The Strategy Clockwork is a management model connecting the dots of the key concepts, theories, and frameworks for managing the full cycle of the Strategy.
Falcon Invoice Discounting Setup for Small Businesses
Strategy Clockwork Short Description
1. The Strategy Clockwork
A management model connecting the dots of
the key concepts, theories, and frameworks
for managing the full cycle of the Strategy.
2. The Strategy Clockwork
STRATEGIC
SCENARIOS
STRATEGY
FORMULATION
STRATEGY
EXECUTION
CHOICES
COMPASS
CAPABILITIES
FACTORY
GAPS CLOSING
SCHEDULER
OPERATIONS
BRIDGE
ALIGNMENT
CONCERTO
FEASIBILITY
& VIABILITY
GATEWAY
PLANNING
BOARD
TRENDS
& SIGNALS
SPYGLASS
OSE
3
EXECUTION
PIT-STOP
HYPOTHESES
TEST BENCH
SKUNK
WORKS
DESIGN
WORKS
OFFICE OF STRATEGY EXECUTION
IDENTIFY JTBD
CHALLENGES
TEST POSSIBLE
SOLUTIONS
OSM
OFFICE OF STRATEGY MANAGEMENT
2
4
5
1
6
10
7 8
9
STRATEGY
EXPERIMENTATION
PRODUCT
EXPERIMENTS
CHOICES
EXPERIMENTS
I II
TEST
STRATEGIC
CHOICES
STRATEGIC CHOICES
Where-to-Play
& How-to-Win
REFERENCE
COGNITIVE
MODEL
STRATEGIC
HORIZONS
BUSINESS
PORTFOLIO
ACTIVITIES
SYSTEM
CAPABILITIES
SYSTEM POSITIONING
GAPS
COHERENCE
GAPS
CAUSALITY &
BREAKDOWN
RESOURCES
CONSTRAINTS
BUSINESS
MODEL
OBJECTIVES
MEASURES
INITIATIVES
RISK
RESILIENCE
INDIVIDUAL
ALIGNMENT
BUSINESS
ARCHITECTURE
FUNCTIONAL
ALIGNMENT
OPS PLANS
& READINESS
CONTINUOUS
IMPROVEMENT
BUDGET
PROGRESS
REVIEW
CORRECTIVE
ACTIONS
INITIATIVES
REALIZATION
MODELS
ADAPTATION
EARLY-WARNING
SYSTEM
Penta
Model
3. CHOICES
COMPASS
SKUNK
WORKS
DESIGN
WORKS
IDENTIFY JTBD
CHALLENGES
TEST
POSSIBLE
SOLUTIONS
OSM
OFFICE OF STRATEGY MANAGEMENT
2
STRATEGY
EXPERIMENTATION
PRODUCT
EXPERIMENTS
CHOICES
EXPERIMENTS
I II
STRATEGIC CHOICES
Where-to-Play
& How-to-Win
The Strategy Experimentation
TEST
STRATEGIC
CHOICES
The Strategy Paradox, described by Michael Raynor as the “collision between
commitment and uncertainty”, exposes our Strategy to risks that are directly
proportional with the boldness of our strategic vision.
How do we deal with risk and uncertainty in the endeavours of our daily
life? We experiment. We prototipe. We test our assumptions for validity
before taking a final decisions.
Unfortunately, the Strategy cannot be tested before being implemented.
And we can’t really prototype it. The changes mandated by the Strategy
usually take a year or more to implement. By the time we finish doing that,
the prototype is the same as the final Strategy. So, prototyping and testing
the Strategy does not make a lot of sense.
The Strategic Choices
The Strategy is about doing different things than what we do
today, or about doing the same things, but in significantly
different ways.
That is why the Strategic Choices are the foundation of the
Strategy. They are choices about Where-to-Play, or which
customer Jobs-to-Be-Done to target, and about How-to-Win
there, or what solutions can best solve those jobs.
This is a combination of Roger Martin’s and A.G. Lafley’s Playing
to Win framework, and Clayton Christensen’s and Tony Ulwick’s
Jobs-to-Be-Done theory.
The Product Experiments
The mature Design Thinking methodology, initially brought into the business
world by David Kelley, provides us sufficient guidance for successfully
empathizing with customers on their Jobs-to-Be-Done, ideating their needs
and context, imagining alternative solutions, then prototyping the most
promising one, and finally collecting some early adopters’ feedback on it.
But Strategy is about more than a single new product. It is about a range of
solutions for a range of customer jobs. For enabling the selection of our
best Strategic Choices, we must extend our Design Works laboratory to a
more comprehensive palette of customer needs and solutions for them.
The Choices Experiments
Reference Cognitive Models like the Penta Model help us gain a
more comprehensive view of our possible choices on the two
Strategy dimensions of Where-to-Play and How-to-Win.
But our hypotheses about which Strategic Choices would best
position our business over a strategic horizon should be based on
some market feedback. That is the role of Choices Experiments
performed by our own Skunk Works laboratory that allow us to
better estimate the success chances that each possible choice
type has in the real world.
4. STRATEGIC
SCENARIOS
CHOICES
COMPASS
TRENDS
& SIGNALS
SPYGLASS
2
1
STRATEGY
EXPERIMENTATION
PRODUCT
EXPERIMENTS
CHOICES
EXPERIMENTS
I II
STRATEGIC CHOICES
Where-to-Play
& How-to-Win
REFERENCE
COGNITIVE
MODEL
STRATEGIC
HORIZONS
BUSINESS
PORTFOLIO
Penta
Model
The OODA decision loop
Based on his US Air Force figher pilot experience John Boyd has
imagined an ideal tactical decision loop based on four stages:
• Observe (gather or research information about the
unfolding circumstances)
• Orient (make sense of the context by comparing it with a
reference cognitive model)
• Decide (pick the best potential course of action from a
palette of choices)
• Act (turn our decisions into real actions).
Strategy cycle’s “schwerpunkt”
Boyd identified the Orient stage as the “schwerpunkt” of the decision loop. It
is the most critical stage for successfully accomplishing the desired
outcome, in a loop performed faster and better than any opponent.
If we extend OODA to the Strategy cycle, we can see that the selection of
our mix of Strategic Choices is the “schwerpunkt” of our Strategy. It is its
foundation. With one caveat: having a Reference Cognitive Model.
The Penta Model
Built as an extension of Arnoldo Hax’s Delta Model, the Penta Model is a
way to structure our strategic positioning palette of possible choices. And it
does one more thing: It looks along both dimensions that are essential for
the Strategy: Where-to-Play (the market) and How-to-Win (the product).
The Penta Model facilitates the process of selecting a mix of choices that
may best position our business over the Strategic Horizons considered.
The Strategic Analysis
The decisions that we must take on long-term for both our Corporate
Strategy (on multiple business lines) and our Business Strategy (on a single
business line) must be based on an anlysis of the trends and weak signals
that are relevant for our industry or arena over those Strategic Horizons.
On the Business Portfolio side, we must decide on developing or re-creating
the Competitive Advantage on our business lines, which should ideally be
structured on the four-plus-one Zones to Win coined by Geoffrey Moore.
That is more meaningful than just considering a BCG growth-share matrix.
The Strategic Scenarios
No Strategy can be formulated for a single version of the future. There are
always multiple plausible versions of how the currently-observed trends
and weak signals may unfold. Therefore, we must formulate our Strategy on
multiple Strategic Scenarios. Fortunately, we have a comprehensive and
mature methodology available for defining the plausible scenarios.
5. From decision to reality, by tomorrow morning?
Once we have decided on our mix of Strategic Choices, we must turn
them from the drawing board into reality.
Can we do that by tomorrow morning?
Well … not. Why? Because those choices usually require new or
significantly modified activities and capabilities to support them, and
we can’t bring all of them up at the flip of a coin.
Actually, it often takes one year or more to create, acquire, develop,
or change significantly both our Activities System (things that we must
do in various Value Stream processes) and its underlying Capabilities
System (a set of competencies, management systems, relationships,
infrastructure, technology, information, and so on).
The Strategic Gaps
Our business is positioned today through certain Strategic Choices
that have founded the Strategy that brought us the current business.
But in going forward, our new or adapted Strategy needs a new mix of
Strategic Choices that we must select for positioning our business at
the end of the Strategic Horizons, at our Strategic Destinations.
Therefore, we must identify the Positioning Gaps between our former
Strategic Choices mix and the new mix of Strategic Choices upon
which our new Strategy is founded.
To achieve this, we must look at the Strategic Gaps between (a) the
Must-Have Activities, Capabilities, and enabling Management Systems
required to support our new mix of Strategic Choices and (b) the
Capabilities, Activities, and Management Systems that we have today.
These gaps are called Coherence Gaps, because they aim to ensure
the coherence between the Strategic Choices and the Activities,
Capabilities, and Management Systems of our new Strategy.
CHOICES
COMPASS
CAPABILITIES
FACTORY
GAPS CLOSING
SCHEDULER
3
2
4
ACTIVITIES
SYSTEM
CAPABILITIES
SYSTEM POSITIONING
GAPS
COHERENCE
GAPS
CAUSALITY &
BREAKDOWN
Strategic Gaps causality and breakdown
This approach to the long-term planning of closing the Strategic
Gaps is borrowed from the Kaplan-Norton BSC methodology,
which works on Strategic Objectives (usually, on an annual
planning cycle).
First of all, there is a major cause-effect relationship between
the Positioning Gaps and the Coherence Gaps. Closing the
former is mostly (but not exclusively) dependent on closing the
later. Then, there is causality (or dependency, if we regard it the
other way) between the gaps within each of the two categories.
Finally, we must break down the multi-annual horizons available
for closing all the gaps onto annual cycles, scheduling which
gaps should we close each year, based on the causality
relationships between them and the resulting sequentiality.
This is the foundation of synchronizing between one or more
multi-annual Strategic Horizons and the consecutive annual
cycles of the Strategy Execution process.
6. The Validation Gateway
Can we start closing all the Strategic Gaps on January 1st, next year? Not really.
First, there is a causality-driven sequentiality and precedence for doing that. Then,
we wouldn’t have the resources for the projects aimed at closing all of them,
simultaneously.
To avoid overalapping resources demands, we can re-distribute the closing of
Strategic Gaps between the yearly execution cycles. But even if we do that, we
might still not be able to rsource them all. It could be too costly overall, or require
too many resources taken from Operations. Our Strategy may eventually be a nice
dream, but not feasible enough to turn into reality. That’s why we need the
Feasibility Gateway.
Once our Strategy is fully implemented we will have a new or transformed business
that we can describe with a Business Model. It brings together all the key Value
Stream processes (internal and external) with their costs or revenue implications.
Would that be a viable model? That’s what the Viability Gateway must tell us.
So, what do we do is we don’t pass these gateways? We go back and re-formulate
the Strategy in another iteration, probably less ambitious, but with a higher
probability of implementation success, considering our Resources Constraints, and
better viability, considering the resulting Business Model and its financial balance.
GAPS CLOSING
SCHEDULER
FEASIBILITY
& VIABILITY
GATEWAY
4
5
POSITIONING
GAPS
COHERENCE
GAPS
CAUSALITY &
BREAKDOWN
RESOURCES
CONSTRAINTS
BUSINESS
MODEL
The Missing Link
A Kaplan-Norton BSC Strategy Map usually
has four causality-linked perspectives that
host the Strategic Objectives, which are
also linked between them with cause-effect
relationships.
If we place the Strategic Gaps in a similar
layout, we get a map of gaps, structured on
causality-linked perspectives, informing the
logic of sequentialy closing them.
How does this help? We can now develop
the Strategic Objectives by aggregating
clusters of tightly-coupled Strategic Gaps.
The Strategy-to-Execution “missing link”.
STRATEGY
RE-FORMULATION
STRATEGY
EXECUTION
Coherence Gaps
Stakeholders-Related Gaps
Value-Stream Processes Gaps
Enabling Resources Gaps
Positioning Gaps
Strategic Gaps Map BSC Strategy Map
O1
Stakeholders
O2
S1 S2 S3
P1
P2
P3
P2
E1 E2 E3
Outcomes
Int. Processes
Enablers
7. Organizational Alignment
Strategy is executed at the lowest level of the organization,
where “the rubber meets the road”. For this reason, the
Strategic Plan at organizational level must be Vertically
Aligned to business units, teams, and to the employees in
Strategic Jobs Families. Within any organization there are
“internal customers” and “internal suppliers” that depend
functionally on each other. They must be strategically
aligned, as well. This is the Horizontal Alignment that may
also involve some Business Architecture redesign.
Strategy Execution
There is no Strategy without a Strategy Execution process to
turn it from an intellectual construct to the business reality of
the market in which we operate.
Brought into the business practice by the Kaplan-Norton BSC
framework in the 1990’s, the Strategy Execution process follows
a Deming-cycle PDCA closed loop (Plan-Do-Check-Act).
The K-N framework has six stages. The first one is actually a
summarized Strategy Formulation process. The other five are
embedded into our Strategy Clockwork model, divided into:
1. Strategic Planning, Alignment, and Operations Integration
2. Strategic Plan’s Execution and Strategy models’ Adaptation
OPERATIONS
BRIDGE
ALIGNMENT
CONCERTO
PLANNING
BOARD
OSE
OFFICE OF STRATEGY
EXECUTION
OSM
OFFICE OF STRATEGY
MANAGEMENT
6
7 8
OBJECTIVES
MEASURES
INITIATIVES
RISK
RESILIENCE
INDIVIDUAL
ALIGNMENT
BUSINESS
ARCHITECTURE
FUNCTIONAL
ALIGNMENT
OPS PLANS
& READINESS
CONTINUOUS
IMPROVEMENT
BUDGET
STRATEGY
FORMULATION
STRATEGIC PLAN
EXECUTION
Strategic Planning
Central to the Strategic Planning process are the Strategic Objectives and
the cause-effect relationsips between them, illustrated by the Strategy Map.
By aggregating the Strategic Gaps, the Strategic Objectives get directly tied
to the Strategy. The “missing link” that connects Strategy and Execution.
The Strategic Objectives are linked in a many-to-many relationship with a
portfolio of Strategic Initiatives that aim to accomplish the objectives by
closing the Strategic Gaps that they aggregate. This is the organizational-
level Strategic Plan that we usually design for an annual cycle.
Our Strategy model (Strategy’s components and their relationships) and
Strategic Plan’s model have been developed based on hypothesis about the
future that allowed us to take decisions on each of their components.
The Scorecards include the Strategic Objectives and, for each of them, Lead
(output) and Lag (outcome) measures that quantify the Performance in
achieving the objectives, their Risk Exposure, as well as the Fragility induced
by factors that may affect the Resilience of the resulting business.
Operational Integration
The Strategic Plan provides guidance to Operations about
the anticipated changes in processes, revenues, and costs
along the coming annual cycle. The Budget, the Ops &
Readiness Plans, as well as the Continuous Improvement
program must synchronize with these anticipated changes.
8. Strategic Plan’s Execution
This is where the action really happens, along the annual execution cycle. We focus
on that slice of the Strategic Gaps that must be closed this year, as well as on the
corresponding Strategic Objectives. The Strategic Initiatives are rolled-out in their
scheduled sequence, with the participation of those who got in the Alignment
process a share of contribution responsibility.
Some employees are included in the Strategic Jobs Families, since they are part of
the Strategic Initatives’ project teams, or are involved in directly supporting the
resulting changes. But most employees do not participate in this planned Strategy
Execution, they are contributing to the un-planned Strategy Execution.
These employees are included in an Open Strategy system that asks their opinion
on the hypotheses employed in Strategy’s models and then targetted by the
continuous Strategy Communication campaign that keeps them connected to the
progress of Strategic Plan’s execution. Being aware of what’s going on, they can
make micro-changes in their work that converge with organization’s Strategy.
Initiatives’ Realization
Unlike tactical actions, strategic changes seldom provide
immediate outcomes. They take some time, and this is exactly
why deciding on Corrective Actions within periodic Progress
Review meetings is not very easy.
Once a Strategic Initiative project is finished, we can see its
output effects, but the desired outcome may appear after
those effects have propagated through the linked processes.
This delay is tied to the concept of Initiative Realization.
For engineers, this works like a slow regulatory loop. We need
to anticipate where will it stop before making intermediary
corrections. That’s why the Kaplan-Norton BSC framework has
introduced the combination of anticipatory (output) and
result (outcome) measures in its Scorecards.
Beyond that role, the BSC measures provide us a feedback on
the validity of the hypotheses employed for the decisions
about the model components that are linked to them.
The Adaptive Strategy
What was called by Henry Mintzberg “emergent strategy” is in
fact the “deliberate strategy”, but with Adaptive capabilities.
The cornerstone of the Adaptive Strategy are the chains of
hypotheses that we have used when deciding about our
Strategy and about our Strategic Plan and its Alignment.
Some of those hypotheses about the future are always
wrong, but we don’t know which ones. That is why we need
an Early Warning System to monitor their validity along
Strategic Plan’s execution.
Once we determine that certain hypotheses have turned
out to be invalid, based on the correlated measured values,
we need to replace them and modify or replace the models
components that depended on them. This is how we get a
continuously Adaptive Strategy.
PLANNING
BOARD
OSE
EXECUTION
PIT-STOP
HYPOTHESES
TEST BENCH
OFFICE OF STRATEGY EXECUTION
6
10
9
PROGRESS
REVIEW
CORRECTIVE
ACTIONS
INITIATIVES
REALIZATION
MODELS
ADAPTATION
EARLY-WARNING
SYSTEM
STRATEGIC
PLANNING
STRATEGY
RE-FORMULATION
STRATEGY
EXECUTION