Across all the definitions from management consultancies, academia, and business journals, strategy is defined as:
A strategy is a communicable plan to maximize and sustain the most important outcomes.
In a strategy, outcomes are achieved through a set of cohesive "initiatives"—"where to play, how to win." But how can leadership be sure that the strategy they've created (or are creating) is good enough?
Below is a checklist that can be a "litmus test" to check for how robust and high-quality any strategic plan is. This 14-item checklist is assembled from decades of experience across Gaussian, the top strategy consultancy firms and frameworks, case studies across industry, and industry publications like Harvard Business Review.
1. Rooted in outcomes, but is itself not an outcome
Without centering a strategy in the outcomes or the high-level performance, it's impossible to achieve the core definition of what a strategy is: a plan of attack to achieve outcomes.
Crucially, a strategy is itself not an outcome, as this is only a small part of the picture. Stating "this year we will double our revenues" is not a strategy.
Prioritization is as much about what an organization does not do as what an organization does.
There is an infinite list of initiatives that an organization might pursue, but unfortunately, resources and time are finite. It follows that resources should be allocated to the highest priority initiatives, and therefore that the strategic plan should be comprised of these initiatives.
As strategy is rooted in outcomes, initiatives should be prioritized based on how much impact they have on desired outcomes, and how easy/feasible they are to perform. There are numerous frameworks for prioritization, such as RICE, but at Gaussian, we often recommend one of the simplest, Impact versus Feasibility.
3. Achievable, not wishful
Planning at the highest levels is heavily informed by leadership experience and instinct, and one of the key ways this manifests is in an understanding of how realistic a strategic plan is. Is this strategy within the realm of possibility for the company to execute? Is it predicated on raising $100M of capital in an economic downturn? Does it presume a mere team of 6 will create an interplanetary asteroid-mining spacecraft?
Leadership must kick the tires and make sure the strategy is achievable, and not an emotional outlet of wishful thinking.
4. Able to be held accountable to
A strategy must form a blueprint that can be used by the entire organization—to rally around and to execute. If a strategy is an intellectual exercise that no one expects to become reality, then we'd recommend easier ways to entertain oneself.
The entire business must be held accountable to the execution of the strategy. Accountability implies that there is a commitment to the strategy being realized—celebration if the outcomes are achieved, and course correction if the outcomes are not on track.
Accountability can be achieved in several ways, including:
- Clear, well-separated KPIs and metrics that allow for easy determination of whether teams are on track or not
- Clear communication of the strategy and the parties responsible for different portions of it
- Two-way commitment between teams and their managers/directors regarding performance against strategic initiatives
Multi-year strategies are supposed to be an opportunity to pull up, and see the forest for the trees. In a mathematical sense, we call this global maximization—a good strategy must come up with the best answer across all options.
Ideally, there are no possible initiatives that have been missed, no rocks unturned. In reality, however, being perfectly holistic is impossible—you can never guarantee that you have truly considered every possible option under the sun.
Instead, businesses should have a process that allows new research, data, ideas and initiatives to continually be considered, forming a constant growth of options considered, and allowing leadership to be confident in an ongoing way that as far as the latest perspectives go, the company's strategy is truly the best path through all possibilities.
6. Rigorously discovery-driven
Research, learning and discovery are critical to strategy planning. Specifically:
- Research allows strategy to be holistic by identifying as many possible options and ideas for strategic initiatives
- Research allows accurate determinations of what the expected impact and feasibility of any strategic initiative would be
Research and discovery may span internal and external sources (some readers may recognize this as SWOT):
- Internal research (product, processes, customers, etc)
(a) Internal strengths, differentiators
(b) Internal/organizational weaknesses
- External research
(a) Competitor (and adjacent) strengths, differentiators, successes
(b) Competitor (and adjacent) weaknesses, gaps
(c) Immediate customer trends
(d) Long-term customer trends
(e) Macro/adjacent industry trends
An effective way to measure the progress of a growing, innovating company is to approximate its rate of learning and discovery.
7. Uses uncertainty as an input, not a caveat
Unfortunately, the modern business environment is filled with uncertainty, and punches-in-the-mouth are as frequent as they are unpredictable.
Rookie businesses view this as a sad fact that cannot be reconciled, viewing their strategies as "best case scenarios" and crossing their fingers that nothing goes wrong.
Mature and confident businesses, on the other hand, view uncertainty as a variable in their strategies. They view returns as risk-adjusted returns. They build in cushions for "unknown unknowns"—for instance, a hardware company may not know what supply chain disaster will befall them next year, but they are confident that there will be at least some disaster—and they are ready for it.
8. Continuous and relevant (“agile”)
Oftentimes, strategies are out-of-date shortly after they are conceived. They hide in lengthy PowerPoint presentations, gathering dust on shared hard drives.
Far more effective are strategies that are continuously pulling in new information, with initiatives adjusting as data and learnings come in.
The challenge is that strategy planning processes are typically arduous enough to only be feasible to run once a year (or less frequently). Nimble organizations are instead able to have parallel, continuous processes that adjust the strategy every quarter, for instance—despite the fact that the formal, fully-fledged strategy planning only occurs annually. Continuous adjustments like this raise speed decision making by 2.5x and are embraced by organizations as large as Microsoft and Diageo.
This draws heavily on the Agile playbook, though the applications are far beyond traditional software development.
9. Separates ideation from prioritization
One classic mistake during strategy planning, or during the year, is to mingle ideation of initiatives with prioritization—in other words, prioritizing something as soon as it's been thought up. This tends to lead to an over-prioritization of ideas. This results in whimsical, high-friction plans and weaker outcomes.
Leaders need to be able to prioritize analytically, and with full awareness of the holistic, global context of all other ideas. But they also need to be able to ideate creatively, outside-the-box, without restraints.
The human brain is unfortunately quite ineffective at handling both of these mindsets: creative ideation, and holistic prioritization.
The most effective solution is to separate ideation from prioritization as intentionally as possible. In particular, by having separate sessions or occasions where ideation occurs from when prioritization occurs.
10. Traceable, logical, and clear
Strategy is inseparable from the concept of an organization—with many stakeholders, many decision-makers, and many executors.
Given that strategy is often a top-level mechanism, its effects can be felt throughout an organization.
A strategy that isn't clear and logical will have poor buy-in, leading to confusion, ineffective execution, lower excitement, and lacking productivity.
Furthermore, studies increasingly point to the benefits of "traceability," namely the ability for any employee to connect the dots between their own work and the top-level strategy and mission. This is especially true for millennial employees.
11. Simple, cohesive, and coherent
A strategy is not a mixed bag of a million ideas. It is a streamlined, cohesive set of initiatives.
Simplicity and cohesion go hand in hand, because cohesion implies that the strategy can be expressed as a simple, overarching statement. At Gaussian, we call this the Strategic Statement.
Benefits of simplicity, cohesion and coherence are that buy-in across the organization is easier, and clarity and motivation are easier to instill among team members. Humans can only have one cause to rally behind at any one time (we have rather limited short-term memory), so simplicity is key.
12. Communicable to employees
A strategy should not be dense and inscrutable, an academic exercise that only executives can understand. Employees (including executives) must implement the new strategy, so communication is critical.
IBM's new Strategic Statement is "Growth through greater focus on our open hybrid cloud platform and AI". This is a communicable soundbite, both internally and externally.
Thought must be given to how the new strategy is communicated to employees, following the standard best practices of HR, communication, and change management.
13. Derived from a consistent process
Strategies may be bold and push organizations to their productive limits. To ensure that team members continually trust the ever-evolving strategy of their organization or department, it can be helpful to use (and socialize) a consistent strategy planning process. This means that employees do not need to re-trust the strategy that is produced every year—instead, they only have to trust the process that continuously yields the strategy.
14. Makes leadership uncomfortable but confident
A bold strategy for growth and change should not be about "business-as-usual," rather it should imply change and some level of risk. Processes and structures and services should mold and adapt and meet the future. There should not be 100% certainty (otherwise, someone else would have done it before). Leaders should be a little unsettled—that's how executives know that they are being pushed to more productive heights.
But being bold does not mean shedding confidence. A good strategy should give a realistic blueprint, and improve confidence, regardless of how aggressive it is.
Photo by David Ballew.