Direction

The Direction function is the centre of strategy. All the other functions on the Performance Panel feed into strategy and are guided by it but the direction function forms and enunciates the strategy, setting the priorities and goals of the organisation.

Strategy is primarily about the big picture, the large scale and the long term. It is about major commitments over time and the deployment of organisational resources. Strategy gives direction to the organisation and enables all its activities to align and coordinate to create value. However, the trick with strategy is that, once it is defined, forces compel it to change and adapt. One of the big myths about strategy is that it is neatly planned and conveniently predicts the future. The reality is that it is an ongoing process of thinking and analysis that accommodates the changing nature of life.

The direction function is about the strategic thinking process. It looks at factors required to set a strategic direction that is linked to operational realities. This is why it is on the alignment axis with the Production function. A strategy that cannot be put into action is a fantasy. Operations without strategy are reactive and at the mercy of luck and external forces.

There are two circles of strategy used here, inner strategy and outer strategy. Inner strategy is about organisational factors that the organisation has some control over. It focuses on the decisions about internal functions and priorities. Outer strategy focuses on the forces at play in the world that affect the organisation. These are factors the organisation cannot control. It may be able to influence some but largely has to adapt itself to deal with them. Both inner and outer strategy are intimately entwined and constantly impact on each other.

There are many things to consider when developing a strategy. Four themes are selected for inner strategy and another four for outer strategy to highlight the range of organisational functions strategy addresses.

Inner Strategy

Market Niche

Drawing on the information developed with the Enrichment axis an organisation must know who it serves and the type of value it creates for them. This is critical for strategy. This enables an organisation to make decisions about its core business, the research and development program, its suite of products and services and how it approaches the market.

Relationship

Adding the information from the Involvement axis the organisation must understand its stakeholders and build constructive relationships with them. Without these relationships and organisation cannot succeed in meeting its goals. Integrating these into the direction of the organisation is important. It requires decisions about which relationships with people, groups and organisations it has to prioritise, cultivate or relinquish.

Set Patterns

As the organisation develops its direction and production plans along the Alignment axis it must focus on how it organises itself. It sets up patterns of behaviour embedded in its systems, methods, and practices. It develops a culture that reinforces what is to be normal in the organisation and how it deals with people. Focusing on this culture and the patterns in it are important as it will either open up or close down opportunities. The patterns must have goals as well as the capacity to adapt. If strategy cannot be reliably converted into outcomes the organisation will decay.

Revenue Generator

Generating revenue is a universal priority across all activity in the organisation. Regardless of its goals an organisation has to pay its way. It has to recognise its primary sources of revenue and focus on its viability and how to secure it. This includes planning for future revenue on the grounds that market needs change and what generates revenue today might not do so in the future.

Outer Strategy

Customers

Finding, keeping and satisfying customers hinges around emotionally engaging them. This involves more than producing quality products or services at the right price. Listening to, understanding and responding to customers' needs, preferences and choices are important. An organisation’s strategy has to constantly focus on current and shifting priorities for customers and prospects.

Substitutes

An organisation might currently satisfy a customers with its products and services but that is not enough. Other products or services may appear as substitutes for yours. Customer priorities or needs may change making room for other substitutes. Other providers with different ways to deliver products and services or engage customers may appear as alternatives to an organisation delivering the same products and services. Disruptive technologies and changing public policies will continue to generate alternatives to an organisation’s products and services.

Standards

The standards in quality, solutions, regulations, taste and style can all change. Sometimes this comes in a predictable way through consultation and clear processes. Other times it comes quickly as a result of a innovation, events, crisis or popular fads.

Unmet Demand

The continuous introduction of new products and services to the market place or the constant demand for services in the community sector show that the opportunity for meeting unmet demand is always possible. How to make this financially viable through relevant products and services with matching skills and resources is a significant strategic agenda.

There are many things to consider before an organisation can set its vision, strategy and priorities. The Strategic Forces Wheel helps to put some structure around that. It doesn’t cover everything in the sense that strategy is dealing with the large and variable nature of life. The wheel is not a check list, it is a navigation device to help move through some of the strategic process.

Below are examples of some of the issues an organisation might encounter as it reviews the strategic forces affecting it. The diversity of issues illustrates why a check list cannot be used for strategy and direction. What is needed is ongoing strategic thinking.

Market niche

• In a time of growth and successful business, will the organisation stay focused on its core business or explore new business opportunities? If it diversifies its products and services, how related are they? Will the organisation start or continue as a conglomerate?
• Knowing that the world around it is changing, will the organisation look to change its products and services? How effective will its current products and services and method of delivery be into the future? How are customer expectations changing?

Relationships

• Where is the organisation meeting its customers and stakeholders? Is it largely face to face or are its customers wanting to deal with them on-line? How will it emotionally engage them for the long term?
• How stable is the workforce? How effective is the organisation at attracting and retaining talent? How many senior staff are set to retire? How can the organisation build the commitment and careers of younger staff?
• How is the organisation represented in the social media world? Are customers dealing with issues in twitter or forums rather than direct, personal contact with the organisation? Who is providing a clear voice for the company in the world of short sound bites and 140 character twitters?

Set Patterns

• How well positioned is the organisation to deal with regulations and regulatory requirements? How is it involved in the policy making process that is designing the next generation of regulations?
• Where are the organisation’s work locations? How do these locations affect staff commuting as travel congestion increases? Can the current locations viable for the work-life balance of experienced staff?
• How is the organisation creating and maintaining productive work environments? What systems and supports does it have in place to balance the need for fewer distractions but more collaboration?
• What workplace flexibility does the organisation have in place compared to rigid work schedules? How can it design business continuity to accommodate for family friendly, personal and community outcomes?
• Is the organisation outgrowing its systems and how it delegates responsibilities in the organisation? Is it time to move to new levels of professionalism in how it organises itself?

Revenue Generator

• What are the organisation’s primary, reliable sources for most of its revenue and margins? How well will these be able to do this into the future? What technology or trends are a threat or opportunity for this income stream?
• How is the organisation preparing for economic downturns? What can it do to shock proof its income stream? How can it use its budgets to keep its knowledge and skills base intact during periods of low demand?
• How can the organisation accessing finance in tighter finance market? What sources are available, other banks and government?
• Does your organisation rely on margins or volume for its bankable income? How does the business approach of other providers and the process of globalisation affect the relibability of this strategy?

Customers

• How does the organisation positively engage customers’ issues in an age of customer activism? How quickly can it respond? How does it resolve issues for customers in a way the reinforced a positive reputation?
• How well does the organisation track and use information about customer engagement and their ongoing relationship? What are the critical steps required to build even stronger customer bonds?

Substitutes

• How do shifts in start up costs affect the arrival of new entry competitors? Where are your next competitors coming from?
• What emerging factors are creating alternatives to your organisation as a provider of products and services? Where will the next disruptive technologies or shifts in fashion come from? What challenges will they produce?
• What impacts or opportunities are created by globalisation? How much are your products and services tied to local production and delivery? How does this affect your ongoing attractiveness to customers?

Standards

• How well is the organisation complying with government and professional standards? How well does it manage relationships with regulators and accreditors?
• How up to date are the organisations communication and public access standards? How are they developing to deal with changing communication practices, such as trends in the use of mobile devices?
• How is the organisation meeting formal and informal standards for remuneration of employees? How does it benchmark with industry for maintaining the level of skills it needs? How certain is it that it can meet its future obligations for entitlements?
• How is the organisation’s data security being managed for current and future threats? How does it maximise accessibility by employees and customers while protecting itself from malicious activity?

Unmet Demand

• How does the organisation scan changes in customer expectations? What are the emerging needs? How well is it positioned to meet them
• Where are the opportunities to expand current products and services to satisfy unmet demand in alternative markets? How can the organisation achieve this in terms of growth or partnerships?

Reinforcement Actions are events or processes to strengthen your people and organisation. They help people learn and develop effective outcomes for the organisation.

Some actions that can facilitate strategic thinking in your organisation are:

Strategic Analysis

Incorporate the strategic analysis into strategy and business planning processes. Organise a series of review and data interrogation processes that report to the planning process to enable structured and informed decisions.

Leadership Retreats

Hold back the tsunami of meetings, decisions and demands that typically flood your executives each day. This flood usually absorbs the intellectual capital of your leaders, reducing their time to reflect and collaborate on the big picture agenda. Use leadership team workshops or retreats, linked to business analysis processes, to scope out possible directions for organisation.

Executive Visitations

Conduct workshops and seminars were the leaders of the organisation sit down with groups of staff and other stakeholders to discuss their view of the organisation and its future. Encourage people to think about their work as part of the bigger picture and a network of people working across the organisation.

Performance Agreements

Ensure that all performance agreements in the organisation link people’s roles to the strategic and business plans of the organisation. Use this to both align activity and build up people’s sense of purpose.

Change Management

Use the processes around change in the organisation to reinforce a strategic view and sense of direction. Do change management thoroughly to ensure people experience change as something that makes things better and not as a burden that builds resentment towards future change.

The example section above highlighted some types of issues that organisations might canvass as they engage in critical thinking. The exercise here offers a set of general questions that can be used to facilitate strategic conversations.

Do not rely too heavily on this list or any other list. Even though the items here are open ended questions they may channel your thinking down particular channels which could lead to missing other important issues. The overall strategic conversation needs an open process to capture the unexpected and unnoticed factors that could influence your strategy.

Market Niche, Positioning and Value Creation

Position

What do other people, customers or organisations think it is that your organisation does?

Value

What value does your organisation produce that creates benefits for your customers and others?

Niche

What is the niche you aim to fill by creating value of a particular type, at a particular place, at a particular time?

Relationships, People and Groups

Support

Who does your organisation rely on for support, customers and investment?

Relationships

What are the critical make or break relationships that influence your organisation more than others?

Outsiders

Whose are the voices that don't get heard by the organisation? What are they alerting you to?

Set Patterns, Norms, Processes and Assumptions

Patterns

What are the patterns of behaviour, decision making, customer service and dealing with change that help or hinder the organisation?

Norms

What are the hidden norms (rules) that people comply with in this organisation?

Processes

Which processes liberate and increase productivity and which are obstacles or burdens?

Assumptions

What activities or priorities are in place that haven't been challenged and reviewed for some time?

Fundamental and Recurring Source of Revenue

Generator

What generates most revenue and profits (financial and non-financial) for your organisation?

Critical

What business area would bring the organisation down if its market was suddenly disrupted?

Growth

What emerging business areas will be major contributors to future revenue?

Redundant

What business areas no longer create value or generate revenue and are unlikely to do so in future?

Customers, Feedback and Market Expectations

Need

What is the need or benefit customers are addressing when they seek your products or services?

Feedback

What are customers telling you about your products, services, their future needs and how your organisation performs?

Expectations

What are the indicators that tell you what the market expects and will expect in terms of the value, products and services you provide?

Substitutes and Competition

Substitutes

What alternatives to your organisation, products or services are available or could become available to customers and investors?

Competition

What competition (organisations, distractions, events or lobbies) is there that could lead people away from your organisation, products or services?

Standards, Technology and Regulation

Standards

How are market, industry or social standards shifting that could affect your organisation and the place of its products and services in the market?

Technology

What technology is becoming redundant, emerging or could be developed that will influence how effective your organisation is at providing value?

Regulation

What regulations hinder or facilitate how you do business? What future regulations could emerge that will influence your organisation?

Unmet Demand and Growth

Demand

Where is there demand for your products or services that is not currently being serviced by you or another provider? Do you have capacity to meet this demand? How does this demand affect the viability of your organisation?

Growth

What capability for growth do you have? How will growth affect the character and brand of your organisation? How would any growth be resourced?

The Strategic Forces items are influenced by several factors. The first is the work of Mintzberg, both in the variety of strategy and the unpredictable nature of it. For this reason the focus is on strategic thinking and dealing with the forces that influence current and future organisational life.

Another factor is the origin of strategy. People are familiar with its links back to military thinking but the term goes back further. In ancient Greek, the Στρατηγός (Strategos) in Greek or Roman society might be either a military official or a civic leader. Either way, it was a term for a person expected to lead and get results. So the approach here is that strategy has to be practical and with clear objectives. This is further reinforced by the work of Bossidy and Charan, who point out that any strategy that cannot be converted into operations and integrated with people is a waste of time.

The framework here is not a comprehensive or final word on strategy. That is not the nature of strategy. Rather it is an angle of inquiry for strategic thinking to help leaders and groups pin down the key factors they need for setting their strategic objectives.