Such documents also seek alignment before the
conversation has taken place, when the whole point of the
conversation is to obtain a diversity of views and then
all, long papers on strategy normally confuse strategy with
tactics. An old nineteenth-century saying sums up the
difference quite well: "Strategy differs materially from
tactic; the latter belonging only to the mechanical movement
of bodies, set in motion by the former". In brief - strategy
is the direction of the business and the tactics are how to
get there. What this means is that a handful of strategic
decisions determine all future operational decisions. The
order of events is shown in the diagram below. In our
experience, the conversation around 'aiming' the business
should take one day, or two days at the most. The third and
more detailed phase around 'firing the gun' can take
Strategy, the aim of the business, should not change that
often, while tactics to stay on course will vary according
to how the game evolves. Indeed, we have defined seven
principles of strategy:
Strategy is direction. Tactics are how to get there.
Strategy formulated without first consulting the context
will probably end up being bad strategy.
Strategy is as much about ruling in potential paths that
fit your scope as ruling out others that don't.
Good strategy can be turned into bad strategy by a
future change in the context. Scenarios are a way of
exploring alternative futures, which might necessitate a
change in strategy.
tactics can destroy good strategy, but no tactic can
rescue bad strategy.
Good strategy has a greater chance of being converted
into good results if tactics are accompanied by a set of
measurable outcomes to which people can aspire.
Above all, strategy is about understanding what you do
and don't control, and what is certain and uncertain
about the future - and knowing when to change direction
to avert unintended, and possibly tragic, consequences.
strategic conversation we facilitate is in two parts:
firstly defining the game and secondly playing the game. The
first part has six steps and the second has four as
indicated in the model below:
Defining the Game
The first step in defining the game is to review its
evolution in recent years and where it stands today
(together with your status as a player). The second step -
Scope - is really about strategy, because selecting the game
you want to play in future is equivalent to choosing the
direction of the business. Steps 3, 4 and 5 examine the
interplay between your strategy and environmental factors
beyond your control, while step 6 - the scenarios themselves
- provide the possible outcomes.
How has the game in your field or industry changed? Where is
it heading? Has it become more international or more
competitive? Has there been consolidation in the industry?
Are, say, the Chinese now a threat? Importantly, how have
you fared as a player? These questions are designed to take
the participants over familiar territory and act as a
warm-up for the harder questions ahead.
What is the current playing field of your organisation? What
lies inside and outside its boundaries? Should the field be
wider or more focused? Where is there scope to extend the
field into new, profitable activities? Should you change
your game completely because it has become so unattractive?
Scope can be divided into product range (horizontal
range of goods and services), product chain (vertical
chain from raw materials to customers), geographical
footprint (the countries where you want to market your
product/service or own businesses) and market segment
(profile of your customers in terms of age, income, industry
where you have industrial clients etc).
In considering Scope you have to reflect on your brand,
culture, core competencies, organisational structure,
business model, resources and location. Where they have
to be changed to accommodate a modification in Scope,
suitable tactics will have to be considered under Options
below. For example, going downstream in the product chain or
entering new countries may require competencies you don't
possess. Tactics may therefore include joint
ventures/alliances with companies that have competencies in
the areas being targeted.
Scope at this point of the conversation should be considered
provisional, since it may be altered by important issues
raised later on.
Who are the players that can significantly change the
outcome of the game you've chosen? Who are the ones for
you that want you to win; who are against you and
want you to lose; and who are neutral and liable to
swing either way? We start by asking you to name your main
competitors and what their strengths and weaknesses are, and
in particular how big they are in relation to you. You can
just as easily be killed by a big gorilla with greater
economies of scale as by a swarm of bees with no overheads.
Remember in sport it's common practice to do a SWOT on your
competitors before you play them.
Then we ask who are your key suppliers and are they
assisting you in winning the game? How about your customers?
How do they regard you, and when did you last do a customer
survey? Are your employees for you or are they neutral? You
can never win a game with an unmotivated team! What about
trade unions, communities around your areas of operation,
the government, shareholders and the media? Where do they
4. Rules of the Game:
Every game has rules. If you break them in sport, you get a
red card and get sent off the field. If you break them in
business, you go bankrupt. However, unlike sport, the rules
of the game of business can change significantly over time.
We have identified three kinds of rules that you need to
establish in order to understand the DNA of your game:
Descriptive rules, which give you a basic licence to
operate in the country/countries where you are located.
Of course, these rules can differ from country to
country. In addition, descriptive rules include those
which describe the long-term forces governing your
market or industry in the future;
Normative rules, which cover ethics, corporate
governance, the environment, health, safety and
corporate social investment. These rules should be
universal for all countries; and,
Aspirational rules, which will give you the edge to
win the game. These are usually few in number but
crucial to the sustainability of the business. For
example, in the mining industry cost leadership and
quality of ore deposits are rules to win, while in many
service industries a rule to win would be the
establishment of long-term relationships with clients
based on trust and value for money.
Options (below) should include tactics to lead you towards
closer compliance with the rules, especially the rules to
win. In other words, how you act in accordance with the
rules is within your control, whereas the rules themselves
are part and parcel of the game.
5. Key Uncertainties:
What are the main uncertainties that can have a major impact
on your business and affect the outcome of the game?
Uncertainties can be economic, political, social,
technological, and legal, or revolve around your market or
your competitors' strategies. They can be international,
national, local, related to your specific industry, or
internal (e.g. CEO succession). They are the surprises that
may necessitate a change in strategy or tactics. Whereas
external uncertainties are usually beyond your control, your
response to alleviate the impact of these uncertainties is
within your control and constitutes tactics.
Good examples are a stock market meltdown (shock event), the
uncertainty around global warming (gradual threat) and the
level of oil prices in the future (volatile parameter).
What are the two principal variables affecting your company
from which you can construct a 2x2 matrix or scenario
gameboard, giving you a best-case scenario, a worst-case
scenario, as well as two intermediate scenarios? Many
companies choose the state of the market as the horizontal
axis and competitiveness as the vertical axis (
examples of scenario gameboards ). Which scenario
are you in at the moment? Where have you come from and where
do you want to be in, say, a year, and looking further
ahead? Equally important, what is the current position of
your competitors on the gameboard, and where do you expect
they will be in the next few years? Drilling down, where
would you put your individual business units or products on
Playing the Game
Step 7 is a realistic assessment of your own profile and
situation before looking at strategic choices (direction)
and tactics (how to get there) in steps 8 and 9. Step 10
gives you a concrete mission statement for the next five
We don't allow the executive team to get up from the table
without measurable outcomes. Otherwise, why waste time on a
strategic conversation? In this sense, our strategic
conversations are very different from the traditional
strategic workshops, which can end up in a haze of hot air
and are often soon forgotten. People don't normally do
things unless they are measured and, in order to measure
them, you need measurable outcomes.
What are your internal strengths and weaknesses, and the
external opportunities and threats in playing the game? How
do you measure up to your rivals in this regard? In what way
does your SWOT change as you move around the scenario
gameboard? Most companies already do SWOT analyses, but in
our model it is done in the context of the game after
profiling your competitors. Thus it is usually more accurate
than one done in isolation. It also gives you an idea about
tactics that play to your strengths, overcome your
weaknesses, take advantage of opportunities and counter
What are your strategic and tactical options (i.e. things
that you can realistically do within your control) to take
the negative scenarios as far as possible out of play and
thrive in the good ones? How do you get closer to the rules
to win? Given a company has finite resources, options need
to be prioritised on the basis of importance/ urgency,
leverage (output to input ratio) and risk versus reward.
Options can be exclusive where you can do either
this or that; or be inclusive where you can do
this and that. Normally the greater the magnitude of
resources required, the more exclusive the option becomes.
The most frequent trap a company falls into is to select a
change in scope (i.e. strategic direction) and then not
allocate sufficient resources to make it happen because it
falls outside the comfort zone of 'business as usual'.
What are the preferred options that, right now, are 'go' and
can be turned into decisions and actions? What is the
initial action associated with each decision i.e. who is
going to do what by when and how much is it going to cost?
What options do you want to defer, either because they are
lower priority or they will only be triggered by other
scenarios coming into play? Which options are too risky or
unethical and should be rejected? Of course, the difference
between options and decisions is that in the former case you
can be as wild as you like because you're not making a
commitment. In the latter case you are committed. Where an
option is exclusive, its selection will always carry the
'opportunity costs' associated with the options refused. The
decision may therefore be harder to take than for an
10. The Meaning of Winning:
We like to end the conversation on an uplifting note; so our
final question to each person at the table is simple: What
is your personal criterion by which you will judge whether
the company has won or lost the game in five years time?
This should be expressed as far as possible as a measurable
Different people give different answers. For example, the
Human Resources Director may well want the company to be the
'employer of choice' in the industry, one to which all smart
graduates thinking of joining the field will apply; the
Technical Director may want at least three revolutionary
breakthroughs in product design so that the company is seen
as cutting-edge in the industry; and the CEO generally wants
the share price to triple because he or she has more share
options than anyone else!
The result can be treated as the mission statement or
balanced scorecard for the company over the next five years
(balanced because if you press the button too hard on one
meaning of winning, you may lose out on another one). It is
a much more useful tool than the homilies which pass as
vision/ mission statements in many companies. Equally, it
demonstrates that winning in business is much more subtle
than winning in sport where outright victory is always the
intention. The purpose of business is to win but not
necessarily make other people lose. Sometimes a business has
to accept a 'draw' on the grounds that a strategy of
outright victory could easily end up in outright defeat
because of factors beyond its control. In practice, business
is a combination of pure rivalry games and co-operative
games (a touch of von Neumann with a dash of Nash).
Whatever you feel about foxes and hedgehogs, try out this
agenda when you next have a strategic workshop. The
conversation will be entirely different, as will the
Two questions we are frequently asked are:
often should you conduct these strategic conversations?
far down the organisation should you go with these
answer to both questions is that there is no set formula and
it is very much up to you as to how to use our model. Some
people like to have a one-off conversation on strategy and
then only review it if and when the external environment
changes to the point that it has to be reviewed. Obviously,
any tactical decisions taken at the meeting along with their
associated measurable outcomes are regularly monitored.
Certainly the gameboard is continually updated to keep the
team aware of its competitive position. Other teams like to
review strategy once a year before the next round of
operational planning and budgeting begins.
On the second question, some companies like to restrict the
conversation to their top executive team, while others like
to cascade it down through the different business units and
service departments. Obviously the lower one goes, the more
restricted the scope of the game becomes. Nevertheless, it
is still useful to consider the range of activities inside
any production unit/service centre and whether these should
be changed to accommodate the needs of other in-house
departments which are its clients. Equally, relationships
with 'supplier' departments can be examined as well.
The Wack Test
Pierre Wack was the recognised master of scenario planning
during the 1970s and 1980s. He used to say that the acid
test for a successful scenario exercise was not that it
captured an unusual future before it happened; rather it was
whether the scenario penetrated the mindset of the relevant
decision-makers and persuaded them to act ahead of time. We
call this the Wack Test. The scenario itself did not have to
be entirely accurate in its details, as long as it modified
the course of action taken for the better.
Many scenario exercises are brilliant intellectually, but
fail the Wack Test because they do not connect to the people
who make the decisions. There are, however, three aspects to
our conversation model which give the scenarios a good
chance of passing the Wack Test:
assist the decision-makers in writing the scenarios
themselves instead of having external specialists
presenting scenarios to them. The decision-makers are an
intrinsic part of the scenario process;
have integrated options, decisions and measurable
outcomes into the same conversation that handles the
formulation of the scenarios. Thus the practical
implications of the scenarios cannot be ignored;
scenarios sometimes feature the main decision-makers in
the story. This makes them feel more committed to take
appropriate action to ensure greater probability of the
virtuous scenario materialising, or the worst-case
scenario being avoided.
Finally, we believe there is a big difference between being
a facilitator and acting as a consultant. The former is
there to extract brilliance from the minds of the
participants who make up the session, whereas the latter is
there to provide original ideas that may not have occurred
to the participants themselves. Self-revelations induced by
the Socratic question-and-answer method have a much greater
chance of changing people's minds about the future than
ideas introduced by an external agency. Nothing beats good
facilitation that tests the basic beliefs and principles of
the executives concerned. They are then ripe for thinking
the unthinkable (and becoming foxes in the process).