Strategic Action Radar^TM:A Scenario-Based Tracking System to Sense and Adapt to a Changing World

By Scott Snyder, Ph.D. and Paul J. H. Schoemaker, Ph.D.
President and Chairman, DSI

While many organizations have adopted corporate dashboards to help them monitor the road ahead and adjust their speed and direction accordingly, the business environment is often much more complicated than a trip down the highway. Important signals from the periphery need to be identified and tracked. The road itself may be shrouded in uncertainty and the organization needs to move forward through this fog. The picture that is emerging from various signals needs to be understood. As discussed in this article, organizations may need to develop a broader “radar” to monitor and respond to this complex environment.

The Need to Sense and Respond

In his book Execution, Larry Bossidy^[1] highlights the capability of organizations to sense and adapt to the changing world around them as a fundamental element of long-term success.  In The Fifth Discipline, Peter Senge^[2] singles out the ability of organizations to learn and adapt as the most important discipline of all.  GE has titled its most recent annual report “Growing in an Uncertain World.”  John Browne, Group Chief Executive at BP, says, “Giving up the illusion that you can predict the future is a very liberating moment.  All you can do is to give yourself the capacity to respond to the only certainty in life – which is uncertainty.  The creation of that capability is the purpose of strategy.”

At the heart of each one of these messages is the call to address uncertainty and change in the world around us head-on as we plan for the future.  We can no longer view strategy as a static event where leaders come together to design a roadmap that they can follow for the next few years.  The reality of today’s world is that the terrain and weather conditions are constantly changing, making our roadmap obsolete unless it accounts for these changes.  Schoemaker’s book Profiting from Uncertainty ^[3] lays out a conceptual methodology for winning no matter what the future brings.  It consists of three pillars:  scenario planning, flexible strategies and dynamic monitoring.

This article addresses the last pillar, assuming the earlier ones are in place.  We focus on the challenge of scanning for and integrating new signals from the environment, including those that lie beyond traditional fields of view.  Peripheral vision, the ability to sense and respond to these weak signals, is one of the most difficult and yet crucial capabilities for an organization to develop.  In one survey of 140 corporate strategists, fully two-thirds admitted that their organizations had been surprised by as many as three high-impact competitive events in the past five years. Moreover, 97 percent of the respondents said their companies lacked any early warning system to prevent such future surprises.^[4] Jack Welch included among his top five capabilities of leaders the ability to see around corners:  the need for leaders to have a sixth sense of what lurks at the periphery (as a threat or opportunity) and even a seventh sense as to what the future may bring.

The Business Intelligence Gap

In recent years, organizations have used IT as an enabler to create real-time systems with access to information both inside and outside the company.  However, most of this information is still relegated to tactical uses and fails to find its way to the strategic decision-makers in the firm.  Some of the key limitations in the way business intelligence (BI) is currently utilized in companies include:

-         The intelligence is narrowly focused on performance metrics and the company’s immediate competitors and markets.  Current dashboards omit potentially disruptive activities on the edge of target markets or important signals happening outside the company walls.

-         The intelligence is collected by only a few people in the organization.  This results in data sources that are susceptible to personal bias or selective omissions of key data points.  The danger is that people often look for confirming evidence.

-         There is no mechanism for actively scanning the environment; instead companies passively monitor known metrics.  The unknowables remain unknown and are ignored in favor of micro-measurement of the things we already know.

As Figure 1 summarizes, a study of 100 large manufacturing companies over many years showed that external and market-related factors determine nearly 50% of the future value of the firm.  While these external factors are by definition out of the firm’s control, they can be analyzed and anticipated to gain a competitive advantage.  Rather than focus only on what can be controlled, companies should especially track the uncontrollables so that they can better navigate the currents and shifts in their business environment. To capitalize on these changes, companies need the monitoring systems to be able to see them coming and respond to them.

Figure 1 – Business Value Drive by External Factors

A New Approach: Strategic Action Radar^TM (SAR)

The Strategic Action Radar^TM (SAR) breaks new ground by enabling firms to structure and map external signals into a framework which then supports adjustment and updating of strategy and decisions.  Much like radar used for electronic surveillance – which sense Signal Echo and Doppler Shift across an array of elements to determine the distance, direction and speed of an object – the SAR uses information sampled from multiple sources to determine the speed and direction of changes in an organization’s environment. 

Advances in information technology (IT), such as more powerful search capability, combined with increasing levels of uncertainty, make this a good time for firms to develop SAR. We expect that firms will eventually use SAR at all levels of the organization including enterprise, business units, functional unit, and other groups by adjusting the inputs and outputs to fit their specific monitoring needs.

How does it work? The SAR template developed by Decision Strategies International, shown in Figure 2, enables leaders and decision-makers to have a more complete view of how their world is changing and how well they are positioning for success in light of these changes.  The full SAR system is a visual dynamic dashboard consisting of 5 major functions:

1.      Detection of external signals, including the periphery,

2.      Linkage to multiple external scenarios about the future,

3.      Linkage to key strategic segments the business is or may be active in,

4.      Re-prioritization of organizational capabilities needed for future success,

5.      Alignment of strategic initiatives and options portfolio to maximize value

Figure 2 – Strategic Action Radar^TM

The “Living Strategy” Concept

The SAR approach paves the way for a true “living strategy” paradigm, where strategy becomes intertwined with business intelligence and tactical decisions relating to markets and internal firm initiatives.  No longer will strategy be an annual event where the great minds in the company caucus on what the “right” direction might be for their organization, only to find out later that the world departed from their assumptions.  Since the intelligence that feeds the SAR comes from across the organization and outside its walls, a broader stakeholder group is now touching the organization’s strategy versus a select few.  With a fully integrated radar and the data inputs to support it, the formal strategic plan may become obsolete.  Instead, firms will view strategy as a continuous, evolving set of decisions that position the company to maximize profits based on emerging changes in the environment.

Conclusion

In military strategy, when the war was on the ground, monitoring could be directed toward patrolling railroads, mountain passes or other critical checkpoints. But when the battle took to the air and sea, there was a need for radar to monitor more broadly across a complex environment, in which threats could emerge from virtually any direction. As many organizations encounter growing complexity and uncertainty, they also need to expand their capacity to monitor. The Strategic Action Radar^TM offers a powerful tool for addressing this challenge.

If you view strategic planning as an attempt to predict the future and conquer uncertainty, SAR is not for you.  If your basic view of strategy sees it as navigating change, challenging outdated assumptions, creating new options, and monitoring external change in real-time, then SAR can be a valuable asset in detecting changes in the environment, recognizing threats, and keeping your organization on the right course.

NOTES