Using tomorrow’s models to guide today’s actions
Traditional long-term strategy formulation focuses on a three- to five-year horizon.
Traditional long-term strategy formulation focuses on a three- to five-year horizon; its validity relies upon a future that is reasonably conceivable based on defined industry boundaries, a known competitive set, incremental advances in technology and well-understood consumer needs. However, the sheer pace and scale of change is now so great that those assumptions are considerably less reliable the further business leaders try to look into the future. Simply put, conventional strategy development methods are inadequate for identifying massive transformational change, let alone preparing for it.
Organization leaders and their boards need to broaden their horizon, looking beyond the drivers of current market conditions to capture a fuller, more dynamic picture of what a less obvious future may hold. This urgency in embracing the duality dilemma has never been clearer; 67% of professionals cite disruptive competition as a leading industry challenge in emerging markets (pdf). To stay relevant in a hypercompetitive future, EY teams advocate a widened lens, which enables the exploration of generational shifts, unarticulated consumer needs, and emerging competitors and technology developments in tangential (or non-existent) markets today that may become direct challengers in the future. By challenging current paradigms, beliefs and biases and looking much further into the future to identify the many potential futures that could lie ahead ―EY teams can map “what could be,” understanding the risks, opportunities and conditions of play that each potential future may offer. Then, with this robust view on the distant future, EY teams work backwards to understand the strategic and tactical implications and priorities for today.
Anticipating the future
Unlocking tomorrow’s success starts with a purpose-driven vision of the future.
To examine how the art-of-the-possible, future-back approach to strategic formulation works, let’s break it down into three sequential steps.
1. Anticipate the future through analysis and purpose
Engaging in an empirical, clear-eyed analysis of a broad range of data and indicators, a future-back approach aims to unpack key megatrends, assess how they might shift market conditions and align these insights with the organization’s purpose. Together we look at the definition and direction of the market, examining where it is going, what might create value in the future and how the organization can position itself to capitalize on potential disruptions. These activities culminate in a new working definition of the ecosystem of the future and where the organization might fit within this new context.
A future-oriented focus goes beyond traditional desktop research, customer interviews and benchmarking. It delves into emerging consumer and technology trends, evolving competitor shifts, legislative and regulatory changes and more to identify key drivers that can change the future and, along with it, the organization’s prospects for relevance in the future. Many of these may be minute or latent indicators; nonetheless they can reveal important clues to a nascent transformation. And, rather than engaging in unstructured or open-ended brainstorming sessions, we uncover these indicators through an informed and directed process of practical ideation, anchored by data and trends into which experienced analysts have credible line-of-sight.
A clear sense of purpose is an essential component of future-planning. During this process of anticipating distant-future scenarios and their consequences, we challenge the organization to define and articulate its purpose for competing today and in the future. When stakeholders across the value chain ― not just employees and customers, but also investors, suppliers and other participants ― embrace “why” change is needed, it becomes easier to align priorities, manage effectively and motivate all parties towards that vision.
2. Respond to the board’s demands for long-term focus
EY’s Center for Board Matters research study reveals that duality of strategy is the most pressing issue for boards. They expect management teams to deliver short term results and have a strategy for success in the long-term. Duality is a broad topic and boards are asking executive teams questions such as: do we focus on our core business or expand beyond the core; do we focus on our current geographies or expand in new markets; do we look for new products or line extensions? Duality success means helping management teams consider multiple options and make the trade-offs transparent. As part of this duality focus, boards are demanding that their management teams articulate their purpose, which they see as a key component of their long-term strategy, and ensure they have the right long-term approaches and measures in place for delivering it.
While long-term value drivers like employee engagement and customer trust are less tangible than shorter-term drivers commonly valued by the analyst community, our research shows that they are actually the strongest drivers of financial success. Long-term value drivers help the organization avoid blind spots in perspective and empowers the organization with a credible voice in a fast-changing market.
With urging from the Board, organizations will continue to be nudged to take a longer-term view and that further necessitates the need for a duality of growth approach to strategy formulation.
3. Chart where and how to play
A dual lens connects insights into the future to the design of the organization’s strategy. With a clearer picture of what the future could hold and the organization’s purpose for succeeding in it, leaders are better equipped to chart their course from present to future with greater confidence and clarity.
In our experience, a dual lens ― one looking from the outside in, and the other from inside out ― is invaluable to understanding the markets, consumers and ecosystem partners to be impacted on the organization’s newly charted journey.
In today’s experience-driven world, human-centered design has become central to all aspects of creating and executing a strategy. When an organization understands the experiences and expectations of the people at the core of its business ― its customers, partners and employees ― it is better able to create and execute efforts to address their needs and drive growth.
Seeking to understand the value drivers that are at play in both the near- and longer-term future, the outside-in approach examines the experiences, interactions, dependencies, unmet needs and pain points of the customer, partner and employee. Along the way, this insight can reveal new opportunities, as well as the potential impact of strategic actions on these groups. Ultimately, these learnings can help distinguish where and how to play by uncovering core, adjacent and disruptive opportunities for growth.
At the same time, leaders can activate an inside-out view, assessing their organization’s processes, value streams, systems and operational requirements to deliver the desired experiences throughout the entire end-to-end journey.
Bringing together the dual lens of outside-in and inside-out, we help clients break down strategic concepts into new business capabilities, technological breakthroughs and cultural shifts, effectively bridging customer-driven growth strategies with the operational requirements necessary to fulfill them. This becomes a strategic roadmap of initiatives and investments prioritized to create impact in the market for both immediate and long-term returns.
Navigating the path to tomorrow
Operationalize the future business model through concurrent tracks of agile sprints and longer-term transformation aligned to purpose.
Equipped with a robust, data-driven roadmap that translates targeted future experiences into “building-block priorities” for today, the organization can focus its efforts on mobilizing. With our clients, EY teams work to achieve a dual-track commitment to enable transformation.
Agile sprint track
In what’s known as an “agile sprint” track, teams seek quick wins that create immediate impact, experimenting then iterating and applying the learning from those trials to the next one. Cost optimizations and new customer experiences are just two examples of this kind of agile experimentation. In these experiments, “quick” doesn’t necessarily imply easy-to-achieve or low-impact; instead, we pursue high-impact initiatives whose benefits can be harvested quickly.
Sprints build capacity for taking palatable risks, testing and learning “in-market” and occasionally failing fast to arrive at crucial lessons-learned. This helps to develop the muscle to innovate quickly and fosters the nimble governance and processes that enable both speed and flexibility for future success. Any “fast failures” experienced during these sprints are an expected byproduct of getting to accurate answers and scaling more quickly.
Simultaneously, some foundational changes in the core business require more than quick sprints. Transformation teams work on longer-term programs designed to achieve the foundational changes that can unlock future competitive capabilities. Informed by the lessons learned in the agile sprints and aligned to the organization’s strategy and purpose, teams within a “transformation track” aim to develop the skills, capabilities and cultural changes required for future success. With a transformation agenda tailored to meet the scope and pace of change required, these teams lead the evolution to a new operating model, governance structure and culture. As a part of this evolution, teams also explore whether acquisitions or new partnerships would benefit the organization of the future, filling capability gaps more efficiently than the organization can address on its own.
When balanced and aligned to each other and the organization’s purpose, these concurrent tracks build the capacity to solve current business challenges, nimbly prepare for the future and operationalize the future business model.
Blended teams harness multi-dimensional perspectives
Along the shared journey of navigating the duality dilemma, EY professionals challenge clients to build teams that bring together business strategy, design thinking and technology expertise.
Along the shared journey of navigating the duality dilemma, EY professionals challenge clients to build teams that bring together business strategy, design thinking and technology expertise. Just as cultivating greater “outside-in” awareness can counter myopic beliefs, similarly integrating a wider diversity of viewpoints and broader expertise can unleash more creative strategy building. Organizations that are intentional about assembling cross-functional teams are better equipped to harness multidimensional perspectives that fuel innovation and differentiated outcomes.
Embracing the duality dilemma for success today and tomorrow
Amidst the upheaval that is rewriting the rules of business strategy, competition now is coming from unexpected sources and will continue to do so in the future. In this fast-evolving environment, organizations are beginning to recognize that yesterday’s approach to strategy isn’t likely to work tomorrow. To mobilize transformative change without inhibiting the current business, organizations need a new, more imaginative framework for developing future-ready strategy ― one that doesn’t force leaders to negotiate between success today versus success tomorrow. Organizations that embrace and adjust to the duality dilemma in their strategic formulation ― through a future-back approach that situates people at the core, aligns them to purpose as well as an intentional view of the future and harnesses a dual-track transformation ― can balance the need for performance today with the need to innovate for a disruptive future.
The authors wish to thank the following for their contributions to the article
Trent Tishkowski, Steve Basili and Mehrdad Moghaddam.
To thrive in the future, organizations must learn to navigate the duality dilemma of balancing today’s success while planning for tomorrow. A future-back strategic roadmap can help them chart a course to purpose-driven growth.