The Fact: Broken Strategy
When people think of (business) strategy, they think that Strategy must be elaborate, detailed, and complex. As a result, the typical strategy development process in big corporations often takes a big team of people working for many months, producing hundreds of Powerpoint slides, excel spreadsheets, and word documents. The output of this kind of strategy exercise is usually a massive document – hard to digest, hard to explain, and hard to execute.
Unfortunately, these complex strategies are not implementable. A recent 2022 survey of 1,750 companies by Cascade revealed that:
Most businesses are struggling to implement and communicate their Strategy;
Vast majorities of strategies (i.e., 9 out of l0) are too complex that they are doomed to fail from the beginning; and
These failures are costing businesses millions.
These unpalatable findings clearly show that Strategy is broken, and we need to fix it.
Why Do Most Complex Strategies Fail?
The culprit here isn't some grand mystery. Instead, it comes down to a lack of communication. Complex strategies are hard to communicate, resulting in a Strategy that is poorly communicated to the broader organization.
When people don't understand the Strategy, they cannot implement it, and they disengage from it and, consequently, don't care about it. This vicious cycle leads to not having a real strategy, wasting immeasurable resources, and pursuing initiatives that don't matter to the company.
The answer to this problem is to pursue a simple strategy that is easy to communicate and easy to implement.
Simple Strategy is Actually Harder to Create
So, contrary to what people think, Strategy must be simple. Please don't take me wrong: a simple Strategy is far from simplistic. In fact, it is more challenging to create a simple strategy than an elaborate one. To make a hundred-page strategy document, you just need to list out all of your findings and analysis results. Any junior analyst can do so.
But to compress those hundred pages into a single page requires you to focus on the so-what insights and what really matters. Even a senior partner in a prestigious strategy consulting firm may struggle.
Take, for example, the SWOT framework. A junior analyst can create a long list of strengths. But a long list doesn't tell you what to focus on, what to do, and how to win. In fact, research by London Business School in 2020 revealed that a long list creates analysis paralysis and cognitive overburden (i.e., a long-list obscures the most important things). Less is indeed more.
If the value of a strategy is how it can help you achieve your goal, then a Simple strategy to a complex strategy is like a diamond to a pebble: thousand times more valuable! It is better to have a simple strategy with a flaw than a complex strategy without a flaw. Just like it is better to have a diamond with a flaw than a pebble without a flaw.
Also, don't think that a Simple Strategy cannot result in complex operations. Look no further than nature.
In chemistry, all complex substances are mere combinations of simple atoms.
In physics, all natural phenomena are simply the interaction effects of simple forces.
In mathematics, all complex formulas are derived from fundamental theorems.
In architecture, complex buildings are simply the joining of various simple elements.
In biology, all complex organisms are made from simple cells.
Do you know that bees build their hives not by following a complex blueprint? Each bee worker simply follows a set of simple instructions.
Similarly, termite mounds, an impressive architectural feat (especially more so if you consider their size) that can reach 30 meters, with systems of tunnels and conduits, extensive numerous subterranean chambers, complete with a heating and cooling system, and can even withstand the weight of an elephant. This marvel of architecture is built not by following a complex blueprint but by each termite following a set of simple instructions.
Another example is the beautiful patterns created by bird swarms. Scientists have wondered how the heck hundreds of birds can coordinate so beautifully. Apparently, it is not due to a complex plan coordinated by a mastermind. Instead, each bird simply follows a simple set of rules. If the bird next to you moves that way, then you must move this way. These simple instructions create beautiful patterns as if hundreds of birds have morphed together to become a single beast.
As you can see, Simple is far from simplistic. Simple is the ultimate sophistication.
I have also listed several examples of the Power of Simplicity in business:
Why Simple is Better: Five Reasons
There are five reasons why a Simple Strategy is better than a Complex Strategy:
First, a Simple Strategy is easy to be communicated. As I mentioned in my other post, even the most eloquent CEO will struggle to present a hundred-page strategy document multiple times (a strategy must be explained repeatedly for it to stick in people's minds). It is much easier to present a single page of Simple Strategy.
Therefore, a Simple Strategy allows the company executives to communicate the strategy over and over again until most of the employees know about it, understand what is expected from them, and realize what they must do.
Second, a Simple Strategy is easy to understand. The human brain is geared toward simplicity. We can understand simple concepts and big ideas easily. But processing a lot of data points is more for computers. Most people will struggle to digest a hundred-page strategy document, but most will quickly grasp a single page of Simple Strategy. Once people understand the Strategy, they can implement it well.
Third, a Simple Strategy is agile/flexible/adaptable. Complex strategies are doomed to fail because they are so detailed and methodical that we are left without an inch of flexibility. Just a small change, and the whole thing comes crashing down.
Isn't this a familiar case:
You pour your energy ad resources into a complex strategy at the beginning of the year. Then, you present it to the wider company with a beautiful slide deck. Everyone loves it. The strategy gets approved. And you toast the team and congratulate each other.
But fast forward three months, the approved slide deck hasn't been opened since the beginning of the year. The strategy spreadsheet is either in version 99 or 101, depending on who you ask. No one really remembered what the plan was. Everyone just reverted to doing what they always do rather than working toward the strategy.
You tried to herd everyone back to the strategy. But they pointed out some changes between now and three months ago. The strategy was already irrelevant and crumbled like dust.
On the contrary, because a Simple Strategy is usually at a higher level (more abstract) than a highly-elaborate, minutely-detailed Complex Strategy, it allows your people to seamlessly modify their actions (while still aligned/in tune with the Strategy). As a result, you can instantly adapt and seamlessly align your people without having to modify the Strategy, re-communicate it, and re-align your people.
For example, in 2020, when Covid-19 hit, Uber's business was down 80% overnight. But because the employees know very well the simple business strategy, they can quickly adapt and adjust. As a result, Uber's revenues were able to zoom past $40 Billion.
Fourth, a Simple Strategy forces you to focus. As I wrote in my book, the GOSPEL of Strategy (read the strategy chapter here), the essence of a strategy is to focus. In Complex Strategy, where you have so many components, it is easy to neglect focus and hide in the details.
However, when you create a single page of Simple Strategy, you cannot hide in the details, i. e., you are forced to distill the essence of your Strategy so that it fits into one page. By distilling your Strategy, you are forced to make the hard choices, decide on a single direction, and set 1-3 most important implications.
One of the main problems with Complex Strategy is that it is usually not even a strategy. It's just the first pass at next year's budget: An annual cycle of secret meetings that exhaust resources and, ultimately, no one is closer to understanding where, why, or what they should be doing!
Ps. Don't forget that a strategy is not a plan. Strategy is at a higher level than plan. Read more about the different nature of Plans vs. Strategy in the GOSPEL of Strategy.
Fifth, a Simple Strategy is easier to implement. As Complex Strategy is often under-communicated, the employees don't know where to find the Strategy. And even when they do, they cannot understand and connect it with their day-to-day executions. This leads to team members not feeling like they contribute to your business, which leads to disengagement, and implementation failure.
On the other hand, a Simple Strategy is much easier for your people to implement. Because everyone understands it, they will use it in their daily executions to solve problems, make choices, and prioritize actions. As a result, you will have smoother execution and bigger impacts from your Strategy. Your Strategy will no longer be hidden on a dusty shelf but manifested in your business model.
Gojek, the super app company, realizes this. So instead of an elaborate, detailed Grand Strategy, they use a simple framework to direct their initiatives (project/actions). Their Senior Director told me that this simple framework allows them to operate faster and more smoothly (even when the Covid-19 lockdown and energy inflation hit) because every member knows what the right thing for the company is.
For Gojek, their simple framework (aka their Simple Strategy) is straightforward:
They want to achieve the "winner takes all" network effect.
Therefore, they need to attract as many users as possible.
They choose to achieve this by encouraging vendors to lower prices and by providing scale and technological solutions.
So then, every action in the company can be measured against this framework, i.e., will it strengthen the network effect significantly?
Benefits of Simple Strategy
Due to the five advantages of Simple Strategy mentioned above, there are many benefits resulting from adopting simple strategies:
Cement the competitive advantage;
Determine the areas to improve;
Be more efficient in internal communication;
Shorten feedback loops;
Have clear responsibility and accountability;
Increase internal capability;
Manage people effectively;
Respond faster to customers and market needs;
Lower operating costs;
Higher profitability;
Manage execution and change better; and
Accelerate the company's growth.
Here I am guilty of creating a long list. It is difficult for us to remember 12 points. Let's just focus on one benefit of a Single Strategy, i.e., it helps realize your goals.
Why Don't Most Strategy Consulting Firms Advocate for a Simple Strategy?
If a Simple Strategy is good, why don't we hear it more? Why do strategy consulting firms keep delivering elaborate and complex strategies?
Well, there are three reasons for this:
First, Simple is actually hard. As I mentioned, it is much harder to create a short and clear strategy than an elaborate and detailed one. Just like what Richard Oldfield, the famous British investor, often says: "Simple, but not easy!"
Second, Simple is not easy to sell. As people tend to discount short and simple strategies, consulting firms try to impress clients with highly elaborate and complex strategies. By making the strategy project highly complex so that the clients cannot do it themselves, the consulting firms can justify the value they deliver.
Ironically, the clients actually get something more difficult to implement. By receiving thick documents and big spreadsheets, the clients often think they work the consultants hard and receive good returns for their money. The clients mistake quantity for quality. It would be best if they actually forced the consultants to create a simple strategy. It will be a better use of their money.
Third, the think tank of consulting firms actually still produces simple strategies: It is the client service arm of consulting firms that deliver complex strategies. If you look at the frameworks created by consulting firms' think tanks, most of them are simple. Look at the following examples:
BCG's 2×2 Growth Matrix – a simple four quadrants helping corporations optimize their portfolio.
BCG's experience curve – a simple concept, but with a profound implication, i.e., companies can become more efficient and productive by focusing on winning more market shares.
Mckinsey's "business system' concept, i.e., all elements of the business need to be integrated and geared toward the Strategy delivery (similar to Michael Porter's idea of "value chain").
Mckinsey's "three horizons of growth," i.e., companies need to think not only short-term but also long-term.
All of these powerful concepts are simple. But the problem is that the firms' partners cannot charge millions of dollars for a 2×2 Matrix. Especially these days, when most clients also hire their own MBA graduates and ex-consultants and have their internal consulting divisions. The partners need something 'sexy' to justify a million-dollar charge. The easiest way is to make Strategy so complex that internal people prefer to outsource the work to consulting firms.
How Do You Differentiate a Simple vs. Simplistic Strategy?
I believe a Strategy must be simple. Especially so in this fast-changing world.
But please don't take me wrong:
a Simple Strategy doesn't mean you don't need to be thorough in your analysis. In fact, you need to be hard on your analysis to create a Simple Strategy. If you want the resultant Strategy simple, you must be thorough in your analysis, considering all aspects, options, and scenarios.
a Simple Strategy doesn't mean you don't need to work hard to execute it. In fact, you still need to be relentless in your planning and execution.
What I am trying to say is that: You need to keep your Strategy simple, but not simplistic. As Albert Einstein once said, "Make everything as simple as possible, but not simpler."
You cannot oversimplify and fail to deal with the situation's complexity. A simplistic strategy often dumbs down, trivializes the issue, and dodges the core of the problem rather than targeting it. Therefore, the Simplistic Strategy is ineffective.
Use the GOSPEL checklist to help you ensure your strategy isn't simplistic:
Is your goal clear? Do you know the measures of success for both the short- and long-term?
Have you analyzed all the options? Is your strategy based on sound analysis?
Is your strategy sharply focused on how to win? Will it give you a competitive advantage?
Have you translated your strategy into action plans? Is everything you do aligned with the strategy?
Is the drive to execute the strategy strong? Is everyone in your company committed to the strategy?
Are you looking out for results and changes? Is your strategy still valid? Is your strategy performing as expected?
These six questions are simple but profound. They force you to think hard, to make hard choices, and to be honest with yourself.
How Do You Create a Simple Strategy?
By now, you must already know that Simple Strategy is good. And that Simple strategies perform better than complex strategies, especially when the conditions are challenging.
Therefore, in this volatile, uncertain, complex, and ambiguous (VUCA) world we live in, instead of making Strategy more complex, we should make it more simple.
But how do you create a simple strategy? I propose the six steps of Winning Strategy, which I call the GOSPEL of Strategy. To read how to do the steps in practice, please check this step-by-step approach.
Hopefully, after reading this post, you will know how to create a simple strategy to your advantage.
If you are interested to read more about what makes a strategy powerful, check out this post.
Alternatively, continue to explore the secret of winning strategy here.