HBR: “Your Strategy Should Be a Hypothesis You Constantly Adjust”

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Just read a good short post on strategy as hypothesis on HBR.com by Amy Edmondson and Paul Verdin. Some highlights:

 

An alternative perspective on strategy and execution — one that we argue is more in tune with the nature of value creation in a world marked by volatility, uncertainty, complexity, and ambiguity (VUCA) — conceives of strategy as a hypothesis rather than a plan. Like all hypotheses, it starts with situation assessment and analysis — strategy’s classic tools. Also like all hypotheses, it must be tested through action. With this lens, encounters with customers provide data that is of ongoing interest to senior executives — vital inputs to dynamic strategy formulation. We call this approach “strategy as learning,” which contrasts sharply with the view of strategy as a stable, analytically rigorous plan for execution in the market. Strategy as learning is an executive activity characterized by ongoing cycles of testing and adjusting, fueled by data that can only be obtained through execution.

Strategy as learning requires senior executives to engage in an ongoing dialogue with operations across all levels and departments. The people who create and deliver products and services for customers are privy to the most important strategic data the company has available. And the strategic learning process involves actively seeking deviations that challenge assumptions underpinning current strategy. Deviations and surprises must be welcomed for their informative value in adapting the strategy. Executives who adopt a strategy-as-learning framework understand that pushing harder on execution may only aggravate the problem if shortcomings are, in fact, evidence of inadequate market intelligence or flawed assumptions about the business model.

What is new is the idea that closing the gap between strategy and execution may not be about better execution after all, but rather about better learning — about more dialogue between strategy and operations, a greater flow of information from customers to executives, and more experiments. In today’s fast-paced world, strategy as learning must go hand-in-hand with execution as learning — bypassing the idea that either a strategy or the execution is flawed — to recognize that both are necessarily flawed and both are valuable sources of learning, improvement, and reinvention.

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