Last week I was a panelist on an event hosted by CEDA on the topic of strategy after the global financial crisis. One particular theme that came out of the discussions was a reduced reliance upon prediction and planning. This is significant becuase traditionally, this is what strategy is all about. There was some recognition of the value of scenario planning, but still, not as a tool for prediction, but as a tool for helping managers respond to unforseen changes.
Now its hard to tell if the economic shocks from the past 12 months will have a lasting effect on the way organisations approach strategy, but there was a definite level of disatisfaction with current strategy practices and a broad agreement that we need to stragegy in a different way, that is more compatible with being ‘nimble’ and ‘adaptable’. If we can’t predict the future of our business envrionments, then how do we stay ahead by being better at sensing opportunties, adapting to changes and experimenting with ideas?
Perhaps the broad framework for strategy in the 21st century is a process of managed evolution. In Eric Beinhocker’s excellent book “The Origin of Wealth” is a chapter on strategy called “Racing the Red Queen”. The title refers to the character from “Through the Looking Glass” who tells Alice that you have to do all the running you can to stand still. In other words, Beinhocker’s argument is firms that stop evolving become history.
So what does it mean to manage evolutionary strategy? Beinhocker’s advice is straightforward…
“The key to doing better is to ‘bring evolution inside’ and get the wheels of differentiation, selection, and ampification spinning within a company’s four walls. Rather than thinking of strategy as a single plan built on predictions of the future, we should think of strategy as a portfolio of experiments, a population of competing Business Plans that evolves over time”.
The thing about Beinhocker’s approach to evolutionary strategy is that it mirrors the processes around good innovation management, but at the level of business plans. If both strategy and innovation are processes that are deeply affected by uncertainty, then managing them both as an evolutionary process makes a lot of sense.
It’s about time we stopped pretending that we can predict the future and start feeling at home in a very uncertain world with both pitfalls and tremendous opportunties.