Strategy Best Practices Series, #4

In our fourth installment, we summarize a popular article that appeared in MIT Sloan Management Review in August, 2020, authored by the partners at MAD Strategy. Their MADStrat™ framework is an interesting approach to how to look at strategic change. Read the original article here.

TL;DR – Article Conclusion

The dynamic nature of modern business keeps business leaders constantly questioning how to adapt their strategy to maintain their competitiveness. With the clarity provided by the MAD change matrix, business leaders can identify which form of change is most appropriate to their company’s context. While any form of change can be described as “new” and “different,” only the right form of change qualifies as “better.”

Concept

Just as the word ride can describe both a white-knuckle experience on a rollercoaster and a leisurely excursion on a bicycle, change is used to describe a wide variety of contexts. We assert that a fundamental source of confusion among managers and executives is the use of that single term to refer to three very different strategic responses to business challenges.
Change can involve magnitude, activity, or direction, and the first step toward a clearer vision for change is to clarify what form of change should be considered:
  • Magnitude: “We need to enhance our execution of the current path.”
  • Activity: “We need to adopt new ways of pursuing the current path.”
  • Direction: “We need to take a different path.”

Key findings

To address the ambiguity around the word change, and to better understand how innovation supports each form of change, let’s parse the distinctions between magnitude, activity, and direction and examine when each is the appropriate course of action.

 

Understand Why, When, and How to Change
There are two diagnostic questions that business leaders and their executive teams should use to assess the nature, scale, and timing of the change required in their specific context:
  • Is the strategy fit to purpose? This question establishes whether the current or proposed strategy is valued by an attractive and accessible audience — measured by the size of the market, willingness to pay, and business model appropriateness — and the level of resource outlay required to scale the strategy.
  • Can relative advantage be sustained? This question assesses whether the current or proposed strategy delivers meaningful differentiation — that is, a “difference that makes a difference” to the attractive, accessible audience — and the durability of the competitive advantage created by that difference.

This analysis is then used to chart the company’s position on the MAD (Magnitude-Activity-Direction) Change Matrix (MCM), providing insight into whether the change should take the form of magnitude, activity, or direction.

 

MAD Change Matrix™

 

 

For example, if the consensus reveals a high fit to purpose and high relative advantage, this points toward change in the form of enhanced magnitude within the current course. Having low fit to purpose and low relative advantage, however, sounds the alarm for implementing a fundamental shift in direction, defining a new strategy on a new path.

Action plan

Clear and Engaging Communication to Foster Alignment.
It’s hard to overestimate the importance of clear communication that promotes the strategy with a common, proprietary vocabulary. The classic cascading-memo exercise can also be quite powerful. It starts with the CEO sending to direct reports a one-page memo that summarizes the strategy. The memo charges them to write their own version for their team that expresses the strategy and what it means for their slice of the organization. The process continues downward. At each stage, the strategy group reviews the memos for clarity and consistency with the overall strategy.
 
High-Profile Strategic Initiatives to Build Traction.
To ensure that the new strategy isn’t drowned out by day-to-day concerns, leading companies convert it into a set of manageable strategic initiatives that give the strategy both visibility and traction. Each initiative needs to be properly chartered, staffed, resourced, and given a clear timeline. It is important that initiative teams and the organization overall understand that these initiatives are priorities for the executive committee.

A Strategy Dashboard to Highlight Success Metrics.
Another powerful way to encourage the organization to embrace the new strategy is to identify quantitative metrics and goals that can measure progress. Complementing the organization’s financial and operational metrics, the strategy metrics should concentrate on new measures tied to the new strategy. And incentives for key players should be tied to these metrics and goals.

Omnistrat adherence

Omnistrat can support the deliberations the leadership team goes through while using the framework as well as allow you to document which of the change types was determined to be the correct choice. Omnistrat would also allow you to document the plan of action to achieve the desired strategic change and the collaborative effort to implement it.

This is the last installment in our Strategy Best Practices Series.