May 26, 2022

This Is A Once-In-A-Generation Moment In Strategy

Complexity is the defining business and leadership challenge of our time. But it has never felt more urgent than this moment, with the coronavirus upending life and business as we know it. For the past few months, we’ve been talking to leaders about what it takes to lead through the most complex and confounding problems related to the pandemic. This is our second conversation with Jonathan Goodman, Monitor Deloitte’s Global Managing Partner and a Vice Chair of Deloitte Canada. For close to three decades, Jonathan has worked closely with the CEOs, boards and executive management of a variety of global corporations on issues of strategy, growth, M&A, transformation, and executive transition. He originally joined Monitor in 1986, and co-founded Monitor in Canada in 1987.

David and David: In our previous conversation you said that “no strategy will survive fully intact” in the wake of the impact and consequences of COVID-19. Can you elaborate on that?

Jonathan:  The COVID- 19 pandemic has already had, or will have, consequences for the underpinnings of the choices that make up corporate or business unit strategy – whether these underpinnings relate to changing customer demand profiles, the blurring of industry boundaries, the reconfiguration of supply chains, or the nature and durability of advantages. We are also seeing either massive headwinds (e.g., in travel and hospitality) or massive tailwinds (e.g. in digital commerce). What we are not seeing is stasis.

And its hard to imagine in world with so much change, complexity and uncertainty, that the strategic choices you’ve made will or should remain fully intact going forward.

David and David: What is happening right now when it comes to strategy? What’s changing as a result of the pandemic?

Jonathan: As we have moved past the initial shock and acute phase of the pandemic, it’s evident that strategy matters.  I am hearing this clearly in the many conversations I am having with CEOs, senior executives, and board members. Of course, their questions have evolved since the pandemic began. Now they are asking about the durability of, and how to reshape, their corporate portfolios, about the outlook for, and structural changes, to their industries, about how customer expectations and behaviors are changing, about the required pace of digital acceleration, and about the smart ways to set cost structures for the future.  

This sentiment has been echoed through a broader set of recent surveys and polls. Deloitte and Fortune interviewed a number of US CEOs in June and found that 77% agreed that the pandemic has created significant opportunity, 60% said the pandemic will lead to changes in strategy, and 70% said the most important factor in setting their future direction will be lasting changes in consumer behavior and methods of customer engagement. Also in June, the National Association of Corporate Directors polled their membership across the US and the most important governance challenge they named was shaping a realistic post crisis strategy.

As we’ve discussed before, strategy consists of making and executing choices about goals and aspirations, where to play, how to win, and the required capabilities and management systems. These dimensions of choice have not changed, nor has the necessity to weigh and make explicit choices across each of the dimensions. What has changed is the context for these choices.

If you believe that all good strategy starts with the customer, then the once-in-a-generation forced break in customer habits is a serious moment in strategy for most companies and organizations.  The same is true of the recognition that we are going to have to think hard about how to build resilience into strategy and in doing so, make explicit choices about where to invest, and where not to invest, in specific sources of resilience. And, as I explained in our previous interview, the pandemic is changing our collective understanding and calculus of uncertainty. As a result, we have no choice but to confront uncertainty head on in our decision-making.

David and David: How should leaders develop strategy and get people aligned around it?

Jonathan: When it comes to how you go about developing strategy, leaders must now:

  1. Embrace hyper-realism and uncertainty: This means confronting reality; seeking the ground truth as best you can; knowing what you know, knowing what you don’t or can’t know, and knowing the difference; developing scenarios; and building all of that into your decision-making
  2. Recognize the heightened importance of sensing in the face of uncertainty. This means being radically open to understanding, and using sensing tools to monitor, what is changing in the environment on those dimensions critical to your business and its future direction.
  3. Be more dynamic in adapting strategy. This means experimenting where you can with choices and propositions, refining strategy as necessary, and not setting some arbitrary point in the calendar as the time to re-think the choices you have made.

I think there are two newer notions I believe leaders need to learn to apply more systematically.

  1. Understand where the environment demands that you speed up and make quicker decisions in the face of not having all the information and all the alignment that you might want, versus where you have time to gather more information and can be more deliberate. I call this smart speed, and it’s an important function of executive leadership to know the difference.
  2. Think about what I call the strategic slack that lies in between the activities and costs that are unnecessary under any current circumstance, and those that are absolutely necessary to the way in which you want to serve your target customers and thrive in the future. It’s in this in-between that the investment choices – in human capacity, supply chains, strategic stocks – are tougher and will speak to resilience in the face of disruptions and opportunities in the future. 

That all said there are three things that haven’t changed when it comes to developing good  strategy. The first is the need to weigh and make choices. Next is assessing the validity of a current or future strategic direction by incorporating changes in the environment, customers, competitors, and capabilities. And the third is recognizing the power of dialogue to produce commitment.

Today’s pressures, uncertainty, and virtual or hybrid work environments don’t eliminate the need to have thoughtful and courageous conversations. Moreover, they amplify the need to hear and embrace diverse perspectives. You still have to determine how to encourage and promote discussion that will inspire action. You still need to be creative and make good choices without taking an un-necessarily long time. All of this requires being even more deliberate about, and applying more design to, your executive thinking and interactions.

David and David: What will get in the way of leaders and organizations adapting accordingly?

Jonathan:   The biggest thing that will get in the way is holding on too tightly to some conception of the past, as opposed to dealing with the realities of today and the uncertainties and possibilities of the future. Don’t let denial or fear overwhelm your courage and determination.

I also think this notion of smart speed has to become a feature of sophisticated executive leadership. I’ve heard it said that the difference between a good neurosurgeon and a great one is not technical skill, but knowing when to actually operate. I think this same distinction will separate good leaders from great ones. The situation your organization faces should determine the required speed and scope of decision- making. On which issues can you be more deliberate, versus where do you need speed? Getting that balance right is important and powerful.  

David and David: Any other advice you can offer? Parting words?

Jonathan: I think for many executives, the generational fate of their companies is on the line. The choices they make or don’t make today will have profound consequences for the future. In the end, as Abraham Lincoln is reported to have once said “you cannot escape the responsibility of tomorrow by evading it today.”

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