Making the strategic conversation a process

Managers tend to be rational decision makers. Their rationality is mostly bounded by the recognized options available. The preference for rationality is well supported by the corporate calculus machinery. Net present value, or metrics alike, is looked at when considering the next steps in the strategic dance around the competitive equilibrium. Actors are supposed to move in a predictable way. And, as long as predictability reigns, things are very well.

Unfortunately, uncertainty has become the new norm. The options available become both vaguer, and more options might appear on the strategic radar screen. In the preface to the second edition to his seminal book on scenarios, Kees van der Heijden writes ‘Uncertainty has the effect of moving the key to organizational success from the “optimal strategy” to the “more skillful strategy process”’. The subtitle of the book is “The art of the strategic conversation”. Today, more than ever, when a lot of decision processes are highly influenced, not to say paralyzed, by the consequences of Covid-19, managers are well advised to move away from the sphere of illusionistic predictability and adopt another approach to cope with navigation and decision making.

Strategic conversations are about how to find a fit between plausible futures that might come at the organization, and what repertoire of activities the organization can mobilize.  Well designed they bring a multitude of perspectives making the conversation very rich. But the richness will turn into information chaos if there is no way to structure it. The scenario practice has proven to be a very powerful tool to cope with vast amounts of information and uncertainty. Scenarios not only bring structure, they engage in an inspiring way with plausible futures, allowing managers to make journeys into the future, and back. Decision making in the present is then informed by their “memories of the future”.

We see very notable examples how organizations use scenarios as a central ingredient in making the strategic conversation a process. A classical design is to have scenarios informing the strategy review at the beginning of an annual strategy process, and then evaluate the strategy proposal against the scenarios before decisions are taken. Another way to engage with scenarios is to have scenarios to inspire the generation of strategic options. Most scenarios are built on key uncertainties. Another use to stage the strategic conversation based on scenarios is to have a series of workshops, or alike, around the uncertainties, and perhaps, letting the learning not only inform the strategic conversation, but also the scenarios, potentially calling for revisions. We do also see how business intelligence systems are used to track and inform on signals connected to the uncertainties encapsulated in the scenarios.

The turbulence managerial decision makers must cope with, will probably not diminish. To live in a world of predictability is to call for trouble. To design a proper process for the strategic conversation, supported by e.g. scenario thinking, is a way to increase the probability of making intelligent choices in an uncertain world, and sleep well at night.

Mikael Paltschik
Senior Advisor
050 344 6953