The new dynamics of strategic management

HOW WE ARE SHIFTING FROM HIERARCHICAL TO

DYNAMIC STRATEGIC MANAGEMENT

January 21, 2019 Håkan Ozan Articles, Digitalization, Innovation

management

Things are not what they used to be

The general dynamics of strategic management have not changed much over the
last few decades. We have been relying on a “waterfall approach” to manage large
and small organizations. The strategic direction of the organization has always been
the responsibility of top management, with the objective to describe the purpose of
the organization and communicate its path. And that approach is fundamentally still
valid – the responsibility of the vision and the general direction of the organization
still lies with the top management team. Their duty is to set strategic direction,
which means they need to use strategic intelligence to find smarter ways to beat
the competition; the same principle as is warfare.

But things are progressing. The great issue is that the world is now overflowing
with information and the amount of change and the speed to market today has

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never been seen before. So how on earth is a top management team supposed to
keep up with all this change and make the most appropriate and timely
adjustments to the strategic path they have set? The simple answer is, they can’t
and they shouldn’t. Let me motivate this argument.

How things have changed

Traditionally things have worked just the way I describe above. Top management
sets the strategic direction and path for the organization – not too rarely on a
three-year basis. This overall organizational business strategy is then
communicated to the rest of the organization to conform to, and to form their own
sub-strategies, supporting the business strategy in achieving its goals. After three
years the business strategy is revisited and renewed, possibly with minor
adjustments. Then the sub-strategies are adjusted accordingly.
This is where things are not working out anymore.

For instance, assume that the top management team communicates a certain
strategic direction to the CIO. The CIO then creates an IT strategy to support the
business strategy. This puts the business strategy in the driver’s seat and the IT
strategy in the passenger’s seat. Then suddenly new machine learning algorithms
appear alongside a new positioning solution resulting in new delivery models that
together disrupt the industry while new startups are entering the market with
millions in venture capital to pursue this new technology-driven business model.
There is no way the CIO of that company can sit around for another two years and
wait for the next version of the business strategy to arrive while the company is
being overturned. (S)he needs to be proactive, analyze and evaluate how these
new technologies can be incorporated in the current business, update his/her
strategy, and act accordingly. And fast! The same goes with new user patterns in
the market and how the CMO needs to react and respond to them. And so on.

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The implications on current strategic management models

So strategic direction can no longer follow the traditional top-down, hierarchical

“waterfall” model where the main business strategy sets direction and the rest of
the organization follows. All the strategies need to be incorporated into a dynamic
ecosystem of specialized strategies, where the change signals come from the latest
market- or technology updates in each area and are then communicated and
adapted throughout the business system of the organization. (See the infographic
at the bottom of this article.) Whenever a new technology is released, a new patent
is approved, a new user pattern is starting to take place, a new startup has
received a large funding scheme, etc., then every strategy in the organization
needs to be re-evaluated. Because the new reality is that A STRATEGY IS VALID
ONLY UNTIL THE NEXT PIECE OF INFORMATION IS RELEASED TO THE MARKET.

This is the new era of strategic management. Now we must cope with this new
reality and build a dynamic, sensory intelligence system that continuously feeds our
strategic intelligence function(s), analyzes and evaluates the implications of this
new information, establishes a new direction, and correspondingly updates all our
other strategies. Strategic management is no longer what it used to be.

As project management has become more and more agile, strategic management
needs to become more and more adaptive. Because face it, what is a strategy
really, if not a long-term overarching “project plan”. And by the same logic as with
agile project management, where the purpose is to adjust when new situations
arise, strategic management is now facing the same reality. But possibly with more
severe consequences if managed poorly. If a project fails, it can cost dearly. If a
strategy fails, it can be devastating. So as with project agility,
strategic adaptivity needs to become the new standard for corporate planning. The
strategy process needs to perpetually scan, connect, absorb and adapt, for the
busness to survive. Systematic strategic intelligence has never been as important
as it is today. And it will never have been as negligible as it is today.

So how is this relevant for innovation and digitalization?

The short response is that it is crucial to both functions. These days strategic
intelligence cannot be an ad hoc activity that happens when some employee
occasionally visits an industry fair. It needs to be organized, structured, and
continuous, constantly feeding the organization with the newest and most relevant

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data into its decision-making process. Those responsible for innovation
management and digitalization in the organization need to be on top of this to
ensure that all units of the organization are fully compliant with this dynamic
ecosystem. Else their mission will fail. They must be an integral part of the system
that feeds the intelligence into their evaluation process. The innovation leaders and
digital leaders are responsible for the infrastructure, the methodology, the tools,
the analysis procedures, the data storage, the availability and communication of
information found, etc. The CIO and CINO are together responsible for the
effectiveness of the strategic intelligence system, but also for turning the input into
competitive digital innovations. Because without digital innovation, dynamic
strategic intelligence is nothing but a mirage.

This infographic visually summarizes some of the content in this article. You can
use it freely (under a Creative Commons licence) by just clicking and downloading
it.

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