By Hubert Saint-Onge
In my previous post, “A Guide to Sense-Making and its Link to Emergent Strategy,” I detailed a practical approach to Sense-Making, the benefits of which are directly linked to the development of Emergent Strategy. By engaging in sense-making, organizations can navigate ambiguity, identify patterns, and create narratives. This process transforms chaos into comprehensible information, renews assumptions, instills confidence for moving forward, and supports the formulation of effective strategic responses. This enlightening approach to strategy development can significantly benefit your organization.
The Intersection of Sense-Making and Emergent Strategy
While sense-making interprets a turbulent, fast-changing environment with a cohesive narrative, Emergent Strategy is an iterative way of giving shape to adaptive strategic directions. Flexibility and responsiveness are at the core of the Emergent Strategy Framework. The clarity sense-making brings to chaotic environments provides the starting point for an effective emergent strategy process. The Emergent Strategy framework emphasizes the organic development of strategic directions based on real-time feedback and learning from execution rather than rigidly structured planning proceeding in locked steps. It recognizes that strategies must evolve through experimentation and adaptation to navigate turbulent markets effectively.
Giving Shape to Emergent Strategy
It is challenging to determine effective strategic responses in highly ambiguous environments, which hide inscrutable complexity while prone to rapid, cumulative changes. Prediction is difficult at the best of times. It becomes impossible in times of ambiguity, high turbulence, and disruption. Dealing with complexity requires an emergent approach where knowledge and valid assumptions come from the learning generated through execution in the marketplace. Although it is difficult to determine the possible outcomes of highly chaotic change, leaders can gain a strategic perspective by seeking out variables that provide a profile of the changes involved by identifying early directional patterns and indicators.
Strategy is what you do to be successful in the marketplace. ‘Emergent’ means that the strategy takes shape by gradually deciphering changes while markets evolve at unprecedented speed. It is not a cognitive process of abstraction but works based on observing and interpreting actual market dynamics. Mindsets and collectively adopted paradigms mask what is happening and limit adaptability. Gradually, several hypotheses can be developed and tested against the evidence gathered. It may eventually become possible to gather enough insights to take action and respond to the market while it remains an enigma to competitors.
Even though it might be premature to make significant capital investments, plans offering different options can be developed and assessed to enable the execution of the one closest to the target, as market dynamics can be decoded more clearly. Identifying and monitoring key trigger points can help articulate new strategic initiatives, specifying when, what, and how. In the end, early movers will have the opportunity to shape the market. It is through experimentation that businesses best select strategies that can easily be modified to adjust their risk exposure over time. They can shape the market and leave competitors behind when they achieve this.
Leaders often fail to pressure test the strategies and business models they adopt. In ambiguous environments, they must look for vulnerabilities and be aware of strategies that are more susceptible to sudden shifts. There is a tendency to resist changing directions after making difficult choices that show early signs of success. It is not easy to walk the line between being alert to what is happening and not triggering additional sources of stress. Still, ambiguous market conditions do not forgive those who freeze their choices too early. Keeping a list of strategic exposures can help identify the potential for disruption, for instance, by choosing strategies potentially less exposed to sudden shocks. Team members must remain confident amid all the questions asked to track marketplace changes. The key challenge is that, by its very nature, it is impossible to have a high degree of certainty in an emergent market characterized by complexity and disruptions. Just as sense-making has to be the product of collectively generated insights, emergent strategy work has to be performed by a diverse team with a strong acumen for recognizing market dynamics that only yield a few reference points with the rest of the dots to be figured out, this explains why the key feature of emergent strategy is the integration of strategy formulation and execution. It is now obsolete to think that the organization can be segregated into those that plan and others that execute. Without more complete and solid knowledge, new assumptions must be tested and validated through an iterative execution process with concrete interventions.
An emergent strategy framework.
A. Description of the phases in each cycle
This diagram illustrates the dynamic components of an emergent strategy framework. The two key components are the Strategy Development (SD) and Strategy Execution (SD) cycles. The SD cycle includes the ‘scanning and diagnostic’ phase, most effectively generated by a sense-making exercise in environments characterized by high ambiguity. The ‘strategic targeted position’ phase outlines the outcomes the strategy aims to achieve. The ‘strategic goals/objectives’ phase describes how these outcomes will be achieved. The ‘strategic challenges and thrusts’ phase defines the obstacles that must be overcome to realize the outcomes.
The SE cycle delineates the execution road map, listing the sequence of activities. The ‘embed change in business’ phase lists the organizational changes that need to be implemented for the execution to be successful. The ‘leverage performance’ phase specifies what needs to be in place to keep enhancing performance as the strategy's execution unfolds. The ‘launch initiatives’ phase describes the mandates of the supporting projects and the teams responsible for managing them. Throughout these phases, rigorous attention must be given to what is to be accomplished and to find effective ways to get it done. When it comes to execution, leaders must be clear on how to carry out activities in the marketplace. Execution is not about what is planned as much as what is done. However, when working within an emergent framework, execution generates learnings that sharpen strategy.
B. Bridges
The bridges are blue connectors crossing the line between the SD and SE circles at each phase, ensuring that strategy development and execution are fully integrated. The emergent strategy mode verifies the validity of the plans made in SD through execution activity in SE. In contexts of high ambiguity, this is how the assumptions identified in SD are tested and adjusted to fit the reality of the market. The bridges provide the basis for learning and seeing through the fog of an ambiguous market. The bridges become key generators of the organizational learning required for both cycles. It is key for the teams working in different phases to make it a point to share their perceptions and generate a deeper understanding of the market dynamics at play as they refine and implement the strategy. The generation of learning, knowledge and capabilities are at the heart of the iterative adaptability inherent to Emergent Strategy.
C. Pillars
Focus, Capability and Coherence are fundamental to the execution of a strategy.
1. Focus consists of ensuring clarity about the strategy's targeted outcomes, which relate mainly to market positioning and performance in the marketplace. This is achieved by constantly sharpening the focus based on the results obtained through experimentation.
2. Capabilities are essential to successful execution. Strategic capabilities encompass the combined skills, knowledge, processes, systems, and structure that enable an organization to execute new strategies. (I have written about strategic capabilities at Human Resources as the Custodian of Strategic Capabilities ). Internally, the tendency is to downplay the need to develop new organizational capabilities to meet the challenges of a new strategy. Execution plans must include assessing the current capabilities and comparing those to the new strategy's requirements. Organization and strategy must be viewed as interdependent: both must be intimately tied and constantly adjusted to ensure successful execution. As new strategic orientations and goals are adopted, the organization may have to change to integrate new ‘strategic capabilities.’
3. Coherence is the Achille’s heel of strategy execution. It is key to ensure everyone involved is heading in the same direction. It happens all too often that different groups or teams working on strategy execution have different points of view on what the strategy should be and end up working at counter-purpose. The stakes are different when discussing plans and implementing them. Often, execution goes through internal pulls and tugs that send other messages to teams and their clients, causing confusion and erosion of focus. Coherence is a must for successful execution.
Leading the ongoing adjustments to Emergent Strategy and Capabilities
As depicted at the center of the diagram, the Emergent Strategy model requires the ongoing attention of the leadership to ensure the optimal fit of the internal environment with the external environments where it operates. The leadership must orchestrate the dynamics between these two dimensions by continuously assessing what is happening in the marketplace and ensuring the organization is constantly learning and dynamically aligned.
It is key that leadership pay attention to applying the Emergent Strategy framework and oversee the alignment between SD and SE toward a winning strategy. Sense-making discussions should occur as often as required by the pace of change to ensure current market readings. The strategic changes required should be validated through the Emergent Strategy framework. When new market developments are detected, assumptions and interpretations must be pressure-tested. Leaders must relentlessly subject current strategies, processes and business models to the rigours of the experimentation inherent to the Emergent Strategy framework, allowing purposeful actions to occur quickly.
Leaders set the tone by ensuring the organization's operation fits the marketplace's evolution. Inexorably, an organization does what it is organized to do. Combining capability development with execution as part of the Emergence Strategy framework is crucial: capability adjustments and development must be an inherent part of the learning stemming from disciplined execution.
The strategy direction and goals adopted as a key result of the approach shown in the diagram determine the capabilities required of the organization. These capabilities include organizational structure, culture, processes/systems, strategy making, and the collective strength of the leadership, which orchestrates how it all comes together as a coherent whole to realize new strategic intentions. For instance, changing the organizational structure and the responsibility maps might become essential. Building organizational muscles aligned with your strategic goals will allow you to adapt successfully to emerging market dynamics, capitalize on the relevant capabilities already developed, and achieve the desired results. To avoid falling behind, leaders must ensure that change has to be as dynamic as the market.
Conclusion
Emergent markets are propelled by turbulence and disruptions that defy predictability. The ambiguity of these markets means that business leaders must work with what is beyond what they know. The Emergent Strategy framework provides an approach to explore and pierce through the fog surrounding these markets. This entails combining well-guided sense-making with a highly iterative and adaptive execution process. As they experiment with the execution of different options, they can confidently arrive at new strategies that demonstrate a strong potential for outdistancing competitors and gaining ground in the market despite the lack of clarity. The pace and strength of the strategic response and organizational capability development depend on the speed and depth of the learning from execution.
Unlike strategic planning, which is episodic, the Emerging Strategy framework helps leaders foster an organizational culture where people constantly take the initiative to refine how the organization deals with the marketplace's emergent nature. Judiciously using this framework helps a business ensure ongoing coherence with the turbulent evolution of these markets. Then, the organization will no longer be disabled by ambiguity.