Strategy As an Organization’s Nervous System
Control the feedback loop
Christopher Columbus didn’t intend to discover America.
In 1492, his BHAG, a Big Hairy Audacious Goal, was to find the western sea route from Spain to India and China.
But on his way to the west, he stumbled upon a continent no one in Europe knew about.
His discovery turned out to be even more valuable than he had planned. However, in business, most strategic mistakes rarely have such happy endings.
Feedback loop
Stefan Betz is 28. He suffers from a very rare genetic disorder called “congenital insensitivity to pain,” or CIP. Put simply, he doesn’t feel pain. If he stubs his toes or bites his tongue, he feels nothing.
The CIP isn’t a superpower. His body’s feedback loop is broken.
This feedback loop is based on our nervous system. It consists of signals that your body organs send to your brain, analysis, and decision-making processes, signals from your brain to muscles and other organs, and subsequent actions.
If you accidentally touch a hot oven, and the feedback loop doesn’t work fast, you’re in trouble.
Many strategies fail because the organizations’ feedback loops malfunction.
Strategy and linear thinking
You, most likely, believe that a strategy consists of two major parts: a Big Goal and a set of planned actions to achieve it.
It sounds logical enough, but there is a problem. Both the Big goal and the path to it are figments of our imagination.
We have already discussed it previously. In brief, no analytical tool can guarantee the feasibility of our goals or even significantly increase it.
Our strategic objectives and lists of initiatives are hypotheses stemming from our assumptions, which derive from our anticipations rooted in our beliefs.
The simple “plan – do” formula represents the so-called linear approach to problem-solving. It works well under two conditions:
The problem is familiar. We’ve already solved it before.
We have a reliable tool.
If you need to move to another apartment and have already gone through this nightmare, you can use linear thinking. The goal is clear, the task is familiar, and you start packing.
But a business strategy always implies doing something you’ve never tried. Our goals are illusive, and we must create a tool from scratch.
Even the legendary entrepreneurs miss the mark. In 2016, Elon Musk targeted demonstrating a driverless car crossing the country by the end of 2017. In 2019, he promised to build a robot taxi fleet by the end of 2020. None of this occurred.
To make things worse, strategy planners aren’t also their implementers. Highly paid executives from the ivory tower of the headquarters create strategies, and the frontline folks try to make them work.
Figuratively speaking, we, like Columbus, are also setting sails in search of a new path to success. But if our feedback loop is imperfect, our ship will crash on the rocks even if we find a new continent.
Feedback loops and strategy
Imagine a company that bases its strategy on a new product. It promises to be a game-changer, a breakthrough that will win the competition.
It takes the organization many months to develop and launch the product. In the first few quarters, sales are far from targets. However, the company’s leadership trusts the sales team’s promises to fix things soon.
Then, it becomes obvious that something goes wrong. The leadership team holds numerous hours-long meetings and decides to double the ad budget. Some months later, everybody understands that the product hasn’t lived up to expectations.
The strategy fails. The board of directors sacks the CEO – the end of the story.
Their strategic feedback loop doesn’t work properly.
What could they have done better? Pro Tips
Treat your strategy not as a plan but as a number of hypotheses.
It points us in a specific direction and sets the pace of development. But it doesn’t determine all the steps.
Beware of SMART goals. They are too rigid. Goals are directions, desirable future states, not the points in the future.
Remember that any business manages Six Value Waves to deliver value for six stakeholder groups.
Build a feedback loop around each Value Wave:
Make a hypothesis
Test it as fast as possible – use MVPs, test sales, customer interviews, preliminary negotiations with business partners, etc.
Establish reliable feedback channels between on-site workers and the headquarters.
Analyze the feedback regularly.
Make quick decisions, adapt, and adjust the hypothesis.
If the hypothesis is confirmed – act, but don’t abandon the feedback channels.
Refine and adjust your strategy if necessary.
Read also: The Quality of Relationships Defines Business Success.
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Constant adjustments, based on feedback, are necessary. This becomes an issue 1) when management wants to release a plan and then forget about it and 2) feedback, especially when negative, isn’t welcome.