Looking at the big picture

If you do not know the mountains and the forests, the ravines, swamp and moors, you shall not be victorious. He, however, who is victorious because he knows how to change and fit the environment to his needs, deserves to be called a genius. e.g., (Tzu S., 2009)Sun Tzu

Reviewing the “Big Picture” is a major part of developing a strong business strategy. It is essential that strategies step back from day to day activities in order to see the business as a whole, allowing a strategy to be developed.

Reviewing the big picture may highlight areas of the day to day work schedule that are unimportant/no needed, thus making these activities redundant and displaying that they are currently not required.

Before a business can move forward, it must review its past. They key questions include:

  • What were the successes and where did they come from?
  • What has worked since the company started?
  • What has failed?
  • What projects have been attempted?
  • How has the past led to the situation the company is in now?
  • What lesson can be learned?
  • What lessons need to be unlearned?

In reviewing its past, a business can begin to understand the way in which it operates and the reasons behind it. Trends can be seen and the

intentions of different parties can be understood more easily.

Firms must also explore their future and review the outcomes of possible routes in order to establish the best possible route to take. Key questions include:

  • What is likely to happen to the company if current trends continue?
  • What happens if current assumptions are wrong?
  • How long can the business last if a key market disappears?
  • What great things could happen if the business changes directions?

Reviewing the future allows business’ to determine the best time to change its course of action from its current trajectory. Gaining a greater understanding of the future will allow the business to have a greater understanding of current implications and the affects they may have. A “bigger picture” allows for greater understanding, which in turn is more likely to result in a greater success rate.

An essential aspect of reviewing the big picture is to look outwards. Reviewing activity outside of the business, its markets or country is essential in developing a broad perspective to make better decisions. Key questions include:

  • What are the fastest-growing trends in the world?
  • What social changes could have an impact on the company?
  • What are competitors doing?
  • What are the new normal ways of doing things?
  • Is the business being left behind?
  • Who can the business learn from?

In looking outward, business’ can see what others are missing. Reading other industry magazines, experimenting with different technologies, understanding key aspects of other industries are all integral in allowing the business to find new markets, niches and gain an attackers advantage, giving value to their consumers.

Many employees focus on their day to day activities without understanding what they do and the affect it has on other aspects of the business. They are looking at the “smaller picture” and in order to review the larger environment they must answer some key questions:

  1. What is the official (or formal) strategy of the business?
  2. How well is the company and industry doing?
  3. What are other people saying about the company and industry?
  4. How does their job (and the work of their team) contribute?

There are a variety of essential questions one must ask of themselves in order to compose the bigger picture, thus allowing more informed, accurate decisions to be made. Not to look at the bigger picture is not to be strategic and this will inevitably result in the business not taking advantage of opportunities and not gaining a first mover advantage over possible threats.

It‘s important to look forward, backward and outside of the company in order to see the big picture, this however, is only the beginning.

The second key step is to break the various details into manageable pieces that create a bigger picture, thus allowing a greater understanding.

A simplified model of the big picture makes for greater understanding from all involved, reducing confusion and allowing greater strategic planning. Clear understanding of the implications of actions can be understood allowing those involved to understand each other’s arguments and reasoning.

It is only when one can fit pieces of information together in a big picture of a business that he has developed a strong strategic understanding. When reading about an event, a good strategist will be able to see the implications to the business and how they must plan for the future.

Good strategists will also posses the ability to draw simple diagrams of business functions, activities and a detailed analysis. He shall also be able to communicate their ideas and reasoning in order to build support.

In order to build the bigger picture of the business, some analysis tools such as PEST, SWOT, Porters Five Forces and the Value Chain Diagram can be used.

Each tool gives different information from a different view point, thus allowing a bigger picture to be built through a strategic point of view.

Author: Carlo Olmi

Structuralist vs reconstructionist

Building up a new strategy means dealing with added value and profitability.

Reaching ‘value innovation’ has been reviewed by many theoristsLeonardo Da Vinci bike over the years. The main topic of discussion concerns the origin of value innovation. Two main theses are related to the points of view of structuralist and reconstructionist.

Structuralists follow a structure, conduct, performance thesis where value innovation doesn’t come from the firm but it comes from fundamental changes in basic economic conditions and technological breakthroughs. Market structure, given by supply and demand conditions, shapes sellers’ and buyers’ conduct, which, in turn, determines end performance.

This means that inside the market structure firms are not able to add value and they will compete into a zero-sum game in which one company’s gain is achieved at another company’s loss. Like chess players, companies will apply strategies to compete within a strict value-cost trade-off. Also profitability is determined from conditions outside of the firm i.e. structural factors and companies principally seek to capture wealth instead of creating wealth.

Competition causes firms to develop new products and services, which would give consumers greater selection and better products. The greater selection typically causes lower prices for the products, compared to the possible price if there was no competition (monopoly) or little competition (oligopoly).

Companies that follow structuralist thesis will act strategically on the supply side of the equation focusing on dividing up by tailoring products to better fit customers demand.

On the other end of the spectrum we have the reconstructionalist view of strategy. This point of view is based on J.A. Schumpeter’s observation where innovation can happen endogenously (inside the firm).

The reconstructionalists view suggests that value innovation can occur in any company in any time by cognitive reconstruction of existing data and market elements in a fundamentally new way.

They move the strategy from the supply point of view to the demand point of view underlining that the market boundaries can be changed to unlock new demand.

This way it is possible to move out from the value-cost trade-off and there are not going to be any more attractive and unattractive markets since companies will be able to move the market boundaries in order to innovate and create profit.

Reacting is as important as planning

Reacting is about reshaping the strategy to match unplanned events. To be able to react it is needed to get feedback from the inner (inside the company) and outer world. A firm may react after factors such as government policy changes, consumer demand etc.

Reacting is also about adapting the company direction in order to compete with other firms and their activities; it is the “me too” approach that usually doesn’t drive the company to more profitable markets as they are constantly imitating others.

After applying a new business plan, a strategist has to start to monitor the inner and outer reactions to the new strategy.

The firms’ new strategy is less value innovative the sooner the competitors are able to react to the market changes. This is due to the fact that with highly value innovative strategies a new market is opened and other competitors have to deeply redesign their activities to follow your company moves. In order to reorganize their activities they will lose time allowing your company to set up countermeasures to limit new comers’ success. The strategist should be continually shifting through events for evidence about how the deployed plan is working. The danger is that following the plan too slavishly (without responding to events) will lead the company “efficiently” in the wrong direction.

The right plan can be made wrong by events and therefore the strategist must monitor these events too. Even worst would be not to follow any plan. It would almost definitely lead the firm to reach low to no profitability as the firm would find it difficult to link actions to create value for the consumer.

A good strategist will consider possible events in the market while planning (different scenarios) therefore being prepared to react to events faster and intellectually, which may possibly give the company the leading edge.

In the real world, it is highly possible that the intended strategy (deliberated strategy) is different from the realized strategy due to the adjustment applied in deployment phase to better focus environmental changes.

Some strategies or part of them turn into unrealized while emergent strategies, driven by market events, become part of the realized strategy. This phenomenon was first highlight in the H. Mintzberg’s “deliberate and emergent” theory (1985).

Mintzberg’s deliberate and emergent

Author: Carlo Olmi