#1 The ambition
The basis of an agile strategy is a shared qualitative and quantitative description of its strategic ambition. Every company needs to have a common north star of its organisation’s future. But what should you include in your company’s strategic growth ambition?
A company’s growth can basically derive from three different categories:
- Organic growth out of the existing business
- Organic growth generated by new business
- Inorganic growth through mergers and acquisitions
We often experience that the growth potential of the existing business is consistently being overestimated and fuelled with highest top management attention. Therefore, it becomes dominating for the allocation of resources and hinders the development of other growth opportunities. If the company has ambitious targets, we also see that growth through mergers and acquisitions is usually seen as the ultimate answer. But the true driver for growth usually lies within new business. For many organisations, however, this is outside their comfort zone and strategic imagination power.
The uncertainty of new business cannot be levelled out by detailed planning of project managers and number crunching of business analysts. To manage the inherent uncertainty, companies need to design an agile strategy process that enables a continuous decision-making and pivoting of business ideas towards the set strategic ambition.
#2 The strategic playing field
The strategic playing field frames the company’s area of activities and provides strategic guidelines. It defines the boundaries of the “where to play” and “how to win” of a strategy without planning the exact path to reach the ambition.
In contrast to classical strategy approaches, the strategy definition only sets the guidelines for strategy execution and is not a detailed plan for the future. This allows an agile exploration of different paths towards the ambition and a constant adaptation to new learnings and changes in the markets.
But what is the vehicle to execute a strategy if you do not have a detailed plan?
If you do agile strategy, you replace the implementation plan with a portfolio of initiatives. The strategic playing field marks space for experimenting and pursuing various initiatives to reach the set ambition. These initiatives or projects are the main instruments to realise the growth ambition and to drive organisational change.
The portfolio of initiatives provides an overview of all major projects and shows where a company has allocated its scarce resources. The portfolio reflects the strategy itself as it points out where resources are allocated and where management has put its attention. This overview is key to establishing resource fluidity and agile decision-making by the management. To set up this steering of the portfolio of initiatives, it is key that you have a well-functioning strategy engine.
#3 The strategy engine
Agile strategy is about a new understanding of continuity in strategy work and the corresponding mindset. Strategy is not a one-off formulation followed by execution but rather a constant work in progress, which requires a continuous dialogue of the company’s resource allocation in the portfolio of initiatives. The way we understand strategy is like an engine that consistently must be fuelled.
The portfolio of initiatives is not a static tool; however, it changes dynamically as initiatives are continuously generated, developed, exploited, terminated and retained. In today’s reality, a company’s landscape of initiatives changes over time and requires continuous conversation and clear choices regarding its resource allocation. At predefined milestones, the company must therefore discuss and evaluate the identified initiatives. Also, a well-balanced portfolio should not only address the short-term horizon but also represent several long-term initiatives, which explore – with a lower intensity than short-term initiatives – the future strategic challenges and business opportunities.
Unfamiliarity with challenges should not be a reason to erase certain topics from the portfolio, as it is of utmost importance to keep those risks and opportunities on the strategic radar and continuously reduce the level of uncertainty.
Consequently, in an agile strategy, the portfolio of initiatives is not about controlling and monitoring the planned initiatives, but it is the overview to facilitate the learning and decision-making towards the strategic ambition.