27 November 2024
Lars Østerby, Associated Consultant
A strategy typically includes several key focus areas—whether we call them priorities, benchmarks, or milestones. These areas receive dedicated attention and resources for the upcoming strategy period. However, when a strategy aims to propel the organisation forward, the challenge of preserving valuable core areas often emerges.
As with most managerial dilemmas, there is no simple answer or straightforward solution to balancing retention and renewal. Yet, there are several critical considerations that leaders can use to inform their strategic decisions. Here are five such considerations that may support the decision-making process.
A common strategic pitfall is defining the market—and by extension, competitors—too narrowly. Strategic literature is filled with examples of organisations that confined themselves to a narrow market definition, focusing on the product or service they offered rather than the need they met. The difference is significant: “What product/service do we sell?” versus “What need are we fulfilling for our customers (or users and citizens)?”
By focusing on needs rather than products, we open up a new strategic question: “Who could become alternatives to us in the future?” rather than “Who are our competitors?” The questions we ask in the strategic process shape the answers we obtain.
In many organisations, a prestige hierarchy exists, where new business areas are perceived as more interesting and prestigious than established ones. This hierarchy may inversely reflect value creation. Leaders must be cautious not to let the drive for renewal rest solely on the allure of the new.
Passion is essential, but strategic decisions should be driven by both heart and mind. Sometimes, the new “toys” are simply more exciting, leading to organisational time and investment that may not align with current revenue or future potential. Leaders risk creating an “A-team” and a “B-team,” where the A-team receives scarce resources for new projects, while the parts of the organisation funding these initiatives feel relegated to the B-team.
This question confronts the issue of “cannibalisation.” Leaders must be prepared to challenge areas where the organisation is most successful, lest they risk stagnation. Innovation is critical, even when current practices are still effective. In fact, the best time to consider renewal may be when existing strategies are successful, and resources are available to explore new directions. If we don’t question our successes, might others do so instead?
Leaders must also ask: To what extent can we further develop existing business areas? Is there room to innovate within them, or must we explore entirely new business domains?
There are no rigid rules on the balance between retention and renewal within a strategy. However, it is essential that the strategy and its focus areas propel us toward our vision. The danger lies in creating a snapshot of the current, potentially successful business model and labelling it a “strategy.”
A true strategy should map out the path to future goals rather than reflect current operations, regardless of their present success.
Investing in new strategic areas always involves risk. No matter how thoroughly you’ve analysed the market and customer needs (or citizens and users) or built robust business cases, uncertainty often remains. Strategic choices often resemble navigating through a cloudy crystal ball.
Though not quite a gamble, the strategic process requires leaders to ask: “How much can we afford to stake?” What is the potential reward, and how many “bets” can we realistically place?
These five considerations can guide your strategic journey, helping to strike the delicate balance between sustaining your organisation’s current achievements and developing new, essential business areas. At Mannaz, we don’t claim to have the answers, but we’re here to help you explore these questions and craft a strategy that will ensure your organisation’s future success.
Learn more about balancing strategic priorities with us at Mannaz. (Please note that the courses are in danish)
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