Eleven chief strategy officers (CSOs) from major global companies met by phone to share leading practices and discuss topics of mutual interest based on an agenda created through advance interviews. The group represented a cross-industry perspective including financial services, pharmaceuticals, utilities, healthcare, staffing and human resources management services, retail, telecommunications, and paper product manufacturing.
Quotes of the Day
“[How do we] respond to changes that hit us off cycle? Because nothing ever seems to happen to us when we are in the middle of strategic planning, it’s always before or after.”
“I struggle with how to maintain a disciplined planning process and be super flexible, agile, and responsive to new opportunities or threats.”
“The idea of uncertain times [included in the agenda and being discussed] … I wonder whether we are in a period of uncertainty or whether this just is the medium-term new normal.”
“It felt like the big hairy issues that we were facing, the big hairy decisions we needed to make, were just as important [after the election] as they were prior to [it] … and that really made me wonder if scenario planning is overrated.”
“With the level of uncertainty in these times, what I’m really challenged with is: what level of commitment do I have from the CEO, our management team, and our board? So that when disruption occurs, we’re committed to acting.”
“We try to take fundamental views of where the market is headed long term, and the outcomes of elections, etc. may hasten or slow down progress toward that end space.”
“We try to put uncertainty into our evaluation process. We try to be extremely transparent about the level of uncertainty, which is hard to do, and most people aren’t comfortable doing that … when people bring forward new strategies or initiatives or business cases, [we try] to have a very open dialogue about the unknowns.”
“It’s too easy, when the model’s been mature for a long time, to move into a new stage and accidently build as if you are as equally certain in the new world as you were in the other.”
“I feel like between the board and the executive team, there’s complete agreement that we need to change, and on what those big levers are that we need to pull … but when push comes to shove, and it’s ‘We really need to take this very risky or uncertain action now,’ then it becomes really challenging.”
Planning and Agility in Uncertain Times: Current Approaches Questioned and Adapted
- The group discussed planning and agility in what CSOs signaled as a time of potentially deep, ongoing global uncertainty. Many traditional approaches were consequently questioned, including scenario planning, the inclination toward positive spin, and current reward structures that tend to favor action over innovation and questioning.
- BRG said key issues to discuss include the new face of strategy, which is about being agile in a measured way, and the need to reconcile the desire for safe bets, with the notion of perpetual disruption. Members further agreed that factors driving uncertainty and ongoing change include politics, economics, and—potentially the largest issue—technology. Despite the tumultuous outlook, several CSOs noted with surprise how little recent, unexpected geopolitical events have affected their company’s macro priorities.
- Given the currently uncertain climate, members agreed that “best-bet” initiatives can only work if supported by senior leaders; therefore, time must be spent helping them understand and commit. One CSO added that even when senior management agrees on the need for strategic change, there is a danger of getting bogged down in organizational issues and/or responding to the loudest voice in room, instead of doing what makes the most strategic sense. More broadly, CSOs feel a need for a fundamental shift in senior management mentality in terms of how businesses are to be run in uncertain times.
- To better address uncertainty, it must be admitted and included, up front, in evaluation and other processes. Members see teams as being: unrealistic about the unknowns; unconscious of how far outside their comfort zone they might be; unaware of the point at which they may outstrip current expertise levels; and, finally, working as though they were equally certain in the new world as they had been in a the old one.
- In an effort to increase the focus on unknowns, one CSO has adapted a discovery-driven model that puts the biggest uncertainties front and center in the planning process, while investments are dependent on passing “gates.” Another CSO is making uncertainty a culture issue by shifting the basis for rewards, including compensation, from “drive and do” to innovation and asking questions.
Engineering Agility: Planning and Resources
- Members and BRG discussed the challenge of increasing strategic agility without abandoning existing processes, as well as shared practical approaches to incorporating and funding agility within current frameworks.
- A discussion on funding agility indicated that success could depend on the nature of funding and how it is monitored. Operational funding, with venture capital–style progress reports, may be more flexible and better suited to agility planning than capex funding, where funds are deployed “period.”
- In one example, agility relies to a large extent on having “a fairly big chunk” of funding in the capital allocation process, which is used for responding to market threats and opportunities. The principal danger here, the member said, is market signals driving over-commitment in the first fiscal quarter.
In a second example, the member is using a similar reserve funding process, but to maintain discipline, teams provided with funding are asked to justify progress and further investment at biannual strategy retreats.
Comparing the examples, it was noted that in the capital cycle funding case, report-backs would help, as would some operational funding, given that that contingency capital is often used for tactical and operational emergency response, rather than strategic agility.
Meanwhile, another organization identified that across their enterprise, it was largely the top eight or ten executives that were thinking about the issues that required agility, and the challenge would come when the need to be more operational around the agility-centered decisions commenced.
- To address this, an experiment has been set in motion that established eight councils driven by second-tier leaders reporting directly to top management. Each is charged with developing recommendations to solve enterprise-level, cross-functional issues. Initial benefits include a wider pool of agility thinkers and a sharper focus, given that this is now a “council job” rather than a “day job.” It has also removed a bottleneck created by the original executive group feeling they all had to meet to drive strategic decisions because there was no other natural mechanism. Asked about council authority and funding prioritization, the CSO said these are still evolving but presently would characterize the councils as “recommendation” groups.
“No Regrets” Moves and Pessimistic Outlook Now Favored
- Members discussed the use of scenario and/or no-regrets planning, with doubts expressed about the former following the surprise outcomes of the recent US election and UK Brexit referendum. From the discussion, it would appear that being clearer about unknowns and negative outcomes is more useful in the current climate. At the same time, it was noted that the impact of events such as elections on macro planning may be overrated.
- One CSO described their UK-based company’s Brexit approach, saying it used the worst-case scenario as a baseline. From there, over the course of several months, various futures were explored; with the encouragement of senior management, potential options were then narrowed down to one “best-central” option that was firmly anchored in worst-case outcomes. Planning is now moving forward on the basis that the fullest possible range of risks and opportunities have been considered.
- It was broadly agreed that while recent events have taken members by surprise, they appear to be having less impact on the big “hairy decisions” than expected. This has led some to conclude that “no-regrets moves” are more useful than scenario planning. However, one CSO suggested that scenario planning remains valid as a means of considering plausible, long-term futures and related business needs, thus serving as an idea-generation tool on which to base “no-regrets” planning.
- A Europe-based CSO agreed on the shift to “no-regrets” moves, adding that upheavals (including Russia’s invasion of Ukraine) had additionally made them see a need to wait for the actual—rather than assumed—facts. They are also taking a more careful approach to short-term priorities given that scenarios, previously about variations on a common view, now tend to be about swiftly approaching T-junctions with “right or left” choices.
- Members with clearly defined baseline planning assumptions provided detailed examples of how little these were affected by the US election. For example, an energy-sector CSO said they are betting on increased long-term usage of renewable energy. The practical outcome is investments in areas of more certainty, such as solar, and the politics of the day are expected to affect this trajectory only in terms of slowing or speeding the process.
- Members also variously observed that: the US election was humbling; its impact may have been over-weighted, and, even where different scenarios are developed, the actual strategies undertaken are often the same.
Macro versus Micro Strategies, and Does Timing Matter?
- The discussion on the US election’s apparently limited impact on macro planning led to another on the differences between macro-level planning and micro-level implementation. The broad conclusion was that the micro level is often the greater challenge because “actually pulling the trigger” in terms of deciding exactly when, how, and what will happen is more of an undertaking than agreeing on the broad strokes.
- Most CSOs agreed that timing and the sequence of events are essential to both agility and strategic success. However, one member questioned this, saying they had not seen clear evidence that holding back or pushing forward at particular moments had a major impact.
- Members who see timing as a key issue said it is often tricky, no matter what the circumstances, to decide when something should happen, as change will often be resisted, either in good times (on the basis that “if it ain’t broke, don’t fix it”) or in bad times (when improvements may be seen as too late/too hard to implement).
Meeting and summary notes protocol
This BRG CSO Quarterly Consortium session was held under the Chatham House Rule, which reads: “When a meeting, or part thereof, is held under the Chatham House Rule, participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.”