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The cost of taking strategy out of context

Figuring out your strategy: Avoiding the cost of taking strategy out of context

When you get there, there is no there, there.

When executives ‘figure out’ their firm’s strategy, they crystallise a figure in their minds. Inevitably they also screen out the future context this ‘outed’ strategy figure will inhabit when it is enacted. Taking their strategy ‘out of context’ without realising they are doing this can be costly for executives and their organisations, yet this unthinking decontextualisation can be avoided, as we recently published in the MIT-Sloan Management Review.

How is it costly and how can it be avoided?

It is costly because the expected context that was taken for granted at the time the strategy was figured out can fail to show up. Instead, another context can appear later, resulting in the strategy finding itself in a context for which it was not designed. In the MIT-Sloan Management Review we offered the example of the type of steel that was used to build the railways in England. That choice did not consider that the railways’ weather context could be different in the future – such as the high temperatures in the summer of 2022. The cost was bent rails, trains having to slow down, services disrupted, and people unable to visit dear ones or attend business meetings.

It can be avoided because attending to how the context of the strategy is evolving – or better, taking time with the help of scenario planning to imagine how it might evolve – enables executives to proactively adapt their strategy to ensure it is not taken out of context. 

Ice hockey tactics board, with skates, paper, tactics and hockey puck on table in front of it.

Canadian hockey player Wayne Gretzky became well known (outside hockey, that is) for saying he skated to where the puck was going to be, not where it had already been. This does not seem to be advice that senior executives charged with executing strategy for their firms appear to be following as much as one would hope to be the case. Too many appear instead to implicitly expect the original strategy’s context to remain unchanged for the duration of the strategy. This is often why we see so many profit warnings announced with ‘unexpected market conditions’ as the purported reason.

This costly and yet avoidable mistake means executives often end up ‘fighting the last war’ rather than anticipating and creating options with which to capitalise on emerging opportunities. Avoiding this error requires executives to invest time and resources to move attention back and forward between their strategy and its context in several points of time so that the two remain aligned - rather than becoming untethered.

This alternation of attention between minding the strategy and minding its context must be deliberate because executives cannot ‘see’ both at the same time. Rubin’s vase is an excellent illustration of how this works – if one focuses on the vase, one cannot see the profiles of the two faces and vice versa.

Enabling a deliberate shift in attention between an organisation’s strategy and its unfolding context is the nature of our work with organisations in the Oxford Scenarios Programme.

Rubin's Vase, optical illusion showing vase and two faces

For a time, executives, along with participants, facilitators, and faculty, focus on the firm’s future context within which the strategy will be operational. This shift of what to concentrate on helps explicitly bring to the fore how the context could be different and proactively helps identify how the strategy can be adapted. 

In the MIT-Sloan Management Review article, we discussed how global insurance firm AXA explored the future of ESG (Environmental, Social and Governance) rather than taking its current formulation as enduring – like many firms are doing. This helped AXA consider ahead of time how they would adapt their strategy to do well if the current set of expectations about ESG did not materialise. 

Similarly, Swift (the Society for Worldwide Interbank Financial Telecommunication) wisely paused to understand more about how digital currencies might evolve rather than getting caught up in the current noise and excitement. This helped Swift to avoid making the potentially very costly mistake of projecting existing trends into the future and deriving over-simplistic assessments.

It is well known that to take a statement out of context risks changing its meaning. Similarly, if a strategy is taken out of its unfolding context, it can end up doing something very different to what was intended, adversely impacting the organisation’s capacity to achieve its strategic and financial objectives.

The alternative, our research advocates, is for executives to move their attention back and forth skilfully and thoughtfully between the strategy and its evolving context to proactively adapt their strategy as needed. In doing so, their firms can become visionaries rather than victims of circumstances.