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Strategy Development has followed a set path since the last century where a predetermined, rectilinear, and inflexible approach defined the process.
In the 21st century, however, business leaders are devising Strategy by evolving it into a probabilistic, repeated, and multifaceted process. An approach that can both endure and adapt to the growing pace of Change and Disruption that is manifesting itself in all industries.
Using gaming, AI, unremitting execution, and adjustment, with numerous scenarios to deliberate on, leaders create “Flywheels” that successfully tackle the not so deterministic world where the future is highly uncertain.
Flywheel is a concept originally used in the power industry to explain an origin of stabilization, energy storage, and momentum. The concept was propagated in the Strategy context by author Jim Collins. Employing the Flywheel concept, executives are able to validate assumptions through simulations as well as in the real-world scenarios.
Rather than using past assumptions and relying on instincts, using the Flywheel Strategy, decision makers exploit the power of Artificial Intelligence (AI) and Advanced Analytics. They model the multitude of variables and produce a sizable number of simulations that propose many strategic bets, option-value bets, and no regret moves.
Instead of numbing decision-makers with a profusion of options they created, the simulations render elucidative insights. Also, the AI system is made more capable through learning mechanisms called Reinforcement Learning by selecting from the above strategies.
The collection of strategic choices is increased exponentially and cost of experimentation is diminished by this approach. Decision-makers are also empowered by this tool to make better decisions. Likewise, organizations are able to select accurate market approaches, pricing, advertising, and customer strategies for several cities and communities, over a time span.
Strategy Flywheels can be used as a basis for developing Growth Flywheels by organizations. The Flywheel Strategy approach consists of the following 3 phases:
- Sense: Market Sensing
- Think: Strategy Formulation and Investment Planning
- Act: Performance Evaluation and Learning
The dynamic and resilient Flywheel Strategy of Sense, Think, Act has 3 parts, which are based on establishing policies, contending with dynamic models within the background of environmental assumptions, and handling randomness.
Let us delve a little deeper into the 3 phases.
Sense: Market Sensing
Environmental assumptions are formulated through this procedure of extraneous Market Sensing.
Uncertainties to which probability assignment is difficult are the target of Market Sensing activity. Most urgent strategic matters can be detected and senior leaders consistently engaged in devising a response to them by recurrently sensing extraneous market changes.
Improvements in Machine Learning and cutting-edge AI can aid in not only expanding the quantity of information scanned but also enhancing the quality of content evaluated.
Think: Strategy Formulation and Investment Planning
Conventional strategic thinking can be aided in the new way of strategizing by the 3-phase process for Gamification—Design and Build, Simulate, and Evaluate.
A stable strategy consists of a portfolio of investments and projects with diverse risk profiles. Diverse risk profile of performance is a mix of:
- No-regret moves
- Strategic bets
- Option-value bets
Act: Performance Evaluation and Learning
Performance Evaluation and Learning from the efforts has to be carried out so that improvement in proficiency to sense the market and experiment with new ideas occurs.
Interested in learning more about how Amazon and Uber used Flywheels, how the Gamification approach is used in Flywheel Strategy formulation, and what constitutes a diverse risk profile? You can download an editable PowerPoint on Flywheel Strategy here on the Flevy documents marketplace.
If you are interested in becoming an expert on Strategy Development, take a look at Flevy’s Strategy Development Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.
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“Strategy without Tactics is the slowest route to victory. Tactics without Strategy is the noise before defeat.” – Sun Tzu
For effective Strategy Development and Strategic Planning, we must master both Strategy and Tactics. Our frameworks cover all phases of Strategy, from Strategy Design and Formulation to Strategy Deployment and Execution; as well as all levels of Strategy, from Corporate Strategy to Business Strategy to “Tactical” Strategy. Many of these methodologies are authored by global strategy consulting firms and have been successfully implemented at their Fortune 100 client organizations.
These frameworks include Porter’s Five Forces, BCG Growth-Share Matrix, Greiner’s Growth Model, Capabilities-driven Strategy (CDS), Business Model Innovation (BMI), Value Chain Analysis (VCA), Endgame Niche Strategies, Value Patterns, Integrated Strategy Model for Value Creation, Scenario Planning, to name a few.
Learn about our Strategy Development Best Practice Frameworks here.
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Companies often know where they want to go when it comes to Strategy Development. Companies want to be more agile, quicker to react, and more effective. They want to deliver great customer experience, take advantage of new technologies to cut costs, improve quality and transparency, and build value.
Yet, while most companies are trying to get better, the results tend to fall short. One-off initiatives in separate units do not deliver big enterprise-wide impact. Improvement methods that were adopted almost invariably yield disappointing results.
Senior leaders have a crucial role to take in making things happen. Business Transformation cannot be a siloed effort. A Next-generation Operating Model is essential to break through organizational inertia and trigger step-change improvements.
Understanding the Next-gen Operating Model
Companies need to commit to a Next-gen Operating Model if they want to build value and provide compelling customer experiences at a lower cost.
- Integrated, Organization-wide Operational Improvement Program. This approach is focused on Customer Journeys and distinctive customer experience. The Integrated, Organization-wide Operational Improvement Program is a holistic approach towards how operations can contribute to delivering distinctive customer experience. It cuts across organizational siloes in both customer-facing and end-to-end processes. This approach is a preferred organizing principle. Having multiple independent initiatives within separate organizational groups can deliver incremental gains. However, the overall impact can be underwhelming.
- Holistic Customer Journey. This is an approach that makes use of multiple capabilities instead of individual capabilities to achieve greater impact.
The holistic Customer Journey is achieved when the 5 core capabilities are utilized.
Discovering the 5 Core Capabilities
There are 5 core capabilities essential in unlocking the most value in the shortest possible time. Two of the 5 capabilities are Digitization and Advanced Analytics.
Digitization is the process of using tools and technology to improve journeys. It has the capacity to transform customer-facing journeys by creating the potential for self-service. It has the power to reshape time-consuming transactional and manual tasks that are part of internal journeys more so when multiple systems are involved.
Another core capability worth knowing is Advanced Analytics. This is the autonomous processing of data using sophisticated tools to discover insights and make recommendations. It provides intelligence to improve decision making and enhance journeys when nonlinear thinking is required. This is very useful in claims triage, fraud management, and pricing.
There are 3 other core capabilities that are essentially important in these days of Digital Transformation. These are Intelligent Process Automation, Business Process Outsourcing, and Lean Process Design.
Intelligent Process Automation is an emerging set of new technologies that combine fundamental process redesign with process automation and machine learning. It can replace human effort in processes that involve aggregating data from multiple systems taking a piece of information from a written document and entering it as standardized data input.
Business Process Outsourcing works best for processes that are manual. It uses resources outside the main business to complete specific tasks or functions. Back-office processing of documents and correspondence is an example of BPO.
The Lean process Design is one capability that helps companies streamline processes, eliminate waste, and foster a culture of Continuous Improvement. It is considered a versatile methodology as it can be applied in multiple processes.
Organizations can use these capabilities to achieve the greatest impact. The maximum effect, however, can be achieved when specific implementation guiding principles are followed.
Interested in gaining more understanding of the Next-gen Operating Model within the context of Digital Transformation? You can learn more and download an editable PowerPoint about Digital Transformation: Next-gen Operating Model here on the Flevy documents marketplace.
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