Have you heard of Strategy Dynamics? Most people haven’t.
Strategy Dynamics is a framework to explain our current performance–and to develop and execute strategies for improving our future performance of our organization. This approach emphasizes building and sustaining the resources and capabilities necessary to succeed.
Strategy Dynamics focuses on performance over time. The overarching objective of strategic management is to develop a sustainable approach to quantitatively improve performance through time. This can apply to the enterprise as a whole, or for a key functional areas (e.g. Sales, Human Resources, Product Development, etc.).
Strategy Dynamics seeks to answer 3 key questions:
- WHY is performance following its current path?
- WHERE will performance go if we continue as we are doing today?
- HOW can we design a robust strategy to radically improve that performance into the future?
The application of Strategy Dynamics is essentially universal. It can be used for every kind of enterprise, whether commercial, public-service, or voluntary, as well as to every corporate function within an organization. It is also applicable to not yet existing enterprises, such as new ventures or voluntary initiatives.
Strategy Dynamics also has numerous benefits:
- The method works for every kind of enterprise—commercial, public-service, or voluntary—as well as to every function within an enterprise.
- It is also applicable to not yet existing enterprises, such as new ventures or voluntary initiatives.
- The method is strongly evidence-based and rigorous, offering a solid understanding of what causes current performance and confidence in the future performance.
- Being evidence-based, it can solve differences of opinion amongst team-members. It also allows each individual, both amongst the management team and in the wider organization beyond, to see where their activity contributes to the whole, and on whom they depend.
- Since it highlights exactly where management actions and decisions exert control, it provides clear and specific strategies and action plans, that can be adapted as the future unfolds.
- The method provides a solid foundation for methods such as the Balanced Scorecard and Value Based Management, and is a means of integrating other established strategy frameworks and approaches, such as PEST(EL), Core Competence, and Value Chain Analysis.
Starting from the view of looking at how performance is changing over time, Strategy Dynamics works logically through 3 stages:
- Stage 1: Resources
Identify the resources that performance depends on. Customers, cash, people, product catalog, and capacity are the most common examples of resources.
- Stage 2: Flows
Identify the flows that cause these resources to “fill and drain.” The thinking behind this step explains why today’s performance and future performance are both unavoidably dependent on history.
- Stage 3: Factors
Identify the factors that cause resources to be won and lost. The final question of causality we need to answer is what has been driving the “flow-rates” for each resource. For example, how quickly customers have been won, or how quickly staff were lost, etc. These flow-rates turn out to depend upon:
- Management Decisions
- External Factors
- Existing Resource-levels
When the 3 steps are combined, the principles create an integrated diagram that depicts the “physics” of the system, known as the Strategic Architecture.
Interested in gaining more understanding on how to apply Strategy Dynamics? You can learn more and download an editable PowerPoint about Strategy Dynamics here on the Flevy documents marketplace.