What is Strategy and how can you Test it?

The origins of the word Strategy have been traced back to the city of Athens in the 6^th century where it was developed to name a new military and political leadership position. It combined the words “Stratos” which means army, and “Agein” meaning to lead. A Chinese military philosopher Sun Tzu defines strategy “as the great work for an organization”.

One of the most valuable definitions about strategy can be the following:

“Strategy is the long-term direction of an organization, formed by choices and actions about its resources and scope, in order to create advantageous positions relative to competitors and peers in changing environment and stakeholder’s context”. (Whittington 2020)

As strategists we believe that one’s of strategy distinctive features is that it draws upon many other perspectives, including economics, finance, marketing, operational management, organizational behavior, psychology, to name a few. Exploring strategy is important in emphasizing a comprehensive view of strategy, and this will enable you to explore the insights of many disciplinary perspectives including both the economics of strategy and the people side of managing strategy in practice.

But how can you test your Strategy?

A stress test by asking tough questions about your business, you can identify confusion, inefficiency, and weaknesses in your strategy and its implementation. As Peter Drucker once warned, “The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong questions”.

So, for testing & checking your strategy you should ask the following questions:

1. Who is your Primary Customer?

Choosing a primary customer is a make-or break decision. Why? Because it should determine how you allocate resources. The idea is simple: Allocate all possible resources to meet and exceed your primary customer’s needs.

2. How do your Core Values Prioritize shareholders, employees, and customers?

Core values must indicate whose interests come first when difficult trade-offs must be made. At some companies, customers come first. At others, it may be shareholders. At yet others, it may be employees. There is no right or wrong choice. Each choice is based on a different theory of value creation. But making one and communicating it effectively are essential.

3. What Critical Performance Variables are you Tracking?

Many managers complain that they’re overwhelmed by how many things they’re asked to keep track of in all-inclusive lists of performance measures. Effective managers monitor only a small number— those that could cause their strategy to fail. There’s another reason to limit your focus: If you add too many measures to your scorecards, you will drive out innovation.

4. What Strategic Boundaries have you Set?

Every strategy carries the risk that an individual’s actions will push the business off course. The risk intensifies when managers feel pressure to hit growth and profit targets. There are two ways to control such risk: You can tell people what to do, or you can tell them what not to do. Telling people what to do helps assure that they won’t make mistakes by engaging in unauthorized activities. You should hire creative people and tell them what not to do. In other words, you should give them freedom to exercise their creativity—within defined limits.

5. How Are you Generating Creative Tensions?

As a business leader, one of your primary jobs is to make outside market pressures felt inside your business. The most common way of motivating people to innovate is to set stretch goals—sometimes called challenge goals or big, hairy, audacious goals. Conducting business as usual or making incremental improvements is not enough. The only way to meet aggressive targets is to do something completely different. If you want people to innovate, try holding them accountable for measures that are broader than the resources they control. Another way of forcing employees to think outside the box is to assign them to a second box. New perspectives emerge when people are forced out of their routines.

6. How Committed are your employees to helping each other?

Although you want your employees to achieve their personal best, they must also work together towards shared goals.

Pride in purpose. If people are proud of their organization’s mission, they will assume shared responsibility for its success.

Trust. When you trust your colleagues, you’re willing to make yourself vulnerable— to put your reputation on the line to support them. Trust is vital if you want people to work collaboratively.

Fairness. The final requirement for collaboration is fairness. If you want people to commit to helping one another, you must share rewards fairly up and down the organization.

7. What Strategic Uncertainties keeps you awake at night?

At the root of every failed strategy is a set of assumptions about the future that eventually proved false. Your entire organization must continually scan the competitive environment for changes and send intelligence up the line. And because everyone watches what the boss watches, if you want your employees to focus on specific issues, focus on those issues yourself. The most powerful way to signal what’s important to you is to use your business control systems as interactive tools. Pay close—and visible— attention to the data they produce and use them to generate questions that will activate the search for information throughout your business.