Strategy Flux is a strategy alignment framework that has been proven to predict your strategic outcomes and ensure that they are achieved by harnessing the collective strengths within your organization. When organizations use Strategy Flux properly, they have been known to achieve twice the results in half the time that they took before. This feat is accomplished by continuously challenging premises and foundational items that serve as the basis for planning.
Studies show that as few as 1 in 7 people are able to successfully navigate the discussions that are necessary to change organizational strategies when they are faced with planning that is based on incorrect foundations (e.g., Grenny, Maxfield, & Shimberg, 2007). This is because most organizational cultures reward silence over evidenced-based decision-making. In contrast to other strategic planning methods, Strategy Flux highlights evidence that is necessary to provide confidence in strategic choices by including relevant participant views.
The basis of Strategy Flux lies in the very definition of strategy, which is a plan for how people throughout an organization make decisions and allocate resources in order to accomplish key objectives. A good strategy provides a clear roadmap, consisting of a set of guiding principles or rules, that defines the actions people in the business should take (and not take) and the things they should prioritize (and not prioritize) to achieve desired goals.” (Watkins, 2007). The popular view of strategy leads people to view it as simply the activities developed at the highest levels of an organization to achieve the organization’s objectives. This view is short-sighted, in that the actions or activities at all levels of an organization are required to achieve the organization’s goals.
Coordination between levels of a company is often overlooked. The popular view of strategy neglects to take into account what Surowiecki (2004) calls the “wisdom of the crowd effect,” which results when many participants in a process are allowed to “weigh in” on solutions.
The Four Components of Strategy
To repeat, most people look at strategy as only the top-level activities necessary to achieve an organization’s goals. However, without the context for decision-making (i.e., goals), which is the approach to achieving goals (i.e., assumptions and hypotheses), it is difficult to choose the right activities. In fact, without the relevant information, studies show that the inclusion of more opinions practically guarantees failure (e.g., Sunstein, 2006). Thus, strategy needs to include the following four components:
1. The goals to be achieved.
2. The assumptions underlying decisions.
3. Hypotheses needed to test the assumptions.
4. Outputs and activities.
The Goals To Be Achieved
A goal is an idea of the future or a desired result that a person or a group of people envision, plan, and commit to achieve (Locke, 1990).
Goals are noun-based, usually with adjectives to describe characteristics expected for the goals’ ending states. For example,the goal of the Massachusetts General Hospital’s Center for Community Health Improvement is “healthy, safe, and thriving communities where all people have that addresses these and other social determinants of health.” Notice the goal in the form of adjectives and nouns “healthy, safe and thriving communities”. Also notice the further descriptions of “equitable access to employment, food, education, housing and a high-quality health care system that addresses these and other social determinants of health.” It is full of adjectives describing nouns which facilitate the process of evaluating goal attainment.
People often describe the activities that they think are necessary to achieve a goal, instead of describing the goal itself. The success of any strategy can only be validated by observing the outcomes or results produced by the strategy (Martin, 2010). In this way, goals provide the context for decision-making.
The Assumptions Underlying Decisions
Assumptions serve as foundations for the mental models or explanations of an organization’s thought processes about how things work in the real world. Individuals in organizations make decisions based on the mental models that they have constructed to represent their realities. Without these explanations, it takes an extreme amount of effort to assure that decisions made by one group in an organization are aligned with decisions made by all the other groups in that organization. Furthermore, when the assumptions are incorrect, then the decisions made from those assumptions will produce ineffective activities that result in undesirable outcomes.
According to Charumilind, Turabi, Finn, and Usher (2020), McKinsey & Company promotes the following concept:
Models are well suited to exposing sensitivities: they show how even small changes in key assumptions can produce large variations in outcomes, helping decision-makers establish priorities.
Hypotheses Required to Test the Assumptions
Since hypotheses describe the relationship between assumptions, planned activities, and goals, they enable us to expose assumptions that are not true (Edmondson & Verdin, 2017). When the relationships between assumptions, planned activities, and goals are strong, then the organization has greater assurance that it is performing the correct activities. Thus, the organization should prioritize testing its assumptions as soon as possible. When a test is created for hypotheses, those hypotheses serve as levers that can be used to establish feedback loops that enable everyone in the organization to challenge false assumptions. When a hypothesis fails a test, the organization knows that either the outputs and activities need to be changed or the underlying assumptions are incorrect. This important relationship enables alignment among the various groups of the organization. When members of an organization know that the prevailing direction of the organization will be thoroughly validated and objectively changed if the direction is proven to be incorrect, then it is much easier to align all the members toward an agreed upon set of actions. The morale and performance of the members of a group are increased when its members know that incorrect hypotheses will be identified and corrected via the feedback loops.
Outputs and Activities
Outputs are the products of an organization’s efforts. Outputs can serve one of two purposes: (1) they can transfer value to customers; or (2) they can serve as tools that the workers within the organization use to build value for stakeholders. Outputs are the consequences of organizational activity. Activities are the actions undertaken by an organization in pursuit of its goals. The outputs that an organization produces and the activities that the organization performs are based on the mental models or decisions that the organization believes will drive it toward its goals (Ovans, 2015).
Most organizations do not document the view necessary for strategic alignment. If the outputs and activities are present without the assumptions and hypotheses, then the members of the organization may not see the connection between the activities and the goals. When that connection is not apparent, it is difficult to obtain buy-in from the members. As a result, the members will start to create their own strategies. When different parts of an organization create their own strategies, they form silos—that is, subgroups that operate in isolation from each other.
When a hypothesis is not explicit, it may be difficult for members of the organization to judge the strength of the relationship between the organization’s assumptions, planned activities, and goals. When the relationship between the three strategic components is strong, then the organization can achieve its goals more efficiently. When the relationship between the three components is weak, inefficiencies abound.
Measuring the strength of the relationship between the three components is the best way to predict the achievement of outcomes. Metrics that describe the relationship between the activities and the outcomes show the rate of goal attainment. That rate is the best predictor of goal attainment. Metrics that describe the relationship between assumptions and goals indicate the veracity of the assumptions. Without this metric, it is difficult for people to see when an assumption is false and should therefore be abandoned. Consequently, the associated plans should also be abandoned. Without accurate hypotheses, it is difficult for an organization to be able to gauge the effectiveness of its activities.
When the assumptions are not explicit, at least two detrimental situations can arise. First, leaders often choose an approach that requires certain limitations on the way the approach is implemented. Those constraints are often only imparted in meetings. However, when the assumptions are not made explicit, the individuals who do not attend the meetings have to rely on the individuals who do attend the meetings to learn what the assumptions are. However, during the transfer of information, the message is often distorted as in the childhood game of telephone. The end results of distorted assumptions are the creation of “shadow” strategies that are not aligned with the original strategies.
The second situation that occurs when the assumptions are not explicit is that the leaders make certain assumptions about the environment, capability of the workforce, processes, policies, impediments, etc. Often, it only requires a small number of the assumptions to be incorrect in order to derail the effort to achieve the outcome. However, when those assumptions are not made explicit, workers have no guidelines concerning when they are allowed to deviate from their directives. Then they know neither when it is safe to dispute an assumption nor when they should choose an alternate course of action. Leaders suffer the most from this situation, since they have no means to completely delegate responsibilities. Instead, they are forced to stay involved to monitor the progress closely, since the likelihood that their subordinates can adapt to changes is small. In summary, without assumptions, leaders cannot convey mental models or decision-making frameworks that should be used by subordinates to make decisions.
When goals are not made explicit, the organization lacks a gauge to measure whether or not it is obtaining the goals. Goals provide the context by which an organization can judge the efficacy of its actions and the applicability of its assumptions. Since without outcomes, organizations cannot form evidence-based conclusions, they cannot learn. Because of this causal effect on organizational learning, goals are arguably the most important aspect of an organization’s strategy. This is disappointing, since goals are surprisingly the component that organizations most often neglect.
This neglect of goals is usually unintentional, for many members of an organization incorrectly believe that they have identified their organization’s goals, when they have actually only identified the activities that lead to those goals.
According to Merriam Webster’s Collegiate Dictionary, a goal is “the end toward which effort is directed.” Ends, by definition, have to be conditions or states—which are best expressed by nouns or by adjectives following verbs of being. For example, “I want happiness for you,” or “I want you to be happy.” Adverbs can be used to further define the condition or state—as in “I want you to be happy now.”
One can immediately detect whether a goal is defective when it is formulated in terms of actions (i.e., in verbs), rather than conditions (nouns and adjectives). For example, if one’s goal is “to lose weight,” the focus will be on eating less or exercising more. This narrows one’s options to two when there may be other possibilities, such as stomach stapling or diet pills. In other words, stating goals as activities kills innovation.
However, when the goal is instead expressed as a condition such as weight loss (as in, “My goal is weight loss”), there are at least two positive consequences: (1) it is easier to create an image of success via quantification (in this case, before and after pictures); and (2) it is easier to create a definitive picture of goal achievement by providing clarifying acceptance criteria (in this case, objective measurements such as lost pounds; and subjective measurements such as enhanced beauty).
When an organization describes its goals with actions, all the members of that organization are released of responsibility for achieving those goals because, in addition to proceeding with narrow options, they may bring about negative consequences. For example, if I say to you, “Clean the kitchen,” you will probably select a commercial cleanser to do the job. However, that cleanser may contain chemicals that can harm you in various ways. On the other hand, if I say to you, “I want a clean kitchen,” you will be free to select nontoxic cleansers, including vinegar, lemons, and wine.
Conclusion
The essence of strategy is decision-making. The most important decision is selection of the outcomes or goals to which an organization aspires.
The second most important decision is the determination of the underlying assumptions or mental models that the organization will use to achieve its goals.
The third most important decision is the design of hypotheses that indicate both the approach that the organization has chosen to attain its goals and the methods it will use to verify if the chosen approach is valid.
The fourth most important decision is the selection of outputs and activities.
Although most organizations focus on the outputs and activities (decision 4), it is the hypotheses (decision 3) that they most often miss or overlook. Without hypotheses, organizations have difficulty agreeing on the mental models (decision 2) that they should use as the basis for achieving their goals (decision 1).
Thus, correctly stating goals in terms of future states is essential for communicating both the attributes of the end result and enabling the feedback necessary for approach correction and innovations in methods of operation. In order for organizations to be motivated to spend more effort on appropriate goal creation, they must first recognize the importance of goals when they define their strategies. Furthermore, organizations with a propensity to state goals in terms of actions need to realize that actions do a great job of making goals relatable, but a poor job of enabling innovation and encouraging evaluation.
Given the constant influx of information pertinent to planning, corporations will only gain the insight to challenge their approaches and continuously adapt their plans after they recognize that strategy includes all the decisions necessary to reach organizational goals at all levels of the organization, including the decisions at all levels about which goals to pursue.
In today’s work environment, evaluation is more important than relatability for knowledge workers, who spend most of their effort making decisions. Furthermore, most workers today are knowledge workers. That is, in the United States, knowledge workers account for over 60 percent of the workforce, and most new jobs created are for knowledge work.
The old system of stating goals as actions was predicated on the assumption that the managers in charge knew more about how to do the work than the workers did. However, this is no longer true for knowledge workers. In most cases, knowledge workers know more about the domain area and therefore can make better decisions than their managers.
Since the managers lack the ability to judge the workers’ decisions, it is imperative that the knowledge workers themselves have a mechanism to evaluate their own decision-making capability. This makes the evaluation ability of goals more important than the relatability of goals
References
Charumilind, S., Turabi, A., Finn, P., & Usher, O. (2020, June 25). Demystifying modeling: How quantitative models can—and can’t—explain the world. Available at https://www.mckinsey.com/business-functions/risk/our-insights/demystifying-modeling-how-quantitative-models-can-and-cant-explain-the-world/.
Edmondson, A., & Verdin, P. (2017, November 9). Your strategy should be a hypothesis you constantly adjust. Available at https://hbr.org/2017/11/your-strategy-should-be-a-hypothesis-you-constantly-adjust/.
Grenny, J., Maxfield, D., & Shimberg, A. (2007, July 1). How project leaders can overcome the crisis of silence. Available at https://sloanreview.mit.edu/article/how-project-leaders-can-overcome-the-crisis-of-silence/.
Martin, R. L. (2010, July-August). The execution trap. Available at http://hbr.org/2010/ 07/the-execution-trap/ar/1/.
Ovans, A. (2015, January). What is a business model? Available at https://hbr.org/2015 /01/what-is-a-business-model%20&%20https:/hbr.org/2013/10/four-tips-for-better-strategic-planning/.
Sunstein, C. R. (2006, September). When crowds aren’t wise. Available at https://hbr.org/ 2006/09/when-crowds-arent-wise/.
Surowiecki, J. (2004). The wisdom of crowds. New York: Doubleday Anchor.
Watkins, M. (2007, September). Demystifying strategy: The what, who, how, and why. Available at https://hbr.org/2007/09/demystifying-strategy-the-what/.