What tools do firms need for open strategy?

Strategy has traditionally been the purview of the CEO and senior executives in an organisation. After weeks of discussion, meetings, conference calls, surveys, research and ‘away days’ the CEO will announce that the company has a new strategy and present a 30-page document for staff to digest.

Once read, or shoved in a draw, employees then return to their work safe in the knowledge that the company has a strategy.

Open strategy seeks to reimagine this process from the ground up. Derived from open innovation, open strategy offers greater inclusion and transparency, so all staff can be involved, even stakeholders outside the company.

Progressive companies are moving towards open strategy as society and their workers increasingly demand inclusion, transparency and hence accountability. While new technologies increasingly offer a means for including more participants than ever in the process. Additionally, the rise of business education facilitates the involvement of a more diverse set of stakeholders. Knowledge about the role of strategy, how it is being shaped and implemented is not limited to managerial elites any more.

Another selling point for opening up the strategy-making process lies in potential performance advantages. The process may be longer and perhaps more costly, but it draws on the wisdom of the crowd and a greater pool of creativity. It leads to increased commitment from staff when implementing the strategy after being involved, and it draws on insights from the ‘shop floor’ that can help make sense of a complex and fast-changing environment.

To grasp this exciting phenomenon better, we conducted an ethnographic study of a US-based global automotive supplier on its open strategy journey over 18 months. This provided us with a rich dataset of 400 hours of observations, most notably during six strategy workshops, and 19 interviews with key informants.

The firm had just doubled in size after merging with its closest competitor and now strived to become the global market leader. So, it was an opportune moment to develop a much-needed new strategy for the newly combined firm. The open strategy process allowed it to reap the benefits and simultaneously serve as a change management measure to align and integrate the previously separate entities effectively.

Although open strategy can involve thousands of employees, such as Wikimedia’s, and even external stakeholders, the auto supplier limited its process to 43 participants, which still depicts a much larger number than normally the case. The group had been chosen consciously by the CEO and the senior management team to cover all hierarchical levels and functions of the organisation.

While studying the firm, we wanted to see how the process unfolded, what strategy tools were used and which ones worked best. In terms of results, the whole endeavour was hugely successful, as the company indeed became the global market leader in less than five years.

During the process, the firm developed several tools that facilitated its open strategizing. We discovered that six tools emerged as the most effective and were used predominantly. Below we summarise the tools before going into more detail.

1 Vision statement

Of course, this is an important starting point for all strategy-making, whether it is closed or open. However, it is even more relevant in an open setting as it provides initial direction and guides the strategic thinking of the various stakeholders involved in the process.

The auto parts company began with the simple vision of becoming “global market leader by 2020”. Like most vision statements this read quite broadly and didn’t really do the trick. However, the open strategy process helped to develop it into something useful.

As the process progressed, the vision statement changed due to feedback from employees and more knowledge that was accumulated. It was made more specific by including the firm’s future market segments and profit being the most important long-term metric. Thus, specifying the vision statement even further by setting a target of 15 per cent profit margin EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).

As a result, the more tightly defined statement ensured departments couldn’t veer off with their own set of targets. To get to this level of specification required long discussions during the open strategy process that iteratively refined the broad opening vision. Once that clarity was achieved, though, the well-defined vision allowed everybody to pull in the same direction more effectively than ever.

Even if the vision is not financially-orientated and more aimed at helping society or the environment, it still needs to be specific, meaningful, measurable and concise to unleash its full power.

2 Strategy house

This is the visualisation of the vision statement and the first step in breaking it down into its component parts. It provides a critical structural aid that further guides the open strategic thinking, so be sure to choose them well! In the company's case, this step was inspired by the four categories of the balance scorecard (financial, customer, internal business processes, learning and growth) but tweaked to fit the auto supplier and its strategic aspiration. These broad themes are then illustrated, such as the pillars of a house with the overarching vision as its roof.

Such visualisation conveys the simple but powerful message that all of the chosen building blocks are important to succeed. But its purpose doesn’t stop at simply being a structuring or communication device; it is also an important change management tool. Each and every employee can relate their work to these themes and see how they contribute. This motivates, creates buy-in and reduces the barriers to change.

After the basic building blocks have been defined, KPIs can be ascribed to them, which feed into the overall goal of the vision. This is the point when the senior management team needs to involve the rest of the organisation with workshops, surveys and more to help further detail the themes and their KPIs with strategic initiatives. In our study this is when the handpicked participants joined in. It can take several iterations before the blocks are fully defined.

By the end the automotive parts company we studied had developed more than 300 strategic initiatives across its four building blocks and their 12 sub-categories. A consultant involved in the open strategy process said: “The house was a sustained framework to which the team related and which was then, over the course of the process, underpinned by specific projects which were defined, re-prioritised, accomplished and new ones added. They could all be related to this overarching concept. So, it was a framework that provided direction with steady consistence more than a single initiative could do.”

3 Strategy cockpit

This is a dashboard that the senior team can use to keep track of the various strategic initiatives and if needed, make necessary adjustments.

At the company we studied this took the form of a highly detailed excel workbook, which managers built themselves and developed over time, where the various metrics of the strategic initiatives were inputted, which automatically updated the overall scores for each building block.

The strategy cockpit helped to analyse whether the firm was progressing well or still needed to improve to achieve its ambitious vision. Therefore, it became the basis for all of the company’s open strategy meetings. Over time the level of detail slowly evolved. With all 43 participants having access to the cockpit it distributed accountability as they made sure their pages were up to date.

A key pillar of open strategy is transparency and so the cockpit fulfils this duty, keeping everybody aware of the company’s progress. This required a lot of trust on the part of senior management as such a tracking device may hold a lot of sensitive information, such as the future of production plants or potential acquisition plans.

4 Strategic objectives

This is a very common tool that managers use to make strategy more tangible for their staff, to enable performance measurement, and to gear the organisation towards strategic change. It is especially powerful, though, for implementing an openly generated strategy, because strategic objectives can be defined across the various levels of an organisation – not only on the top one.

This means that the strategic initiatives on the organisational level from the cockpit are successively broken down into qualitative targets and quantitative KPIs for each employee. This is possible as the “crowd” contributes to translating the top-level objectives into lower level ones, which ensures that all workers are informed and aligned to the strategy implementation. Feedback loops back to the upper levels, whic also ensures that the company-wide strategic objectives are well specified.

Out of experience, it is rare that strategic objectives are truly concrete and cascaded down across all levels of an organisation and to each and every employee in a way that is traceable and clearly links individual performance to the organisational vision. Of course, this might also be achieved in traditional closed strategy processes, but it is so much harder to do.

The company we followed used the strategy house icon to discuss and present strategic objectives on each of its hierarchical levels. Through this, came a sense of inclusion and collective responsibility, which created a strong momentum throughout the workforce.

5 Target pictures

This is an example for a very company-specific tool that emerged in our study due to the dire need to detail the auto suppliers’ different product categories further in order to better understand and meaningfully detail the company’s strategy more.

The target pictures broke down the vision statement, its building blocks and sub-categories, as well as the associated objectives further to a product category level. It contained six elements and followed a timeline of five years while also paying respect to geographic differences.

By drilling deeper down into these different categories, the organisation was able to understand more clearly what the key success factors for each market were and how to leverage them. This was useful input for the open strategy meetings, in which the group subsequently tried to define the segments’ strategies and the aggregated company-wide one.

For this purpose, each target picture had to be summarised on one single page, which outlined what was needed to achieve the company’s vision, otherwise it would have simply been too much information to digest. Drilling down and then aggregating again was a useful exercise to being able to understand the details but still grasp the organisation as a whole.

An employee in finance said: “Having all that information combined in the target pictures in front of us was very helpful because we could look at our piece of the discussion in the context of the bigger picture. I think what that did was provide the context to keep us focused, if you will. So I thought that was pretty effective.”

6 Strategy presentation

This depicts the end of the open strategy process and summarises all the tools’ outputs, usually in PowerPoint slides. It is a great vehicle to communicate the big picture of the strategy going forward. It helps to summarise learning, manage knowledge and as a final check as to whether the various and increasingly detailed bits and pieces align.

In our study the PowerPoint presentation was put before the Group CEO, who instantly approved it and praised the auto supplier for the comprehensive but well aggregated result it had produced.

A senior sales manager said: “The biggest benefit was that we had one consolidated deck which defined the overall vision, objectives and ways to get there. We could align not just us but we could also transparently provide an outlook to our corporate management."

For any organisation looking to open up its strategy process tools can help, but they should be tailored to the context of the company and the managers using them.

Make sure to use them in a way that leverages the benefits of open strategy, such as generating a wealth of ideas and specific knowledge over time, that help your strategic decision-making.

At the same time, link them so that feedback loops are created that cross-pollinate and channel information back into more aggregated and prioritised strategic outputs.

Christina Wawarta has recently completed her PhD in Strategic Management at Warwick Business School after being Manager of Strategy & Innovation at Capgemini Invent for seven years.

Sotirios Paroutis is Professor of Strategic Management and teaches Strategy & Practice on the Distance Learning MBA, Executive MBA and MSc Marketing & Strategy. He also lectures on Strategic Advantage on the Executive MBA (London).

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