Research indicates that approximately 90 percent of U.S. firms utilize a strategic management system in some capacity. In essence, they employ a system to gauge their advancement towards the strategic objectives they’ve established. Whether it’s through balanced scorecards, strategy maps, or OKRs, the primary aim is to assess if key performance indicators (KPIs) are being met and if progress is being made towards the defined goals.
However, the question is whether employing such a unified approach to measuring your strategy makes sense. I’m here to tell you that, in most cases, it doesn’t make much sense. Here’s why.
Low Turbulence
Using a unified strategic management system makes much sense if you operate in a market with low turbulence–predictable and slow-moving. The problem is that there aren’t many industries like that anymore. Examples might be a coal operation or a railroad, markets with long-term and predictable cycles. In these markets, tight measurement controls regarding precise dates and metrics make sense. You can have much confidence that in tracking your specific KPIs, you know exactly what’s happening with your growth.
But, when things get more turbulent, this approach can fall apart.
Unpredictable Markets
What happens if you operate in a less predictable market where you can’t always control what happens internally or externally with your competitors?
A tight control system can become a hindrance or even damaging because it doesn’t allow you to adapt to your dynamic environment. If you keep your metrics stable and only check in six months later to see where you stand relative to your goals, you might find that the entire market has shifted, and your measurements are now obsolete.
This might help explain why the research shows that the success rate of strategic initiatives is below 50%.
The good news is that there’s a better, more effective way to measure your progress in dynamic markets.
Playing It Loose
The alternative to using a tight control system to measure strategy is to employ a relatively loose and directionally correct system that’s not explicit. The goal would be to define what you will do but not how you will do it. This will allow you to stay aligned with your vision and agile enough to adapt and modify your measurements as the market develops.
An excellent example of this comes from a tech business I ran where we were trying to enter a new market. It was highly dynamic and one where we didn’t know a lot about the competitors. We needed something to measure to tell us whether we were moving in the right direction. But, because we knew the market was changing rapidly, we couldn’t be rigid or highly specific when measuring KPIs.
So, what did we do? We measured trial purchases. That was a loose definition for anything we sold, regardless of who we sold to or at what price point. We only wanted to track whether anyone was buying anything at any level. If someone bought something for $5,000, we counted it. If we had sales of any kind, as opposed to none, we knew we were headed in the right direction. Since we didn’t know where we could end up, this gave us enough guidance to know if we were still heading in the right direction.
This might not seem as satisfying as hitting some significant number (and it wasn’t), but this allowed us to be flexible as the market shifted. Then, as we learned more about our customers and competitors, we became more specific about our strategic targets. In other words, we had a loose metric, checked it frequently, and modified it quickly as we learned.
The Upside of Flexibility
When thinking about how you’re measuring up to your strategic plan, start by evaluating what kind of market you operate in. The more dynamic and turbulent it is, the looser and more flexible you need to be with how you measure your success. If you can do that, you’re giving yourself the opening to end up somewhere you haven’t even planned to arrive at–and that you might never have reached if you hadn’t been dynamic yourself.