Strategy validation

The first quarter has ended. Maybe you are evaluating the progress of your strategy, maybe that will happen closer to the middle of the year… But how aware are you of what happens in between?

Discussion often revolves around strategy planning and execution, sometimes even touching upon acceptance, which is of particular importance when change is involved. However, it is less often acknowledged that we live in a complex world, every day more interconnected, with social and economic changes, global competition and a myriad of risks distracting us. As much as we try to validate a strategy a priori through in-depth market research, data analysis and forecasts, we are still a part of an ever-changing ecosystem. There are also resource limitations influencing how much we can explore and sets of simplifying assumptions where these strategies are anchored.

How valid are your assumptions?

While internal monitoring and management is a relatively established practice, companies do not always stay on top of what lies outside their control. They may be focused on following a set direction and meeting planned goals, but what if the correct decision is to change the plan? Do the initial assumptions still hold true? Is the environment still the same?

Forbes lists 10 reasons for strategic planning failure. Among them are:

  • not understanding the environment
  • unwillingness or inability to change
  • ignoring marketplace reality, facts, and assumptions

Harvard Business Review identifies as the second most important Fundamental Trait of Organizational Effectiveness that important information about the competitive environment gets to headquarters quickly.

What does this mean for a company?

Do not blindly follow a plan that is already failing

No battle plan survives contact with the enemy – Helmuth von Moltke the Elder (1800 – 1891)

Does this mean one should not have a plan? No. But the strategy needs to include a natural degree of uncertainty that comes from the complex world we live in. (For a sense-making framework that explores certain simplifying assumptions we often make, see the Cynefin framework.)

Following a planned vision leads to less success than keeping an open mind-set for discovering new things along the way (Pontikes and Barnett, 2017).

Many of these concepts are not new and we have very reactive processes, such as those described by Mintzberg’s Environmental School of Thought, or with an embedded agility characteristic of iterative development models that are making their way from software development to more ‘traditional’ industries. Nevertheless, many companies are still tied to rigid processes and time scales, without incorporating in their strategies elements that allow them to have a continuously updated view of the environment.

As a conclusion, a long-term strategy should be complemented by an agile and constantly informed (what the Boston Consulting Group calls the Always-on) strategy and leadership. This requires, not only the existence of information services and constant monitoring, but also a different attitude that seeks falsification / validation of assumptions and a managerial approach that encourages this behaviour.

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