Friday, June 5, 2015

How to Leverage Systems Thinking in Strategy Making

Systems Thinking allows studying "forest" in order to be able to see "the trees in their context."

Digital strategy is the dynamic planning with well set of guidelines to achieve coherent goals through a series of specific actions. This definition clearly suggests the value of Systems Thinking in devising such a strategy. With the dawn of the digital era, there is an interdisciplinary convergence of diverse science, both “hard”  and “soft,” as well as humanities essential to the evolution toward a circular digital economy. So when preparing business strategic plans, IT, marketing, sales, financials, HR, etc. are all needed to get involved, to be critical and creative: What are the basic business 'assumptions' mostly flawed, invalid. And how to leverage Systems Thinking in Strategy Making?

In the business planning process, System Thinking helps to make more logical “assumption.” When trying to determine the macro environment and how the factors there influence business strategy/plan one way or another, it is difficult to move away entirely from assumptions. Everything has more than one side and you have to master them all, including assumptions: You have to make them, but you will never have complete information, and if you try to only act on what you know by the fact you are more likely to go wrong. Another label of assumption is "forecast." You can always put a semantic spin on the word and call them projections, but then again, those "projections" are very often based on conjecture or assumptions.  But in the business planning process, assumptions should be kept to the minimum. The defining document of your business should not be based on assumptions. Of course, if you’re entering a space where there is no historical record of standards and procedure, it is acceptable to draw conclusions to some degree. But, keep in mind that every unsubstantiated element of your plan is a loose brick in the wall of success! In the case of your financials, "assumptions" should be thought of as qualified projections rather than the best guess. Business can be only done on facts and that too objectively assessed while business vision requires imagination power, but the same needs to be validated at repeated intervals. If the assumptions are WRONG, the CONCLUSIONS also go wrong.

Define three changes enabling strategy implementation by leveraging Systems Thinking. Organizations must relate their current business environment continually to those assumptions made when the plan was first devised. If these are changes in the assumed conditions, you must ask how this affects the business currently and going forward. Business benefits arise when people act in new ways. Customers, staff, partners need to do something different to make business benefits to occur. Therefore, investing in business improvements often fail because you try to forecast the result only. The fact is, you need to define three "changes" to get reasonable control: (1). Enabler (2). Process change enabled (3). Results from process change. When you define these three kinds of changes, you need to find the KPIs to measure for each of them, and assign the change owners for them, Not doing this is the cause of all wrong assumptions.

Emergent strategy is nowadays a fact. The strategy is always 'emergent,’ especially in the digital era with "VUCA" characteristics, Systems Thinking helps manage such Strategy-Execution dynamism more effectively. Even when you do a 'strategy exercise' and created a new strategy, it changed slowly and surely into something quite different within a year or so as you started implementing. And this happens because of two reasons. The environment is constantly changing forcing business to 'adjust,' but also because you cannot figure out the 'various possibilities' that may happen as you 'intervene' in the environment. Strategy in implementation is alive and, therefore, adapting and adjusting continuously to ground realities and the real world. Those who plan the solutions need to also be capable of implementing them. Only this coordination between the plan and implementation can succeed. It needs to be done in real-time. And the problem solving and crisis resolution must be handled in real time by as many involved parties as possible. Therefore, Systems Thinking and analytics are crucial for the success of strategy execution.

And the days when businesses spent months doing all sort of analysis and preparing detailed plans are gone. Today is about being prepared and having the organizational capability to deal with the unexpected digital disruption, without losing sight of the business objectives and priorities. Systems Thinking allows studying "forest" in order to be able to see "the trees in their context." Hence, it is critical to leverage Systems Thinking in digital strategy making, to make strategy execution an ongoing journey and dynamic continuum.


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