Who should use strategy dynamics?

As a CEO, general manager, or member of a leadership team you need confident answers to strategic questions - why the organisation's performance is progressing as it is, and how that performance can be improved and sustained into the future.

You need specific and consistent policies to guide your decisions taking account of the inter-dependencies between them. You need mechanisms to monitor and adjust those policies and assess the likely outcomes of different choices.

Strategy Dynamics helps you control your destiny, with an approach to strategy development that:

• is based on evidence, not on opinion or politics
• deals with all aspects of strategic challenges, rather than seeking a magic bullet or simplistic targets
• is easy and clear to communicate, not abstract or complicated
• has clear implementation - who is to do what, when, how much, coordinated how with others, and producing what likely outcomes
• can adapt to unavoidable uncertainties outside events.

As a consultant or business advisor, your clients want your help to explain why their organisation's performance is progressing as it is, and how they can improve that performance, sustainably into the future. Strategy Dynamics helps fulfil those needs – because it is an approach to strategy development that:

• is a rigorous and reliable discipline, instead of the qualitative and unreliable strategy methods used by others
• focuses on the substance of the business - its resources and capabilities (properly specified) – not just the financials that usually dominate business analysis
• is fast and holistic, to understand quickly what is actually happening, rather than the shopping-list of irrelevant issues typical in the early stage of client assignments
• can focus the efforts of the team, and not waste time trying to 'boil the ocean' in the hope that some nugget of insight will be found
• clearly and persuasively communicates your findings, so clients understand and act on them, rather than being bemused by large piles of disconnected exhibits
• leaves your clients able to evaluate and monitor progress, and adjust how they implement your advice as conditions change.

As an entrepreneur trying to build a new venture from nothing, you have to persuade investors to back your plans and there are few facts to go on. So investors' support often comes down to little more than belief in the abilities of you and your team. Strategy Dynamics offers both you and your backers much more confidence. It makes crystal-clear:

• exactly what resources - products, people, customers – have to be developed, at what rate, over what time, to get the business going and viable
• where those resources will come from and how you will get them
• the effort and cost needed to do this
• how revenue and cash flow are likely to develop
• and how these outcomes change if things go differently than planned

Armed with a rigorous model of how your business will actually work and perform raises the chances of getting the backing you need.

Strategic management of human resources is critical, but it can still be difficult to demonstrate to senior colleagues the value of HR interventions. That’s because the whole issue is beset by big challenges:

• very long-term cause-effect mechanisms — your hiring 10 years ago affects availability of experienced people today, and you will live with today’s decisions many years from now
• numerous interdependencies — staff turnover reflects pay, work-pressure, culture and so on, and in turn impacts experience, service-quality, customer growth and many other issues
• much feedback both good and bad — hiring the best people makes the organisation attractive to more great people … or staff attrition raises pressure on remaining staff, so more want to leave
• numerous threshold effects — business grows fine until customer support needs exceed capacity, when both customer and staff losses suddenly escalate

These are exactly the features that strategy dynamics deals with, as has been done frequently for all kinds of HR challenges.

Strategic marketing management is critical, but features several challenges:

• the customer-development process is a complex chain, with long lead-times from marketing action and spend to loyal customers and sales
• this whole process is further complicated by the diversity of customer behaviour across many seemingly similar products
• in many markets, customers cross-switch between numerous products from numerous producers
• many producers are isolated from their end-customer by retailers or distributors whose attention and loyalty also must be captured.

These are just some of the complexities in marketing that are unavoidably dynamic in nature – how the system behaves over time is what matters — and for which strategy dynamics is the only viable solution.

Investors and analysts are under pressure as never before to cut the short-termism that infects management and causes such economic damage. But existing analysis methods are no help in getting from firms' strategy statements to what investors want — sustained growth in free cash flow. But there is hope …

The world's largest accounting firms and regulators form the International Integrated Reporting Council www.theiirc.org, working on guidelines for Integrated Reporting – "… a concise communication about how an organization's strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term.". The guidelines also require reporting of social and environmental impacts. This needs:

• specification and quantification of the main substantive elements of a business aside from its finances — customers, staff, products and capacity
• a formal and rigorous functional model that captures how the business actually works and delivers performance.

To date, no such model has existed, nor has there been any adequate definition of the elements required to produce such a model, so efforts at Integrated Reporting remain qualitative, judgemental and overly complex.

The objective is challenging to fulfil because of the problematic features of any business system — accumulation processes, interdependence, feedback and threshold effects. But these are precisely the mechanisms in complex systems (such as a business) that strategy dynamics is designed to deal with - explicitly and quantitatively.

See a summary of the solution at http://sdl.re/IntegratedReporting (Video 33 mins).