Abstract

Much of the work that happens inside organizations falling under the guise of ‘strategy’ is much like dieting for humans: an isolated change event meant to produce quick results, irrespective of considerations related to sustainability, vitality, and energy. Dieting is well-known to be a mirage, having more to do with appearances and posturing than the desire to create enduring change. Preoccupied with the visible rather than the viable, it creates no new capabilities. Dieting can spiral into vicious cycles, whereby people go through the yo-yo of losing weight, only to regain it soon after, affecting both the physical and psychological.

A focus on ‘fitness’, the holistic process which implies multiple discrete, demanding actions, yields superior health benefits than isolated strategies, such as dieting. Based on work spanning more than a quarter century helping organizations navigate complex strategic turnarounds, we've found striking similarities between the issues linked to the phenomenon described above and a certain organizational obsession with strategy. Given this document's limited and closed scope, we resist attempts to debunk the millennia-old concept of ‘strategy’ (along with the multi-billion strategy industry assembled around it), which would imply diving into complicated arguments with multiple levels of nuance. Rather, we make the more simple case, reasoning by analogy, that the under-studied concept of strategic fitness should receive more attention from leaders and businesses who are interested in becoming more responsive, robust and able to take on the new.

As a starting point, we claim that, as per fitness in the physical domain, there is a set of practices (in our case, a straightforward kit of deliverables) that every business should have on hand. Together, they form a foundational core which enables the formulation of strategies and plans, while in motion. Strategic fitness is not solely focused on what’s happening ahead, it also takes care of the routine of what today brings. It does not require huge budgets, marquee consultants or interminable off-sites and, even when undertaken at the most basic level, can help leaders raise the calibre of their everyday decisions, feel more confident navigating complicated questions and make their work more enjoyable. Better decisions by empowered leaders mean businesses can maintain their license to operate and even strive in the turbulent, ever-changing and uncertain 21st-century business landscape.

Central question

Given leaders and organizations face exponential change, what fresh approach or set of practices would help improve the quality of the decisions they make every day, not just during formal strategy sessions?

Key points 

1. Leadership is all about making the right choices. Making good choices has always been hard, but it is becoming increasingly harder, because of two large-scale dynamics:  (1) our information ecology makes it harder to know what is ‘true’ and what is ‘real’, upon which sense-making and choice-making depend; (2) the world is becoming increasingly complex, and thus changes constantly. This means leaders must develop the ability to make the right choices, while in motion. 
2. Inside organizations, choice-making usually happens in a separate process known as ‘strategy’ (a.k.a. strategic planning, the fast-food type done at off-sites, or ‘Grand’ Strategy — the type which occurs every five-to-ten years with expensive consultants behind closed doors). Since strategy is episodic and leadership rhythmic, a conflict of tempo thus exists. Leaders operate in the ‘fast’, which gets faster, and strategy isn’t made on whim, so it tends to be ‘slow’, and thus a gap persists in the middle. The constant oscillation between fast and slow creates friction and for leaders, strategy feels increasingly like dieting: an isolated event which produces a temporary change of appearance, but no new capabilities. 
3. We claim that organizational fitness, more than ‘transformation’, is the more appropriate lens to approach strategy and decision-making, given the turbulence that typifies our age. Fitness is not concerned with the flashy and the visible, it is all about the viable. It aims to create the vitality and energy required to take on the new and the extraordinary. It understands that being strategic is no longer about building bridges to cross the river, it is about navigating the river itself. Fitness ‌allows leaders to cope with constant change. Fitness is the authentic form of agility.
4. Similar to fitness in the human domain, we propose that there are a basic set of practices (or deliverables) which together form a foundational core which applies to organizations of all types. While we recognize that more specialized strategies may be required depending on the particular context of each business (not unlike athletes specializing in certain disciplines), we identify six core practices which every business should have on hand. They are 1, Situational awareness; 2, Foundational thesis and theory; 3, Adversarial collaboration; 4, Defence and layered security; 5, Deep customer research; and 6, Principles, rules and rituals.

I — A complexifying decision landscape 

To capture value, leaders must make several important decisions every day. These decisions are based on multiple assumptions and interpretations, notably about ‘reality’ and the ‘future’. At a basic level, three epistemological dimensions inform the ability to make sense:

First-person — Understanding oneself
Second-person — Understanding and relating to others
Third-person — Understanding the world at large

First-person epistemics is where we find the extensive list of cognitive biases and heuristics, chief among them the confirmation bias, which is the tendency to search for, favor and recall information in a way that confirms or supports prior beliefs. Second-person epistemics is the ability to know what each other thinks and feels. It implies being able to inhabit someone else's position well enough (‘steel manning’) that it unlocks the development of new perspectives and different points of view. Finally, third-person epistemics are concerned with our ability to make sense of the world at large, via the scientific method.

First-person epistemics have always been difficult and will remain so. (See Kahneman and Tversky). However, two recent, large-scale dynamics are negatively affecting the second and third epistemological dimensions, and this has an oversized impact on leadership and decision-making: 

1. ‘Reality’ and ‘truth’ are becoming more fragmented, creating an environment which erodes trust
2. The world is complexifying, which means constant change and turbulence 

Reality, up for grabs

“What is the nature of reality?” might be a perennial philosophical question, but it has never been an urgent concern for leaders. Their reliance on a mix of observation, intuition and data has usually been enough to make decisions — even important decisions, like formulating strategy.

‘Reality’, however, is becoming more blurry, pliant even up for subjective interpretation. Three vectors may explain this phenomenon:

• We are experiencing an unprecedented explosion of information and knowledge, which exceeds our capacity for learning, leaving us overwhelmed, and creating a “cloud of unknowing” .1
• We have witnessed a collapse of the business model of traditional media organizations — the traditional synthesizers of information — triggering a shift of focus from clarity to conflict, which fuels user engagement and clicks.2
• The amount and velocity of information shareable notably via social medias make verifiability more difficult, creating an open space for narrative warfares (using information which fits a certain point of view or agenda, even at the price of objectivity and truth).3

If the information ecology is no longer reliable, if we do not know what is true because information can be so easily weaponized—including even information from the highest institutional echelons (WHO, NIH, CDC, etc.)—the higher the chances that we have an epistemic crisis on our hands.

This has obvious ramifications for decision-making, which relies first on the ability to orient oneself, using a set of understood concepts. But what happens when reality becomes fluid? US Supreme Court Nominee (now confirmed) Ketanji Brown Jackson, “What is a woman” confirmation hearing question is a revealing example.4 Skipping politics and the theatrics behind the question, the inability to respond to such a seemingly simple question reveals something important about our ability to make sense.

Or consider the recent California appeals court ruling that, for the purposes of environmental legislation, bees should be considered a type of fish (to be fair, the law they were interpreting, taken literally, could include bees). The claim: without a shared sense of reality, decisions and trade-offs are more difficult to make.

If these examples seem too complicated, try buying a simple mattress and see how complex even simple decisions have become.

What is a problem for citizens and consumers doubles for leaders, for whom making strategic decisions is constant. And we don’t need the melodrama of contemporary politics to make the point: a quick safari into “Web3” (née blockchain) reveals just how effervescent and murky decision-making can become when seemingly new concepts can be manufactured overnight. 

When all these factors coincide, what emerges is doubt and doubt erodes trust.6 Trust in information, trust in the media, and trust in institutions has eroded considerably, to the point that blurred reality has become the new constant.

From complicated to complex

The second large-scale phenomenon operating in the background of decision-making is tied to the fact that, since we have gone from connected to hyper-connected7, we are also experiencing additional complexity. Complex systems theory exceeds by far the scope of this document8, so we will simply list the two core characteristics of complex systems9:

• Emergence
• Self-organization

As new connections are made inside a system, new phenomena emerge, creating disruption and chaos until a new equilibrium is found. This new equilibrium will create a new state of becoming, meaning that the system self-organizes‌. 

The best way to understand this is to picture a football stadium before, during and after a game. As people flock to the stadium, the system absorbs the changing conditions created by emerging connections via feedback loops and the system rebalances. Or simply picture a pinball machine with a multiball mode to get a sense of what a complex system implies: a lack of control. 

Indeed, control is a problematic concept when faced with complexity, since complex systems are beyond control. It is possible to build computer simulations to anticipate the behavior of a system. It is also possible to design (up to a point) a system, but it is not possible to control or plan for it. The implications for leaders are significant, since management usually sees the world through a mechanistic lens, using a language (‘blueprints’, ‘roadmaps’, ‘plans’) which implies ‘fixed’ conditions, like a machine. 

But as explained above, if leaders now face changing conditions and complexity across the board, then it means that the assumptions on which they make decisions must be constantly probed and reassessed. The company is a giant optimization machine: factor the wrong assumptions and you may optimize for the wrong thing. 

Philosopher Nick Bostrom makes this exact point in a TED Talk about AI, but which applies to pretty much any optimization process: "If you create a really powerful optimization process to maximize the power of objective X, you better make sure that your definition of X incorporates everything you care about ". In short, beware relying on the wrong map.  

To summarize, we’ve shown that the decision-making environment is now characterized by movement, which requires leaders to question the assumptions on which they operate. In addition, we noted ‌these assumptions are harder to formulate given the current state of our information ecology and our increasingly liquid modern context.

This means that if leaders could traditionally focus on building bridges to cross a river, now their job is to navigate the river itself. Per Tim Ingold: “we’ve been concentrating on the banks while losing sight of the river. Yet were it not for the flow of the river there would be no banks, and no relation between them. To regain the river, we need to shift our perspective from the transverse relation between objects and images to the longitudinal trajectories of materials and awareness” .10

And that is why we are experiencing the limits of strategy.

II — Strategy, given constant change

‘Strategy’11 is increasingly being called into question for its inability to cope with constantly changing conditions. As noted earlier, this is because strategy has traditionally been more focused on building bridges to cross the river called ‘future’, rather than navigating the river where the future actually flows every day. Strategy works best when thinking of a destination, but not necessarily when tasked with building new capabilities. 

To start, let’s consider the two key processes by which we make strategy inside organizations:

1. The process commonly known as ‘strategic planning’
2. ‘Grand strategy’ —— the more ambitious type done every five to ten years

To facilitate this exploration, we’ll rely on Stewart Brand’s concept of pace layers.12 Initially developed as a way of understanding the various layers of a building, Brand expanded the theory more broadly to explain how a healthy society works. The key concept is the pace, or tempo. That there are layers within systems which operate at different speeds.

Equally useful is Kahneman and Tversky’s labeling of neural systems between ‘thinking fast and thinking slow’.13 Slow thinking is more accurate but takes time, calm and relatively stable assumptions. Fast thinking is incredibly biased and inaccurate but is, well, fast.

‍

Strategic planning

​​This process, which features a cast of managers and leaders pulled from their day-to-day and dispatched into strategic retreats so that they can ‘think’, ‘innovate’, and where Post-it notes, coloured stickers and flip-charts reign supreme, is usually called strategic planning (Or sometimes design thinking if you want to comfort yourself into feeling innovative!).14 This process is akin to dieting, in the sense that it is a temporary change event which creates a tangible outcome (a plan) but no new capabilities. It is more preoccupied with the visible, rather than the viable. 

A difficulty with this process is that it puts ‘Fast’ in charge of ‘Slow’, whereby a cocktail of often conflicting priorities and agendas, biases, blind spots and shortcuts get effectively woven into a ‘plan’, the validity of which is often called into question for lacking perspective, deliberation, and intelligent debate.

Indeed, leaders spend the bulk of their time and energy on a fast tempo, running the day-to-day of operations, which leaves little time for deep, reflective thinking. Fast is the operational, the routine, the firefight. It’s made of tactical plans, KPIs, projects, budgets, and HR decisions. Fast is demanding, nebulous, kinetic. 

Even if there are immense virtues to most bottom-up processes in theory (for being at least grounded in operational reality), participants in these processes can rarely contribute adequately, despite their enthusiasm for being involved in crafting the future of the business. 

​​Here are a few reasons:

• Preparation & perspective — most leaders suddenly mandated to put operations aside for a few days to come up with strategy are ill-prepared for the job. Absent the required perspective and introspection required for considered, deliberative thinking, they will easily fall for empty formulas (“skate, not to where the puck is, but where it is going”) and trip over questions of decorum (agreeableness tendency towards peers) or boss-pleasing. Plus, the blindness of operational myopia can reinforce silo effects and make ideas harder to integrate into a coherent whole. 
• ​​Shared understanding & visibility of assumptions — fundamental assumptions about the business are rarely stated from the get-go, if not ignored entirely, and as result leaders don’t get to a shared understanding of the reality of an organization, which prevents the formation of plausible strategies. And as noted earlier, even if assumptions are from the start, there is good reason to believe that we might anchor these assumptions in heuristics or opinions more than a robust understanding of shifting contexts. 
• ​​Brute force prioritization — anybody who has spent two to three days stranded in the windowless basement of a Hilton hotel knows that at some point, exhaustion kicks in and bad ideas inevitably make it through the weighted decision matrix or voting process by which ideas get prioritized. Plausible, appealing, financeable projects will get the green sticker and everyone gets eager to move on to the next activity on the agenda.

The list of objections to this process could be much longer, and we would cover only what happens during the process. What happens after is just as scary, when the bureaucracy of the organization is charged with putting the wheels in motion15 and when capex decisions are actually made. 

Strategy, on the contrary, is slow and, quoting Brand: “slow constraints quick; slow controls quick”. Thus, if fast is in charge, what it is doing might be useful for the organization, but it is not clear that it warrants being called ‘strategy’. As noted earlier, the decision-making environment is much more complex than it used to be. Leaders operate, by and large, in a state of permanent disorientation. Strategic planning essentially codifies confusion into doctrine, which can be extremely dangerous if it somehow steers the organization in a specific ‌direction. 

If it fails and the ‘plan’ stalls in the bureaucratic doldrums (until new, urgent priorities emerge), then the executive team loses credibility, other leaders in the organization get demobilized because priorities keep shifting, and the business slowly loses momentum and starts circling around. 

‘Grand strategy’

Grand strategy16, the more ambitious type, usually happens every five-to-ten years and often elaborated by expensive consultants, mostly behind closed doors. The resulting Grand plan then trickles down to the operations for implementation. Too often, however, these plans create adverse reactions (see our point above about bureaucratic gatekeeping) because they neglect to consider the fullness of reality.

When asked to plan a snack for next week between chocolate or fruit, people chose fruit 75% of the time. When choosing a snack for today, 70% select chocolate. When choosing a movie to watch next week 63% choose an educational documentary but when choosing a film for tonight 66% pick a comedy or sci-fi (Read et al., 1999). We have great intentions for the future, until the future becomes today — Hagens, 2020

If this process has at least the virtue of being robust, it is also increasingly running into problems, for the velocity of change means even the best plans can become obsolete ‌quickly. In other words, slow can be too slow, which is why Mike Tyson’s “everyone has a plan until they get punched in the face” is constantly thrown around. The core issue here is the notion of control, which fails when complexity is present. If the future is not a fixed point or destination, if it emerges and self-organizes, then it can’t be controlled and Grand strategy hits severe limitations.

Imagine that in December 2019, you were tasked with the job of assembling a strategic plan.  The goal of the plan would be to make predictions about, say, the coming five years. At the very first session, we'd inform the participants attending the workshop that the first two and a half years of the 2020s would see:

“A global respiratory pandemic that killed over 1,000,000 Americans and 12-18 million globally, the largest economic contraction and highest unemployment rate since the Great Depression (below), record drug overdoses, a widespread surge in homicides and automobile fatalities, nationwide racial justice protests, one of the most contentious presidential elections in American history, eventually leading to an insurrection at the US Capitol that contributed to the death of multiple police officers, the first open warfare between European nation states since World War 2, historic wildfires and heatwaves in the American west, a historic ice storm shutting down Texas' electrical grid, the highest levels of inflation since 1981, record high oil and gas prices, and two stock market corrections.”

Given that information, how likely is it that anybody attending would've predicted:

“Unemployment near 70 year lows (above), labor participation rates near pre-pandemic highs, a stock market up ~20%1, record housing prices and equity, record state budget surpluses, record economic well-being of US households, a decrease in household debt service as a percent of disposal income, the most rapid vaccine development in human history which has remained effective against multiple more transmissible and/or more lethal variants, a massive increase in retail sales, all-time high domestic investment, the largest ever decline in the federal deficit, and that despite political conservatives generally being more germophobic, vaccine safety being widespread and apolitical, and a Republican president funding vaccine development by American private businesses, and both the clinical trials and the results released during his presidency, that the American Right would reject those vaccines in mass.”17

One might argue that the global pandemic was an extreme case (a black swan, which it was not) that no form of strategy could anticipate. That does not appear to be true since the risks of a pandemic were fairly mainstream18 and every week seems to reveal more instances where ‘those tasked with the job of knowing’ seem to fail spectacularly.19 Take, for instance, the current conflict in Ukraine. During William J. Burns Senate hearing in February 2022, he said that, as CIA director, he would have “four crucial and inter-related priorities.” They were: “China, technology, people and partnerships.” Russia was not even on that priorities list. A year later, Russia invaded Ukraine. 

We see the same failures of planning happening at a micro-economic level within businesses, who still seem to persist with Grand strategy efforts despite the risks of having to scrap plans almost as soon as they are conceived. 

For instance, Pew recently did a big report asking a bunch of people what they think ‘the metaverse’ will be in 2040. Such framings appear misguided, and as tech commentator Ben Evans noted: “Imagine that in 1995 you asked some very clever and well-informed people what they thought ‘the information superhighway’ would be in 2020 - they would be wrong, except in the vaguest and most general terms, but more importantly it would have been the wrong question. You simply cannot do any kind of useful prediction in tech on that timeline.” 

If strategic planning forms a biased, incomplete picture and the more deliberative ‘Grand’ strategy creates the illusion of knowledge before quickly falling into obsolescence, what then?

III — Instead of transformation, fitness

The transformation mirage

Realizing strategy’s shortcomings, management theorists and consultants proposed ‘transformation’ (née agility), and effectively nested the concept as a mid-layer, between the fast and slow layers of the aforementioned leadership timescale. 

​​The problem with transformation is that it is a mirage. It is usually framed as a temporary process, but many businesses have already spent several years ‘transforming’ and it does not seem that the end is in sight. Indeed, organizations are not butterflies who undergo a singular metamorphosis: they operate more or less in a state of flow. They are evolved, rather than designed. If the context keeps changing, then transformation is perpetual, and the word loses its meaning. 

Moreover, the transformation discourse ultimately leads to a dead end. It signals that a new, brighter tomorrow is coming, when in reality tomorrow will be as complex and tumultuous as today is. This creates false hopes and leaves staff and stakeholders skeptical of the direction a company is taking.

That said, we’re not suggesting that businesses should stay still, quite the contrary. In fact as this summary table shows, the world in which organizations exist and compete today is far different from the world of just a decade ago so businesses are correct to embrace change, but change is not a one-off event.

The big move20

While the ‘Big Move’ is a significant change event, it is unwise to think it is temporary in an age of accelerations. 

​​Therefore, transformation’s biggest issue is that, like strategy, it focuses too much on the destination rather than the process. But as James Clear beautifully put it: “You do not rise to the level of your goals. You fall to the level of your systems”. 

To repeat what we said earlier, in a kinetic environment, leaders can capture value less by fixating on a moving target and more by developing better navigational abilities. In short, developing fitness.

Fitness

The late Polish philosopher Zygmunt Bauman described fitness as: “being ready to take in the unusual, the non-routine, the extraordinary - and above all the novel and the surprising… the capacity to break all norms and leave every already achieved standard behind.” 

We propose that fitness, rather than transformation, is what leaders and organizations should focus on. It is the glue that holds the fast and slow together. Fitness means fast can better handle the punishing reality of what today brings, while acting as a filter for more elaborate and complex strategies which might need to be engineered from the top. 

Unlike transformation, which is more about narrative and posturing, fitness is about creating capabilities. Again, the analogy with dieting seems appropriate: the benefits of dieting may provide flashy, visible rewards, but the benefits are usually short-lived until a new cycle must begin. It produces quick results, irrespective of considerations related to sustainability, vitality, and energy. 

If it is so obvious, as we claim, that movement implies fitness, why is this not a more widely circulated idea within the ocean of leadership novelties produced every year? Why is it not more mainstream? A few reasons come to mind:

• First, fitness is hard, as any couch potato will tell you. It is punishing, constant, and not flashy. It requires discipline, intense resolve and everyday commitments, and the rewards are not immediately visible. 
• Second, fitness is multifaceted, holistic. Fitness does not start and stop at the gym. It requires equally substantial commitments in adjacent domains such as nutrition, sleep and so on. While it is easy to get a membership card for the gym, the vicious part is actually getting there again and again, for no patently obvious benefit. 
• Third, fitness is seen as passive. Leaders like to get on with the action! Make the move! Being merely able to respond, bounce back or navigate is not bold enough. Concepts like maintenance, preparedness and responsiveness have never been associated with career success.
• Fourth, fitness is something which is only determined retroactively. One knows how fit it was when it survived the challenge. 

Are these attitudes changing? They’re bound to. Faced with constantly changing conditions, leaders are exhausted and out of shape. If it was always somewhat clear that we expected leaders to skate to this nebulous idea of “where the puck is going to be”, this implies one knows wherever the hell it actually is right now, and to figure out how it even got there in the first place. It requires having the proper intel to know one’s position and the ability to move swiftly around. In short, it implies fitness.

IV — Tempo

Fitness is mid tempo, in the sense that, similar to transformation, its job is to unite the fast and slow domains, recognizing that fast is getting faster and more frenetic and that slow is hitting several boundaries. We think that the mid-tempo should receive more attention because this is where the strategic action is taking place. Instead of strategy, strategic thinking. Being able to make strategic decisions while in motion. 

As a starting point, we have defined six elements which are part of our fitness toolkit. Analogous to human fitness, we are not claiming that these are definitive or complete, but simply that they make up the basics. As anybody who’s ever set foot in a gym knows, there is a basic set of exercises which apply across disciplines, whether one’s goal is to optimize for tennis or basketball. 

​​Following the same logic, we’ve outlined such basic activities which are by themselves neither operational nor definitive plans. Rather, they aim to provide perspective and orientation and allow leaders to keep up with the pace of change and, to paraphrase Bauman “to take on the unusual, the non-routine, the extraordinary.” They are: 

1. ​Situational awareness — the gathering of all relevant facts and perspectives, situating them in appropriate contexts. This kind of ongoing activity is becoming more crucial given the increased pollution in our information ecosystems (narrative warfare and so-called “fake news”) which makes it harder to determine one’s exact position. 
2. Theoretical foundations  — the North Star, the theory of the firm. The narrative construction which clearly states why a business exists and why the world should care. If you’re getting fit, what are you getting fit for?
3. Adversarial collaboration — the bias buster, the outside view. This is‌ an unusual activity which aims to remove the blind spots and confirmation bias which invariably exists in leadership teams where it is not fashionable to bring problems (rather, one is supposed to bring solutions).
4. ​Building defense — borrowing from the idea of the S1 SEC filing, the ultimate defensive strategy, which audits a business as if it was going through an IPO, in order to outline its reality in clear terms, identify vulnerabilities and detail options for repair.
5. ​Deep customer knowledge  — an antidote to the unfortunately frequent realization that a business has “lost touch with its customers”. A customer book goes beyond the clichéd, lightweight personas and researches customers in their own habitat, outlining the deeper motivations, hopes and struggles which form the basis of decision to buy a particular product or service.
6. ​Principles and culture — this is the cookbook, the compendium of principles, values, methods and unique ways in which a company creates its own magic. It is the rulebook which allows empowered execution. It captures the moment when management moves away from alchemy and turns into deliberate practice.

Conclusion

We’re comfortably settled in an age of turbulence, where change happens at exponential speed and nebulosity is the default posture. Leaders and organizations must confront this reality by being adaptive, resilient, and fit. When the environment is uncertain, strategy is not an event, it’s your job. The only way through is through. 

But it’s not useful to tell you that. After all, the ‘world is more complex' meme has been going around for a long time now. Everyone feels the weight of the increased complexity existing in the world daily. The more interesting question, then, is knowing why management practice around strategy has changed so little in the face of exponential change. Why rely on the mirage of transformation when this process will never end?

We’ve proposed six practices or deliverables which we think are a good starting point to create a space between ‘fast’ (too fast and biased to generate sound strategic options) and ‘slow’ (prone to obsolescence in the face of changing conditions). Keeping in mind that these practices are a starting point, not a finality. Other models exist within the organizational fitness space (such as John Boyd’s OODA loop) and one would be wise to experiment with several practices. 

Although we are skeptical of many of the core tenets associated with ‘strategy’, we’re not advocating a revolution either. There’s nothing wrong with the occasional strategic off-site or hiring expensive, marquee consultants when dealing with inscrutable problems which require hiring a bunch of strategic savants. After all, cultivating fitness does not mean refusing surgery when surgery is needed. Fitness is not against anything; it is an ‘over-and-above’ element in the toolkit. 

It’s never too late to start, and it pays off in the long run. Enhancing your strategic fitness should start now.

The Practice

[fs-toc-h2]1. Knowing your position — situational awareness

When submerged in the turmoil of change, the first thing you lose is the sense of perspective. Situational awareness is essential to clarify what’s going on now and to anticipate what lies ahead.

[fs-toc-omit]Definition 

A situational assessment is very flexible, and can take many shapes, forms and names. The output can be a three pages memorandum or a detailed forty pages research report. The questions can be very broad (“what is the state of our competitive context?”) or very narrow (“what is the future of X?”). Budget can also vary depending on the scope of the investigation. There are, however, a few constants: it consists of a brutally honest, objective, investigative, well-researched background, which aims to tell you what’s going on in clear terms, while avoiding telling you where you should go. 

Situational assessments are not unusual. They superficially appear in some form (bullet points, mostly) on most power-point presentations used in the day-to-day of business. They also exist within long-form, investigative pieces published within the most credible branches of mainstream journalism. The FP, for instance, publishes situational assessments all the time. You can also read a few more here, here, and more corporate versions like these. But as said earlier, you’ll encounter one or two every week (say on the evolving situation with the covid pandemic and other current events).

[fs-toc-omit]What it does

• ​​Identifies all the relevant facts and perspectives
• ​Places them within the appropriate contexts
• Outlines the theoretical models that explain why and how certain things happen or do not happen
• ​​Explores themes, opportunities and new territory

[fs-toc-omit]Sample questions

• ​​How has our competitive context evolved?
• ​​What is interesting about X?
• What are the opportunities from X?
• ​​What is the future of X?
• ​​How can we get a quick start on X?
• ​​How have the foundational assumptions driving our business changed over time?

[fs-toc-omit]Limitations​​

• Not a strategy — Rather, it provides background to enable the choice of strategies.

• ​​Not a theory — Jus the facts that are needed in order to formulate a theory.  

• ​​Not a plan — Knowing where you are is neutral as to ‌where you should go.

[fs-toc-omit]Why it matters

• ​​First, knowing where you are is necessary to generate sufficient consensus to determine where you should go;

• ​​Second, too much business strategy and foresight work tells leaders what they already know, or what they want to hear. By focusing on appearances, perception, and external possibility, rather than hard reality, this type of ‘strategy’ work sells the illusion of a map while leaving decision-makers effectively lost. There is a vast empirical literature on biased thinking, which further informs this point (think: confirmation bias, principal-agent problem, etc.)

​​Thus, effective strategic advice needs to cut through the performative layer (reformulating what management already knows with a veneer of complexity to make it look and sound ‘smart’), and provide businesses with decision intelligence which must be objective, timely and situated in relevant contexts. 

[fs-toc-omit]Where it fits

​​Taking a pause to know your position can happen at any moment and, as noted earlier, for many reasons. In a strategy process, as mapped generically below, it should happen at a phase I may call context-setting, itself part of problem-setting, which aims to understand ‘problems’.

​​The key question which helps create a fork in the road is: does the current situation conform to existing frames of reference, yes or no? If the answer is yes, you may move directly to planning (unless your strategies have proven unsuccessful in the past, in which case it would be worth asking why your strategies have not worked, which by itself might be a sign that the context is changing more than you think!).

​​If your frame of reference is changing (hint: it probably does), then it is usually misguided to move along the process of strategy without having first done proper context-setting. 

[fs-toc-omit]Foundations

​​Here are some elements of intellectual scaffolding supporting the situational assessment:

1. ​​Humans are easy to fool — As noted earlier, the literature on biases in human judgment and decision-making is quite vast. Charlie Munger has written insightfully about all this topic and, of course, the previously noted pioneering work of Kahneman and Tversky. There are at least six or seven biases which inform the need for situational awareness. See also the Dunning-Kruger effect. 

2. ​​Even information or research that is credible and ‘true’ (e.g. peer reviewed) does not mean it survives contextualization. For example, some research on lung cancer may appear scientifically valid, but may require additional scrutiny if revealed that tobacco companies funded it. But that last piece of information (‘context’) is what is scarce.
3. “In a domain characterized by interdependence and unknowns, contextual understanding is key; whatever efficiency is gained through silos is outweighed by the costs of “interface failures.” Source (See also “The silo effect” for a high-level discussion on compartmentalization and its impact on perspective and context.)

[fs-toc-omit]Usage and outputs

​​Situational assessments are for internal use, but can also be repurposed for external use, making them a valuable investment overall. 

[fs-toc-omit]Sample outputs may include:

• ​​Internal memorandums 

• ​​Background for strategy and planning retreats 

• ​​Background and talking points for CEO keynote speaking engagements

• ​​Client-facing briefs and reports, from long-form blog post or more extensive client-facing reports‍

[fs-toc-omit]Alternatives to consider

​​Perhaps the budget is tight and you can’t afford external consultants. If that’s the case, here are three things you may consider doing:

1. ​​Break down your strategy formulation process in different visible steps, as I’ve outlined in the chart above. Avoid bundling everything into one extensive process called ‘strategic planning’ (see earlier discussion). It creates cognitive overload, generates errors, and is not an enjoyable process for those involved.  

2. ​​Look around, there is probably an amazing (possibly bored), smart ‘analyst’ you can task with doing a decent situational assessment. We can usually find them in market research or finance. They usually ask too many questions and possibly have a reputation for being rebels or ‘difficult’. They are good people, use them wisely!

3. ​Have the fortitude to face reality. If you are a CEO, please refrain from peddling platitudes like “don’t bring me problems; bring me solutions!”. It’s tautologic and just creates more confusion in the system, plus your team wants you to understand what they go through. Embrace problems! (solutions will naturally come later if you’ve built a competent team. If you haven’t, then your problem is obvious.)

[fs-toc-h2]2. The theory of your firm — the thesis

​​A thesis outlines in clear terms the theoretical foundation of a business, its ‘North Star’. It aims to map the core reasons why your organization exists.

[fs-toc-omit]What it is

​A thesis is the theoretical foundation of your business. It incorporates elements of purpose, mission and vision, but it assembles it in a comprehensive, communicable piece of narrative. A thesis is strategic but is more than a strategy: it is a guide for the selection of strategies.

A striking example of a thesis is Satoshi’s Bitcoin white-paper — clocking in at nine pages total — upon which lies the entire theoretical scaffolding of a market worth several hundred billions of dollars (depending when you look!). Another striking example is Nike, which became a 150+ billion company, after literally inventing the sport of ‘jogging’. Innovative businesses rarely come out of thin air.

[fs-toc-omit]What it does

• ​​Establishes consistent philosophy as a platform for all other work, such as your communication ecosystem and stakeholder communication
• ​​Elevates your foundational message from the generic, to interesting, to irresistible
• Lets everyone know why they come to work each day
• ​​Sets out a map for leadership and growth as an organization
• ​​Identifies transformational possibilities and the problems in the way

[fs-toc-omit]Sample questions

• ​​​​What is the deep promise we make to customers, employees and society at large?
• What story unifies our mission, vision and strategies?
• ​​Why should the world care about us?
• ​​What would we tell Oprah if she called for an interview?
• ​​What is our theory of (growth, value creation, etc.)?

[fs-toc-omit]Examples, by types of output

• ​​​​Foundational thesis — Vision 2030 is MBS’s & the Saudi family’s thesis. 
• ​​Bull case / bear case — See A bull case for ether
• ​​Defensive theory / third party research & PR: Apple defends its app store
• ​​Transformation agenda: Starbucks Howard Schultz’s 2008 ‘transformation agenda’
• Impact, ESG and other reports: as previously noted, see, for instance, Axa’s

[fs-toc-omit]Why it matters

​​Humans are wired to understand story, not PowerPoint presentations and corporate jargon. This means the quality of the story, the myth (the one you tell yourself, your employees and society at large) is really important. It allows you to lead with perspective.

​​Why‌ are most businesses happy with cookie-cutter, boiler plate-type material which forms the essence of the story of their business? 

​​While ‌mission statements do help tell a story, it is nevertheless hard to crystallize in one’s mind what the mission statement really imply, hence the story element. For example, WeWork (the shared office operator) has as a stated mission to “elevate the world’s consciousness”; while Indigo, the Canadian struggling book retailer, claims to be a “living with intention company”. Scott Galloway, NYU professor fairly well-known for his straight-talking style, calls this kind of stuff “Yogababble” because of the amount of helium present inside these corporate stories…

The story can be ambitious and inflated, but… can you back it up somehow? Because if you can’t, your employees and customers aren’t following you.

[fs-toc-omit]Startups vs. legacy businesses

​​It is not hard to understand why startups need a good thesis since a sharp story is the only thing they have to sell. Thus you’ll find elements of thesis in pitch decks and investor presentations, eventually refined into the introductory section of an S1 filing. Startups are thus usually fine regarding their story (sometimes even a little too fine, i.e. Theranos, Nikola, Bolt Financial, etc.).

​​​​But what about legacy businesses? The error most established businesses make is thinking that just because they’ve been around for a long time, they don’t need to clarify their underlying theory. That is even more important when a company finds itself at a turnaround point. Sears, the mortally wounded retailer, never really managed to formulate a theory for why its business mattered in the 21st-century. Instead, it kept remodelling stores, inventing new promotional schemes and rebranding every five years until it died — of exhaustion, possibly, and also because customers had deserted the stores. A proper thesis might not have saved Sears, but it might have helped it die more peacefully (a concept I call Corporate Palliative Care.)

[fs-toc-omit]Theory: a taboo word

​​​​Most leaders cultivate an aversion to the word theory. Why? Because leaders prefer action. ‘Theory’ seems overly cerebral, slow, boring, and is seen as an obstacle on the road to progress. Talk about the need for theory in most management teams and your chances of landing that big promotion just halved. In a way this is understandable, since most business and political leaders today have learned to think mostly in clichés, in words, phrases, and non-sense language. In other words, opinions more than theories. The problem is that opinions, in a world where we now question everything including basic biology, have disorienting power more than informational power (as noted earlier, see biases in human judgment).

​​​​In the early days of disruption theory, Clayton Christensen had an epic exchange with Andy Grove who heard about his theory and called him up at the Harvard Business School:

​​​​Clayton picks up the phone, 

​​​​"Look, Clayton I'm a busy man and I don't have time to read drivel from academics but someone you told me you had this theory... and I'm wondering if you could come out to present what you're learning to me and my staff and tell us how it applies to Intel"

​​Christensen ecstatic from what he just heard, accepted the offer and hopped on a plane out west to meet with the Intel team. Soon after arriving at Intel's offices to speak, he was greeted with a gruff response from Grove: 

​​"Stuff has happened to us, but look we only have 10 minutes for you, so tell us what your theory means for Intel."

​​Christensen pushed back saying,

​​"Andy I can't because I have no opinion about Intel but my theory has an opinion... so I have to describe the theory." (our bolds).

[fs-toc-omit]Where it fits

Using the stack I introduced earlier in explaining the situational assessment, the thesis defines and ‘attaches’ several key elements which act as a frame or lens upon which strategy can be defined. 

​​Using notably Disney and Apple as case studies, Todd Zenger outlines the three elements of a good corporate theory, which have been added in the chart above (in yellow):

1. ​​Foresight — “articulates beliefs and expectations regarding an industry’s evolution, predicts future customer tastes or consumer demand, foresees the development of relevant technologies, and perhaps even forecasts the competitive actions of rivals” (see above, Situational Assessment)

2. ​​Insight — “An effective corporate theory is therefore company-specific, reflecting a deep understanding of the organization’s existing assets and activities. It identifies those that are rare, distinctive, and valuable.”

3. ​​Cross-sight — “A well-crafted corporate theory identifies complementarity that the company can singularly assemble or pursue by acquiring assets that can be combined with existing ones to create value.”

[fs-toc-omit]Foundations

​​Here are some elements of intellectual scaffolding supporting the thesis:

1. ​​The Bible (?)

2. ​​Hero’s Journey, see Joseph Campbell, The hero with a thousand faces.

3. ​​Amazon’s widely discussed “6-pages narratively structured memos” which replaced power-points (to say nothing of the annual letters).

4. ​​See above conversion between Clayton Christensen and Andy Grove.

​​The above should be enough to convince anyone, but the following statements are also useful:

• ​​“We (entrepreneurs) are all impostors who must deploy a fiction (i.e. story) that captures imaginations and capital to pull the future forward and turn rhyme into reason. No business I have started, at the moment of inception, made any sense … until it did. Or didn’t. The only way to predict the future is to make it” (Scott Galloway)

• ​​“Essentially, a leader’s most vexing strategic challenge is not how to obtain or sustain a competitive advantage—which has been the field of strategy’s primary focus—but, rather, how to keep finding new, unexpected ways to create value. In the following pages I offer what I call the corporate theory, which reveals how a given company can continue to create value. It is more than a strategy, more than a map to a position—it is a guide to the selection of strategies. The better its theory, the more successful an organization will be at recognizing and composing strategic choices that fuel sustained growth in value.” (Todd Zenger)

• ​​“North star - This is the clearly defined, visible, and understood aim of your company. It's your compass in every future move you make, and it's visionary. Figuring out your shining north star is a vital step in the zero-based approach if you want your efforts to lead somewhere (…) A zero-based design means taking an in-depth look at what your company is now and reviewing it with your north star in mind. Instead of forecasting and looking at where incremental changes may take you in the future, the approach works on a system of back-casting. With your visionary aim as the starting point, you re-evaluate your processes and ask how you can change them to connect you to your north star.” (source)

[fs-toc-omit]Usage and outputs

​​A thesis can be used internally and can also be repurposed for external use, making it an overall bargain. Think about how it can empower the following roles:

• ​​CEO — provides the overall storyline of the company (think: talking points, keynotes, etc.)

• ​​CMO — orients the communication efforts (i.e. editorial strategy, content marketing)

• ​​CHRO — provides the foundation to internal branding efforts, employee communication, journey management, on-boarding, etc.

• ​​PR/IR — give them a proper foundational myth and you can probably reduce your PR agency retainer by 50%. 

​​An incomplete typology of outputs was noted earlier in the What it is section.

[fs-toc-omit]Alternatives to consider

​​The key here is taking the narrative route. An inspiring 2-3 pages well-crafted piece of narrative eats 100’s of powerPoint slides for breakfast. It may not be sufficient for bankers and investors, but they aren’t the ones walking through the door (entering the zoom waiting room) every day. Re-read Jeff Bezos or Warren Buffett’s annual letters for a momentary delight in clear thinking. 

[fs-toc-h2]3. The perception report

​​The unvarnished truth from the outside – a candid report on how you’re really perceived. The headlines your PR department won’t write. This report red-teams your business, providing a critical and neutral look from the outside.

[fs-toc-omit]What it is

The perception report is a research-driven tool which basically aims to find flaws in your strategic reasoning. It is anchored in the belief that most businesses suffer from acute myopia with respect to their strategic position. Think of it like a building inspection, but for your business.

[fs-toc-omit]What it does:

• ​​Presents external perspective as a journalistic and fact-checked report with visualisations and third-party sources.
• ​​Speaks to those who have something to say about you, without fear for their own careers or partnerships.
• ​​Probes and interrogates weak points in your model
• ​​Analyses the approaches and models in yours or adjacent sectors 
• ​​Orients planning efforts and provides a research-driven grounding for further strategy and analysis
• ​​Paves the way for deeper sector-specific or functional investigations

[fs-toc-omit]Sample questions:

• ​​What are the best counter-arguments to your most important assumptions?
• ​​Is your brand fulfilling its mission? Is its position in the marketplace as clear as you think it is?
• ​​Can you really see your own biases and myopia? Where are your blind spots?
• ​​If Businessweek were to write a cover feature on your sector, how would you be represented? What would truly be said of you?
• ​​Is its position in the marketplace as clear as we think it is? 
• ​​What is the perception of outside stakeholders, former employees, partners past and present? 
• ​​What are some of the weak points (in our business model, etc.)

[fs-toc-omit]Examples by type of output:

• ​​Critical analysis and research notes, the type VC firms do
• ​​Short-seller reports: See Hidenburg, Citron or Markopolos
• ​​In-depth research reports — See this gem from 1999: MP3 report
• ​​Investigative journalism — See for instance the work of Bellingcat
• ​​Design fiction artifacts — Such as Julian Bleecker’s Annual report from the future
• ​​Premortems (read Gary Klein’s explainer) — Often mentioned but rarely done in practice

[fs-toc-omit]Why it matters

​​“As soon as you become a leader, he says, you are surrounded by liars. People tell you what you want to hear. “Very quickly, you find yourself in a hall of mirrors . . . And people who don’t tell you what you want to hear, you fire. So you get into this echo chamber. What can be done to break into that echo chamber? “Every leader needs a fool,” he says. Someone to tell them the truth? Who: the chairman, their best friend? “Your wife, your husband. And the fool should tell you you’re full of shit, on a regular basis.” Consultants? “Never hire a hungry consultant. Never.” Because they will tell you what you want to hear? “Exactly.” — Manfred F.R. Kets de Vries in a Lunch with the FT conversation.​​

​​Good criticism is hard (to formulate, and to receive) but nevertheless essential to anyone interested in making good decisions. As noted earlier, a big problem in most businesses could be called ‘strategic myopia’, which means cultivating internal perspectives that are not stressed-tested from the outside using skillful counterarguments. 

​​Take the recent example of CNN+, the $300M streaming service launched by Warner/Discovery and shut down only one month after it launched. How can this happen? Per Benedict Evans: “just because you want a direct relationship with your users, that doesn’t mean they think about you at all”. Inward, isolated thinking based on faulty assumptions create these kinds of fiascos.

[fs-toc-omit]Where it fits

​​Although it can be done at any time, it is appropriate to consider it before settling on specific strategies. Durable, it should nevertheless be updated every 2-3 years.

[fs-toc-omit]Foundations

​​As mentioned previously, the dense literature on biases in human judgment and decision-making provides a strong foundation for this exercise. See mostly Munger, Kahneman and Tversky. 

​​To name a few most relevant here:

• ​​Inconsistency-Avoidance — The process by which leaders prioritize consistency 

• ​​Confirmation bias — The anti-change tendency, it is the process by which we try to maintain previously reached conclusions.

• ​​Sunk-cost fallacy — Investing additional resources in a losing account, when better investments are available elsewhere.

• ​​Availability heuristic — Overweighting what is easily available

• ​​Echo chambers — Amplification and distortion of signal based on existing views (i.e. Ivory tower)

• ​​Principal-agent problem — Conflict of interest (i.e. consultants pitching their book, executives optimizing for bonus, etc.)

• ​​Endowment effect — Thinking that your vision and strategy is overly special and good, because its yours

• ​​Agreeability tendency — Tendency to act as other persons (boss, colleagues) 

Other similar practices include:

• Red teaming — From the military. To circumvent bad decisions in a domain where errors can be a matter of life and death, the military has developed a concept called red team, which is “a group that plays the role of an enemy or competitor, and provides security feedback from that perspective. Red teams are used in many fields, especially in cybersecurity, airport security, the military, and intelligence agencies”. Daniel Kahneman calls this “adversarial collaboration”.

• ​​Building inspections — Would you buy a building without first having an outside expert evaluate it objectively? Of course not, because objectivity matters when decisions are consequential. We think the same should exist for businesses. 

[fs-toc-omit]Usage and outputs

​​A perception report, depending on the scope, is the closest thing to a strategic plan without claiming to be one. It orients the CEO agenda, the strategy formulation process, branding, innovation, product decisions. It’s a useful flashlight for many decisions otherwise made under opacity.

[fs-toc-omit]Alternatives to consider

​​Sometimes, egos and overconfidence prevail. That’s fine, but there’s no alternative to objectivity.

​​At least, ‌try to…

1. ​​Foster a culture of candor and honesty and reward skillful counter-opinions. Take the time to listen to the naysayers and the rebels who question assumptions. Be scared if your leadership team/board becomes complacent and accommodating to internal perceptions.

2. ​​Find a fool, and protect him/her. Iconoclasts and positive deviants are invaluable to an organization because they favor judgment over biases, can generate fresh new insights, and are naturally prone to push against bureaucracies. “The identification of positive deviants among our ranks was the most important result of the Task Force’s allocation of decision space. These leaders would consistently test the bounds of their decision space: they understood the game and were willing to follow the rules, but constantly sought better ways to play.” (McChrystal & Fussel).

3. ​​Create and enforce healthy feedback mechanisms (exit interviews, Glassdoor, customer research, call center verbatims, etc.)

Rule #10 “SWIM upstream. Go the other way. Ignore the conventional wisdom” — Sam Walton.

[fs-toc-h2]4. The S1

​​The S1 report is like an MRI for a business. It slices, magnifies, details, contrasts, outlines, and clarifies. Loosely inspired by the SEC Form S-1, it is used as a defensive strategy to uncover and manage organizational risk and orient planning efforts.​

[fs-toc-omit]What it is

• ​It is a bottom-up report which outlines everything you don’t know about the operations (in the wide sense) of your business. An S1 report, therefore, allows you to find the ‘known-unknowns’ that exist in the business.  
• ​​Although its name borrows from the SEC Filing, it is not a compliance or regulatory document. It uses the same logic (granular, extensive, detailed) but rather than aiming to present a rosy, positive view of the business (which might entice someone to buy the security), it helps the CEO understand where risk hides inside the business. 
• ​​It is a defensive strategic document with an aim to achieve what James Reason calls a “high reliability organization”, which means organizations that, “instead of making constant local repairs, are in fact looking for broader system reforms.”

[fs-toc-omit]What it does:

• Lays out a​ root-and-branch, or layer-by-layer non-financial audit of your organization
• ​​Creates a coherent and hype-free overall and complete picture of your business, free of marketing constraint
• ​​Identifies addressable risks, gaps and market opportunities
• ​​Identifies the tough questions so you can answer them before anybody asks
• ​​Lays out desirable and less desirable possible futures for your industry and your part in it, identifying strategy to address ramifications

[fs-toc-omit]Sample questions:

• ​​How can you strengthen your organization and improve governance across the board?
• ​​How do you create a safe space to de-risk the areas of your organization that you believe to be working well?
• ​​How would you sell yourself to investors if you were a startup? What tough questions would they ask of you?
• ​​How much technical and managerial debt have we/are we accumulating?
• ​​How robust are our safety and accountability mechanisms?
• ​​What is the real, pragmatic workbench? What are the true priorities?

​​An important note on scope:

I should state that the S1 report can be tailored to be more or less extensive, depending on business context. For example, a more extensive version of an S1 report could include elements that we have previously covered when explaining the thesis. In short, an S1 is not one-size-fits-all and need not be erroneously perceived as necessarily a major endeavor because compression is possible.

[fs-toc-omit]Why it matters

​​Strategy is mostly top-down, but risk is a silent killer which can creep up from below and attack at a moment of vulnerability. While it might be a top strategic priority to launch an “AI innovation lab”, perhaps your most urgent priority is in fact disaster recovery and business continuation, because someone in IT never really bothered to make sure they put proper redundancy mechanisms in place. How do you balance these two ‘priorities’? In the first case, you might miss an important innovation opportunity. In the other, your entire business might vaporize (or at least go dark for a while).

​​I’ve observed countless situations where leaders became obsessed with strategy and neglected objective reality, when both are equally important (reality is just more boring and dry). The problem is that reality usually prevails. If you don’t fix the problems which lay dormant in the ship's belly, eventually you will stall.

​​If you are still unconvinced, read the backstory of the brutal death of Target in Canada.

[fs-toc-omit]Where it fits

​​An S1‌ is the best possible planning exercise. Once you’ve gone through an S1 process, you have in effect documented sixty to eighty percent of your operational projects, which fall under the maintenance category. You can then superpose ‘strategic’ (top-down) projects on top to avoid conflicting priorities. 

[fs-toc-omit]Foundations

• ​​As previously noted, the report is based on the SEC S-1 filling. Also known as a CIM, pitch book or investor presentation. They are quite similar, just different in intent, audience and format. An investor presentation (such as this one from Buzzfeed (totally a random choice)) is not the format we use for an S1. We prefer the longer, more painful and narrative-driven conventional S-1. 

• Swiss cheese model of failure — Also known as the Swiss cheese model of accident causation, this model received little attention before it became a popular meme during COVID, as people grappled to understand the origins of the pandemic. James Reason outlined the theory back in 2000 as a way to understand medical errors. It ported nicely to other domains, such as airline accidents.
• ​​The structure is the strategy — The core idea is simple: excellent game vs. game excellence. See Atul Gawande’s checklist manifesto; it is also a central idea behind the ‘team of teams’ approach developed by Stanley McChrystal and Chris Fussel (previously noted).

​​“The SEAL team in Abbottabad had not planned for the helicopter crash, just as Captain Sullenberger’s crew had not planned for the bird strike, and the Carty-Caterson team had not planned for the marathon bombing, but all were capable of adjusting to the unexpected with creative solutions on the spot, coherently and as a group. Their structure—not their plan—was their strategy”  (our bolds) — McChrystal and Fussell

• ​​Resilience and maintenance — There is a vast body of literature on resilience, maintenance, fitness and basic focus on survival which we won’t explore here but is foundational to the S1 idea. 

[fs-toc-omit]Usage and outputs

​​As previously mentioned, an S1 report orients planning efforts. As such it can be used to identify departmental priorities and structure projects and supporting activities according to a prioritization matrix. Beyond planning, it helps leaders agree on a view of reality and allows for tactical interventions at the organizational level (informs reorgs, transformation, etc.)

[fs-toc-omit]Alternatives to consider

​​Some organizations have embraced forms of radical candor or extreme visibility protocols (such as what Bridgewater has become famous for). It certainly helps. So-called ‘strategic planning’ exercises also help identify vulnerabilities (because managers will be happy to flag them) but as noted earlier in our critique of this process, the impulse to be ‘strategic’ and ‘innovative’ at these meetings castrate efforts to raise anything that looks like a ‘problem’. There are no proper alternatives to building defense, it either exists, or it doesn’t.

[fs-toc-h2]5. The customer book

​​Your customer as they actually live, presented through deep and careful study.

[fs-toc-omit]What it is

​​How common is it to read that a brand “has lost touch with its customers”? Too often, organisations think of their end users through anecdotal evidence and secondary sources, and understandings that have ossified into conservative positions over time. Customers are understood through incredibly reductive lens, such as ‘personas’ (abstract and fictitious labels) and statistics which, on the surface seem profound, but are in fact devoid of meaning (e.g. “70% of surveyed customers think that a ‘personalized, warm’ service is important or very important” —— what does that tell you?). Sears, infamously, kept an empty chair in its board room reserved for the ‘customer’…

​​The Customer Book is an in-depth exploration of the customer in their context. This means going out there and capturing authentic stories of real customers and seeking to understand the broader cultural context, deep motivations and attitudes, family and community dynamics which inform their lives and purchase decisions. This report is not about data, it is about texture. Not about convenient abstractions, but about reality.

[fs-toc-omit]What it does:

• ​​Presents a comprehensive and compellingly told story of the lives, needs and aspirations of your customers
• ​​Investigates the service aspects of your business
• ​​Maps habits, behaviors and journeys
• ​​Questions and validates metrics you use to measure your customer relationships
• ​​Assesses how your partnership ecosystem (distribution, delivery, service) factors into your customer relationships

[fs-toc-omit]Sample questions:

• ​​Do you understand the context in which your products and services are used or do you only make ‘educated guesses’?
• ​​What’s it really like to deal with you and maintain a relationship with you?
• ​​Do you keep the promises you make to your customers? Is their trust in you changing over time?
• ​​How culturally relevant is your brand given the world we live in?

[fs-toc-omit]Sample components:

• ​​Customer context (general)
• ​​Expectations and needs
• ​​Hopes, fears, values
• ​​Cultural references
• ​​Purchase journey
• ​​Experience with product and service (design, usability, task completion etc.)
• ​​Job-to-be-done analysis
• ​​Logistics, last mile, etc.
• ​​Ease of doing business, simplicity
• ​​Service delivery model
• ​​Exception handling

[fs-toc-omit]Why it matters

​​You already have much of the data you need on your customers, but what you miss are the human stories, the social and cultural context which might influence your core industry assumptions.

​​Consider the following question: “is yoga a sport?” Depending how you answer the question, you’ll create vastly different outcomes. While Nike completely missed yoga (not a sport!), Lululemon saw yoga as part of a broader shift in culture, which helped the company grow to become the $33 billion business it is today (surpassing the likes of Adidas). A hotel might ask “what constitutes a good night of sleep?” or “what role does the minibar play?”. A healthcare provider might have to revisit assumptions about the lived experience of what it means to be ‘healthy’, rather than rely on simplistic generalizations.

[fs-toc-omit]Where it fits

​​There’s no special moment for this work to be done, although it can provide valuable input into a strategy formulation process. It can also prove to be really useful in the context of rebrands, and ahead of editorial strategy work.

[fs-toc-omit]Foundations

• ​​“There is a set of assumptions about human behavior that drives most of our current understanding in today’s business culture. We don’t talk about these assumptions. Most of us aren’t even aware of them. They create the invisible scaffolding supporting our surveys, our focus groups, our research and development, and, for the most part, all of our long-term strategic planning” (The Moment of Clarity)
• ​​“Imagine an ambitious luxurious hotel trying to stay afloat in a competitive market. The hotel would tend to imagine it knew what it needed to do for its customers; the struggle would be all about delivery. However, what tends to be rushed is the definition of what exactly a good night in a hotel is. Where do the sheets and the minibar fit into this? What is the role of the soap and room service? What if one went back to the drawing board to address the question of what a hotel is?” (Alain de Botton)
• ​​“Virtually all industries and companies are vulnerable, but the ones that are most ripe for disruption have a few things in common. They are those that don’t ask lots of “Why” and “What if” questions, have stopped learning, and have these qualities: Grown complacent by past successes and haven’t evolved their product offering much; Lost touch with their core customers’ evolving needs and have no way to track this well; Didn’t imagine a whole new set of customers, with different needs, entering the market; Don’t take new competitors seriously, potentially because they feel competitively safe due to their historical regulatory environment; and Have no clue what the true essence of their product offering is. That last bullet point may seem a little ethereal, so let me explain and offer a shortcut. Most businesses get commoditized over time such that they become just transaction machines. The lack of new oxygen (innovators and rebel thinkers) in the system means they define their business and its appeal in a very bottom-line way.” (Chip Conley)
• ​​“Does the corporation behave consistently, whoever we deal with? Do we actually know what to expect from it? Does it practice what it preaches? Is it a brand we can trust in all kinds of circumstances? Does it apologize when things go wrong? Can we really believe what it tells us, or do we have to look very carefully at the small print? (…) Once trust is lost between individuals or between individuals and the corporation, it’s gone forever.” (Wally Olins)

[fs-toc-omit]Usage and outputs

​​Going through the process of building a Customer Book can have a significant impact of the following roles and functions:

• ​​Marketing — helps creating culturally relevant marketing and communication programs
• ​​HR — creates appropriate context useful for recruiting and on-boarding, beyond abstractions
• ​​Product — helps product teams elevate beyond features and explores patterns around usage
• ​​Operations — provides discreet, useful cues which help elevate the customer experience; it also helps identify ‘micro-transitions’ in the customer journey, which might involve partners you have little or no control on, but who influence the overall experience
• ​​Innovation — can uncover useful clues that may lead to new innovations

[fs-toc-omit]Alternatives to consider

​​Context is what is scarce, so finding ways to capture elements of customer context will be a plus for any organization, even if you don’t go the route of building a Customer Book. For example you might:

1. ​​Implement intelligence-capture programs inside call centres and other venues of customer interaction in a concrete way. Too often, organizations collect only fragments and anecdotes and valuable elements of consumer context is lost

2. ​​Encourage more so-called ‘customer intimacy’ programs among your executive team. As CEO, make sure it is taken seriously (mandatory trip reports and debriefs should be part of the process as well)

3. ​​Include well-researched customer profiles as a core tenet of your editorial strategy
4. Ban the use of fictional personas in all strategy and creative planning​

[fs-toc-h2]6. The company book

​​Your company's missing bible. A living document for all your stakeholders on who you are and where you’re going.

[fs-toc-omit]What it is

​​Taking the same work principles we apply to our Customer Book, we turn the lens on the business itself. Part brand book, part employee manual, but adaptable in form for the reality of each company, the Company Book expresses the thesis, and beyond, as lived culture and principles in the working life of employees. If there are values not yet in place that leadership wishes to imbue, the bible can lay out a practical pathway towards them. The Company Book should serve for recruitment, as the onboarding handbook given on day one, and as a living resource every day. No false promises, no vague motivational values (teamwork! respect!). Just the truth of it.

​​In its most complete form, it would look like this, although it can be tailored to individual needs.

[fs-toc-omit]What it does:

• ​​Makes your culture tangible without having to resort to vague terminology and values.

• ​​Maps decision-making criteria and aligns thesis and mission to everyday work challenges.

• ​​Empowers every employee to make better and more strategically aligned decisions on the front line.

• ​​Assesses the quality of your governance

• ​​Serves as core material for onboarding, training and recruitment – sets the baseline for what it means to work for you

[fs-toc-omit]Sample questions:

• ​​What’s the gap between the culture you express and the culture your organization lives?

• ​​What would world-class onboarding look like for your organization?

• ​​What if your culture was clarified in a book that every employee could carry in their pocket?

[fs-toc-omit]Sample components:

• ​​Readable stories of company life

• ​​Living FAQ structured by employee need, not opaque corporate divisions.

• ​​Corporate statements and philosophy

• ​​Mission, culture, vision, values

• ​​Management principles

• ​​Brand message and promises

• ​​Basic policy guidelines

• ​​Methods

• ​​CSR and Ethics

• ​​Customer service and customer satisfaction

• ​​Hospitality

• ​​Dress code, style, posture, etc. (with respect to customer)

• ​​Language, Rules

• ​​Basic knowledge of the business (divisions, structures, geographies, codes, etc.)

​​A note on scope:

​​Using the word “book” might make this deliverable sound more complicated than it ought to be. At a minimum, it can be a well-articulated company culture page (see also this example). The scope must be tailored to needs and this is meant to be a living document, so it can absolutely start small. 

[fs-toc-omit]Why it matters​​

• ​​Empowered execution — There’s a growing realization in most companies that we’ve reached the limits of command and control and that employees must be empowered to make autonomous decisions on the frontline, in the name of agility. However, only if you’ve detailed your methods and principles can you feel confident that you can effectively decentralized decision-making down the chain of command and reduce front-line risks. 

• ​​Culture — while it may be true that “culture eats strategy for breakfast” (Peter Drucker), your culture is mostly intangible. The Company Book aims to use the power of narrative and design to make your culture more tangible.

• ​​Brand — To be effective, your brand needs to be authentic, and authenticity needs provenance. A Company Book creates the background for all of that.

[fs-toc-omit]Where it fits

​​Similar to the previously noted Customer Book, there is no absolute moment when this type of work might be done, except ‘ASAP’. As noted in the case of customer report, a rebrand is an appropriate moment to consider assembling your Company Book, as an extended version of your brand book (which is usually limited to questions pertinent to graphic design, such as fonts and logos). It can also be an important ally in a transformation journey, as a way of using narrative and to explain what the transformation journey is about. 

[fs-toc-omit]Foundations

​​More service, less product. More experience means relying more on humans. Plus, teams are distributed more than ever, which means there’s never been more need for cohesion. 

• ​​Company or culture books are not new: we have samples in our library going back to the late 1800’s. Usually, these books served, not as internal cultural artifacts, but rather as elaborate collaterals made for clients and partners, at a time when methods of communication were more limited. An industrial company would, for instance, showcase its manufacturing plants, product lines, R&D facilities or explain its quality control policies. As an example, see this book titled “Foundation for the future” from the Benjamin Moore company (1958).
• ​​As an analogue, one can take example in design systems, which are a single source of truth to manage brand and UX components so teams and partners can stay in sync. While the Company book might recoup elements of the design system they remain different, but serve similar cohesiveness purposes.

• ​​HR departments have catalogs of ‘policies’, which are important but no one really reads. Turning ‘policies’ into a practical document designed for human beings rather than for the legal department is what this deliverable is about. 

• ​​It has become fashionable for some iconic or at least well-known companies to publish culture books (Netflix, Valve, etc.) or founder autobiographies, of which there are countless examples. 

[fs-toc-omit]Usage and outputs

​​A Company Book artifact can be repurposed for many different usages:

• ​​As a client facing document, serving sales and marketing teams

• ​As an essential part of the HR apparatus for employees training and on-boarding, since it is the cultural “source of truth”

• ​Outlining the key components of the company’s design system, covering elements such as tone brand guidelines, voice and tone and editorial strategy

• ​As a transformation agenda for a company in need of a major shift or turnaround

[fs-toc-omit]Alternatives to consider

​​The only suitable alternative we can think about is to dispatch someone to help your HR team make sense of everything that falls under “internal branding”, from policies, training material and recruitment material. That comes after having done appropriate work understanding and documenting the employee journey. Although most HR consultancies (AON, Hay, Mercer, etc.) are well-equipped to do this type of work, in our experience they usually fall short of producing much more than powerPoint slides.