Strategic Design is More Than Strategic Planning

Every organization of every size has nine separate strategic design elements. Each element shapes the organization. Each provides guidance to the people in the organization: what to do and what not to do; what direction to go in and what to avoid; how to do things and how not to. The organization's plans and policies are the most obvious elements providing this guidance but other elements often giving strong guidance. The are:

1. Scan
2. Spirit
3. Strategy
4. Structure
5. Staff
6. System
7. Support
8. Stretch
9. Sanctions

Small, young organizations characteristically have few, if any, written or formal elements. This is a real benefit in early stages of organizational life as the organization does not have the time or resources to formalize plans and policy. Even if it did have time and money enough, the organization lacks experience. In fact they are likely to change frequently as the organization learns and grows. As the organization grows, the elements are recorded and formalized. This allows the organization to grow without the leader being involved in every decision. Unfortunately, as plans become formalized, two significant problems arise.

Misalignment

The first is that the elements tend to evolve on their own, without coordination and integration. Senior leaders create strategy in response to the environment, while HR struggles with the structure, accounting with information systems and no one with the culture. Thus, it is common to find organizations where the nine elements are misaligned. In fact, they often give conflicting information to employees. For example, the new strategy focuses on customers and their needs, yet everyone knows promotions happen from taking actions which save money, or are brilliantly creative. This sort of misalignment between strategy, structure, systems, culture, and rewards results in tremendous inefficiency and low organizational productivity.

Like a car with misaligned wheels, you can count on slippage and noise as each wheel moves in a slightly different direction. You can drive the car, but it takes more energy (gas), burns up more resources (tires), and if you go too fast the whole thing shakes. Few leaders are sufficiently skilled or interested in all the nine elements to give them the focus required for alignment. The higher in the hierarchy you are the less the factors constrain you. Thus leaders are often unaware of the misalignment.

Autopilots

The second problem as these elements become formalized is that they become rigid and resist change. Think of the elements as autopilots on a supertanker, keeping the ship on course. If the captain changes course with the steering wheel (strong leadership) the ship will start to turn, slowly. If the captain releases the helm for a second, the auto pilots will immediately reassert their programming and return the ship to the original course. Change requires that each and every auto pilot (strategic design element) must be changed to the new course.

Strategic Design Elements

Although the nine elements are distinctively define below, in reality they overlap one another. Because of this, the factors interact in such a way that you can never design just one perfectly. As you design one and go on to the next, your explorations will frequently lead you back to fine-tune the first, once the implications on the second become clearer. Thus one cycles through the nine elements over and over, adjusting, fine-tuning.

It generally helps to start at the top of the list and work down. This is so because, more likely than not, you need decisions in all elements above, before the next can be understood.

1. Scan: a well articulated description of the key opportunities or threats in your business environment.

2. Spirit: Begins with the CEO's values and expands to organizational culture, attitudes, beliefs about customers, how people relate to one another and the community.

3. Strategy: Purpose, direction, and broad choices on how to achieve the purpose.

4. Structure: How is the work divided; who reports to whom; who is responsible for what? Who has authority. What is centralized, what is decentralized?

5. Staffing: the match of individual knowledge, skills, desire and style the job requirements.

6. Systems: What we measure, monitor and control.

7. Support: How we allocate budget resources.

8. Stretch: The critical, regular activities you do to aggressively manage and stretch your organization's performance.

9. Sanctions: The formal and informal rewards and recognitions, both intrinsic and extrinsic.

New Organizations Require Different Alignment

In each organization, the elements, if designed appropriately, favor the growth, health, and efficiency of the business. Add a new product or service and significant misalignment will happen if only because of the newness. If it has a different market, or a different set of success criteria, or different strategy, the misalignment will be even greater. This is why innovation fails.

Christensen's recent book, Innovator's Dilemma, presents strong data for this long established principle of strategic alignment.[1] Ichak Adizes seminal work on the organization development argues that each developmental stage requires resetting the autopilots as well as their reintegration.[2]

In my work in review why dozens of collaborations and mergers fell apart or achieved only modest success, the lack of alignment of the organizations' strategic elements always played a critical role.

1 Clayton M. Christensen, The Innovator's Dilemma, Harper Business; ISBN: 00666206941997.
2 Ichak Adizes, Corporate Lifecycles, 1990.