Reshuffling strategic priorities without losing your balance

Firms that operate in uncertain and volatile markets best build their strategy around three main layers that each have a specific role towards building a sustainable competitive advantage.

  • Layer 1 seeks to get the most out of the existing core business of the company.
  • Layer 2 is geared towards growing new promising businesses.
  • Layer 3 makes sure there is dedicated attention to exploring radically new ideas and opportunities.

But what happens to this nicely layered strategy when ongoing uncertainty turns into an unexpected crisis that prevents even some of the most basic functions to operate?

Clearly, attention to the core and protecting the essence of one’s business is paramount.
Yet, next to ‘saving’ the core, you would also want to prepare for the possibility that the measures taken to deal with the crisis may trigger a new normal; and that, in the mid to long term, this new normal may challenge the fundamentals of your business even more than the crisis itself. Think of the Covid-19 crisis we are currently dealing with: What if teleworking becomes the norm? What if consumers who, out of necessity, found their way to online shopping, end up preferring this channel? What if digital becomes the new way of learning, visiting a museum, or entertaining ourselves?

In that case, selected ‘futuristic’ ideas from layer 3 may need to be put in the spotlight and get more focus, while other may be temporarily de-emphasized. Also, ask yourself: Are there some fundamental strategic choices pertaining to the core business that should be revisited? Key in this rebalancing of priorities is to thoughtfully select which parts of the strategy to boost, which ones to slow down, and which new elements to add while others get scrapped. One simple and powerful way to go about this is to map different possible scenarios.

We probably all agree that the Covid-19 crisis will get to an end, some day; and that it will have an impact on the economy. But no one knows exactly what the impact will be. Instead of trying to predict the future, the basic idea of scenario mapping is to envision different plausible “what if…” scenarios, think of what may lead us to one or another, and use that insight to inform strategic decision making. For instance, what would need to be true for your customers to prefer virtual interactions and not return to old habits of coming to your stores? Which combination of events might make social distancing have lasting impact? Or, under which circumstances would the economy not just recover, but actually emerge stronger within 3 to 5 years?

Now, these high-level scenarios may be informative and useful as a general compass. The consultancy firm McKinsey&Company has actually developed a couple that are getting quite some traction in board rooms nowadays. But you will want to go beyond that. You will want to develop scenarios that are specific to your industry and the markets where you compete. And you will want to think about the implications for your business. You can do that by following 5 key steps that are central to the scenario mapping technique.

Scenario mapping in 5 simple steps:

1. SCOPE – Decide on the particular industry / sector / geography and timeframe you want to build scenarios for. You may turn this into a question that will guide you through the exercise. For instance: What will the world of business education look like in 2025?
Key: Don’t be too broad so that scenarios remain too generic; but also don’ t be so narrow that you may miss important evolutions beyond your current scope of activities.

2. EXPLORE – Do your homework researching all trends and evolutions that could impact your industry within the studied timeframe.
Key: Focus on external trends and uncertainties. Implications for your business will come later in the process.

3. PARAMETER – Select few critical uncertainties from step 2 – that is, things that are highly uncertain but whose outcome will have a big impact on the industry – hence it makes sense to build scenarios around them.
Key: Be parsimonious (2 critical uncertainties is more than enough) and select uncertainties that are as independent as possible from each other.

4. IMAGINE - Create stories about possible outcomes of the selected uncertainties for key stakeholders; and what would lead the industry to one or another.
Key: No taboo – the more you will consider extreme outcomes, the more likely the actual future will fall within the range of options you have considered.

5. CONCLUDE – Derive implications for your organization. Looking at the 3 layers of your strategy, what can you do to minimize negative consequences and seize new opportunities that the scenarios have surfaced?
Key: There are many ways to leverage the scenarios. In the context of the current crisis, conducting a stress test of your current strategy is probably a must.

Interested in the latest thinking on how to lead your business through turbulence? 
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