might only get very broad strokes. I personally don’t subscribe to the idea that operational people should only focus on operational tasks and should be “sheltered” from strategy. Strategy should be reflected on every level. If your strategy is to scale up your sales, the people who do first-line support will be affected by more sales-related technology questions. You can’t just expect them to go in unprepared.

I’m not saying every strategy decision should roll out with a full alignment with the entire organization, I’m rather advocating for a polite heads up. This can be as simple as a newsletter; I’ve even seen companies do podcasts.

The reverse is also true. The people that set out the strategy only know what they know. If they aren’t informed about the organizational situation, they might assume, and those assumptions might come back to haunt you.

Business strategy versus employee strategy

Another important part of this entire conversation is the human element. Companies are filled to the brim with politics; that’s just the nature of the beast. I’ve never seen a company that is free of company politics. In the case of this conversation, this will relate to career growth and sunken cost fallacies. I’m pretty sure I could write an entire other article about this stuff, but let’s go quickly over what I mean:

In the case of career growth, it’s not hard to imagine that company strategy and employee strategy might diverge. Leading and landing an important project is always a huge boost to your career. Now, what would happen if they had the lead in such a project and suddenly the company focus shifts? That would not only mean that your current project might not get the necessary funds and people, but it might even get binned. And even if you land said project with diminished resources and people, management might not even care all that much, the focus is somewhere else.

The will for landing this project is still there; this is all sunken cost fallacy² at work. If the lead of this project is well connected in the organization they might still get the resources and people needed. Going against the strategy to land the project. It’s nearly impossible to counter this.

The other case is more subtle. Again something in almost every company: people might just not really care about the direction of the company. If these people who might be doing something in a very particular way for a long time suddenly have to switch over to a radical new approach without seeing a personal upside, there will be resistance. In this case, you might think I’m talking about very operational people, but managers are just as susceptible to this. There are people that run entire departments that will not change their setup to conform to strategy. This might seem extreme to some people, but it’s definitely conversations like this that go on in meeting rooms almost on the daily.

So how do we fix this?

We don’t. 

There is no solution for this, and there shouldn’t be one; it’s just the realities of setting out strategy. I think that you should be very aware that when you set out new strategies, you should always do it in the context of your previous strategy, but even that will not suddenly fix all of these issues.

The other approach would be to make less big steering strategies, but then you will run into the probable risk of your competitors running circles around you. You might lose all momentum and become an oil tanker in a sea of speedboats.

It is, however, nice to be aware of these topics so you know of the gravitas of strategy making.