Validating strategies workshop, 9th and 11th November 2015, by Dr Phil Driver

Copyright OpenStrategies Ltd 2015

Validating Strategies Course

November 9th and 11th 2015

Dr Phil Driver [email protected]

+64 (0)21 0236 5861

mailto:[email protected]

Who are we?

Participants • Your name

• Your background (2-3 sentences)

Facilitator: • Dr Phil Driver

• Author of Validating Strategies

• Founder of OpenStrategies Ltd

• Background in business, science and technology


2

Key questions and messages

• What is ‘strategy’ and what’s it got to do with project

management?

• What do organisations (and project managers) actually

do?

• Can project managers ‘realise benefits’?

• PRUB – linking Projects and Results to Uses and Benefits

• SubStrategies and OpenStrategies

• Validating strategies

– Is it logical?

– Will it definitely work?

– Will it be worth it?


3

Learning outcomes

• Understand why most strategies fail

• Understand the core functions of organisations and project managers and how strategy influences (or should influence) projects

• Know how to develop and ‘Validate’ strategies

• Understand how to work in the different types of strategic environments

• Know more about your own strategic ‘comfort zone’


Clarify

• Breaks

• Lunch

• Time-keeping

• What else do you want or expect?


Your strategy background?

• Who has read a strategy document?

• Who has created and documented a strategy?

• Who has implemented a strategy?

• What was your strategy experience like?

• Did people apply the strategy successfully?

• Do ‘people at the top’ know what they are doing?

• What training have you had relating to ‘strategy’


Worldwide, what percentage of

strategies makes a significant

difference?



‘Tired of Strategic Planning?’

From a 2007 survey of 30 top international companies, McKinsey’s

conclusions about strategic planning were:

• “…the extraordinary reality is that few executives think

this time-consuming process pays off…”

• “…there is a lot of banging of drums and waving of

feathers and an almost mystical hope that something

good will come out of it”

Freek Vermeulen, London Business School

• “Most companies do not have a strategy… I think 9 out of

10 (at least) don’t actually have one”

• “Most companies and CEOs do not have a good rationale

of why they are doing the things they are doing and how

this should lead to superior performance”

• “A strategy is only really a strategy if people in the

organisation alter their behaviour as a result of it”


Actually…..

• All organisations do have a ‘strategy’ of some sort

• Most organisations have a ‘strategy’ which is not

written down and which just means that they will

– ‘respond to whatever the world throws at us’ (that is, it is a

purely reactive strategy without any serious planning)

• Many organisations have a written strategy but it is not

the same as what they are actually doing

• Very few organisations have a genuine strategy that is

written down and which they are actually implementing


10

What is the meaning of the word ‘strategy’?

– Discuss

– Agree that for this course we will define

strategy as: “…………”


Strategy?

• A strategy is “an action plan and rationale”

• ‘Rationale’ means the reasons for implementing the strategy i.e.:

– confirmation that it is logical, plus

– confirmation that it will actually work, plus

– that it is worth it


12

Strategy?

‘Strategic planning’ may involve environment scanning,

scenario development, market research, focus groups,

test marketing, product development and much much

more……

but at the end of the day….

a strategy must be distilled from all the above information

and it must be:

“an action plan and rationale”


13

Strategy?

• A strategy may exist in people’s minds or it may be

written down

• If it’s going to be shared and used to inspire many

stakeholders it has to be documented in some way

• It has to be understandable by many people


14

Exercise

In groups, identify a list of stakeholders who

would be interested in the following high level

strategy:

“to design and build a new coal fired power

station in the old and partly abandoned

commercial area of the city”.

Most of these stakeholders need to understand

the strategy if they are expected to support it


Are these ‘strategies’?

• Optimise profit

• Operate sustainably

• Be environmentally responsible

• Be socially responsible

• Operate legally

• Exceed customer expectations

• Apply quality management methods

• Optimise shareholder value


16


Meridian will maximise long-term shareholder value

by:

• seeking sustainable competitive advantage from

excellence in generating electricity at optimal value

through to meeting customer needs for energy and wider

complementary and adjacent products and solutions

• actively developing and participating in competitive energy

markets to provide products and services that deliver value

to our customers and to enable Meridian to optimise its risk

position



Meridian will maximise long-term shareholder value

by:

• undertaking new investments that over their lives are:

– aimed at yielding a positive risk-related net present value

– managed in a manner that will maximise the commercial value of

the business

• undertaking prudent risk management in relation to its

business activities

• minimising operating costs

• acting with a sense of social responsibility and reporting on

its actions

• providing healthy and safe places of work for its people


• Exercise 5


Do we need strategies?

• “If in doubt restructure because it gives the impression

of progress”

• If in doubt create a strategy because it gives the

impression of progress

• If in doubt set up a pilot/trial (or committee or inquiry

or…) because it gives the impression of progress

• Too often, these are ways of avoiding making

decisions and taking action



The Old Strategy Paradigm (by OpenStrategies 2001)

005

How do strategies influence Projects?

1. Stakeholder engagement

2. Strategy and higher-level SubStrategies

3. Design

4. Operational-level SubStrategies (tactics?)

5. Implementation

– Project Management

– Performance management


Why most strategies make no difference #1

• 3 levels of strategies

• Aspirational

• Guidance

• Operational

• Human cognitive limits

• Lack of focus on core organisational functions


Why most strategies make no difference #2

Strategy language

• Taxonomy (classification of strategy words)

– Outputs, outcomes, mission, goal, objectives, framework, vision, status, cross-cutting-themes, aspirations, strategies, plans, collaboration, cooperation, competition, values, structures, KPIS, tasks, accountabilities, responsibilities, principles, tactics, actions, directions, issues, factors, priorities, benefits, impacts, purpose, capacity, capabilities, forecasts, scenarios, drivers-for-change, data, information, knowledge, wisdom…. and sometimes ‘implementation’

• Syntax (rules for constructing strategy ‘sentences’)

– Do goals create objectives or do objectives create goals?....

• Semantics (meaning of strategies)



Levels of strategies

• Improve the transport system

• Improve the bus system

• Buy new buses and make sure that they run on time

• Buy new buses which produce fewer harmful emissions and make sure they arrive within 1 minute of their scheduled time

• Buy new, low emission buses which use computer-controlled scheduling system to ensure that they arrive within 1 minute of their scheduled time


The meaning of strategy….

1. Strategy is what people above you in the organisation do…

2. Tactics is what people below you in the organisation do…

3. Statements 1 and 2 are true irrespective of what level you are in the organisation

Driver’s 2nd Law 2014


Human cognitive limits

• There are limits to how much information humans can

use at any one time:

– Humans can hold 7 +/- 2 ideas in their heads (Miller’s law)

– We believe that humans can understand just 15-20 inter-

connected ideas when they are in a written or graphical format

(Driver’s 1st law)

• So if strategies are to be understood by many people

they must be easy to understand 27


Our main OpenStrategies’ principle

The smallest amount of information…

that has the highest value…

to the most people

What should strategies do?

Strategies should guide the improvement of what

organisations actually do

So what do organisations actually do?


29

Exercise: What do organisations actually do?


Core functions of organisations

and their customers/citizens Inputs Outcomes

External factors

Internal factors

This is what organisations actually do


Create assets (products, services,

infrastructure) and enable

customers/citizens to use them to

create benefits

Inputs Outcomes

External factors

Internal factors

This is what organisations actually do


Inputs Outcomes

External factors

Internal factors

32

Create assets & enable people to Use assets to create Benefits


33

P R U B


PRUB

Organisations run Projects

which produce Results (outputs/assets)

which people Use

to create Benefits (outcomes)


PRUB

PRUB: The smallest amount of information…

that has the highest value…

to the most people


36

Happy customers because they

have done and achieved what

they wanted to do and achieve

Sustainably manufacture,

distribute and market our

company’s new product

Our company’s new product

available to customers

together with relevant

product marketing

information

Customers buy and use our

company’s new product to do

& achieve what they want

Our company is sustainably

profitable

Projects Results Uses Benefits

Build a sheltered, safe

cycleway from the housing

estate to the school

A sheltered, safe cycleway is in

place from the housing estate

to the school

Children ride to school and

home again on the safe and

sheltered cycleway

Children are safe when

travelling

Two simple example SubStrategies


Assess customer’s needs based on what they want to do and

achieve with our company’s potential

new product

Information available on what customers

want to do and achieve with our company’s

potential new product

Use this information to design, build and test market new products

to enable customers to do and achieve what they want to do and

achieve

Accurate product and customer-use data is available relating to

our company’s potential new product

Happy customers because they have done and achieved

what they wanted to do and achieve

Sustainably manufacture,

distribute and market our company’s new

product

Our company’s new product available to customers together

with relevant product marketing information

Customers and buy and use our company’s new

product to do & achieve what they

want

Our company is sustainably profitable


Example SubStrategy

• Post-earthquake Christchurch



39

Deliver 30,000

chemical toilets to

ChCh homes

30,000 ChCh

homes have

chemical toilets

Families in 30,000

homes use

chemical toilets

30,000 ChCh

homes have high

hygiene standards

Install sewage

disposal tanks in

streets

Sewage disposal

tanks in position in

streets

Users Use & empty

their own chemical

toilets

Deliver cleaning and

sanitation chemicals

to all users

Users Use, empty,

clean/sanitise own

chemical toilets

Develop/operate

disposal tank

emptying/cleaning

processes

Vet/train reliable

operators who empty

& clean chemical

toilets for frail people

All users have

cleaning & sanitation

chemicals

Frail users Use

chemical toilets that

were emptied &

cleaned by

‘someone’

Disposal tanks clean

& useable at least

98% of the time

Chemical toilets of

frail people are

ready for use at

least 98% of the

time

Exercises

• Card sets

• Worksheet exercise


Kidney Health Monitoring example


You must identify and understand

1. The most compelling Uses

2. The Uses that the customer will pay for



43

GIS hardware

& software

GIS data

Land managers:

• learn about using GIS systems & data,

• purchase hardware/software,

• download GI data,

• collect their own GI data,

• integrate data,

• verify & analyse data,

• draw conclusions from data,

• make land management decisions,

• train their staff to implement the

decisions,

• get permits to implement the decisions,

• purchase equipment to implement the

decisions,

• manage the land better (i.e. implement

the decisions)

Results (Compound) Uses Benefits

Economic,

environmental

& social

Benefits

‘realised’ by

the better land

management

What is the ‘Benefit-realising’ Use?

Who is it that ‘realises Benefits’?


44

GIS hardware &

software

GIS data

Land managers:

• learn about using GIS systems & data,

• purchase hardware/software,

• download data,

• collect their own data,

• integrate data,

• verify & analyse data,

• draw conclusions from data,

• make land management decisions,

• train their staff to implement the decisions,

• get permits to implement the decisions,

• purchase equipment to implement the

decisions,

• manage the land better (i.e. implement the

decisions)

Results (Compound) Uses Benefits

Economic,

environmental &

social Benefits

‘realised’ by the

better land

management

GIS data

integration tools

GIS analysis &

validation tools

Decision support

tools/advisors

GIS/Managemen

t training

Land mgmnt

tools

Permitting

system New Results which are essential

to enable ‘Benefits Realisation’

by users

PRUB or BURP

• BURP for strategic planning

• PRUB for strategy implementation

• Usually it is best to start by identifying

and precisely defining Uses


P R U B


46

Projects

Results

Uses

Benefits

Handover

Engage

Create assets

Use assets

Planning

Implementation

Three broad levels of strategy

• Aspirational (high level – not implementable)

• Guidance

• Operational (action plans – implementable)


Projects

What organisations do….

– Aspirational

• Develop insurance policies

– Guidance

• Develop home insurance policies for earthquakes

– Operational

• Develop home insurance policies which cover selected

earthquake damage (but excluding ground liquefaction) for

the New Zealand market


Results

What organisations achieve….

– Aspirational

• Insurance policies are ready to sell

– Guidance

• Home insurance policies for earthquakes are ready to sell

– Operational

• Home insurance policies which cover selected earthquake

damage (but excluding ground liquefaction) are ready to

sell in New Zealand


Uses

What end-users do….

– Aspirational

• People buy and make claims on insurance policies

– Guidance

• People buy and make claims on home insurance policies

for earthquakes

– Operational

• New Zealanders buy and make claims on home insurance

policies which cover selected earthquake damage (but

excluding ground liquefaction)


Benefits What end-users achieve….

– Aspirational

• People are happy because they have made successful claims on

their insurance policies

– Guidance

• People are happy because their homes were repaired after

earthquakes

– Operational

• Some New Zealanders are happy because their homes were

repaired after earthquake damage where their homes did not

suffer ground liquefaction

• Other New Zealanders are unhappy because their homes were

not repaired because the earthquakes caused ground liquefaction


Strategy syntax (rules for strategy ‘sentences’)

There are no short-cuts…to be effective…

Projects must lead to Results (outputs)

which must lead to Uses

which must lead to Benefits (outcomes)


‘Validating’ strategies

• Almost anyone can write a document and call it

a ‘strategy’

• It is not a strategy unless it has been ‘validated’

• How do we develop and validate strategies?


53


Creating a Validated Strategy

1. SubStrategy Describe the idea as a SubStrategy

Is it logical?

2. Evidence Add compelling Evidence for the Links

Will it definitely work?

3. Value $B must be greater than ($P + $U)

Is it worth it?

54


Step 1: SubStrategy

• Create a SubStrategy which identifies what we would like to happen

• This shows theoretically how Projects (inputs) Link through Results (outputs) and Uses to Benefits (outcomes)

• Ideally 15-20 ‘PRUBs’ (a human cognitive limit for each SubStrategy)

• This answers the question: “Is it logical?”

55


Research results suitable for

incorporation into XXXX

XXXX product developers and

programmers incorporate R&D

results into XXXX

Possibly… other organisations

incorporate XXXX into their

products or produce products

which are complementary to

XXXX

An updated XXXX product

Complementary products and

services

Farmers & other land owners

manage their land better using

XXXX & complementary

products within regulatory

guidelines

• Dairy farmers for nitrate

management (dairy effluent;

fertilisers)

• Conservationists for native

plant management

• Regional authorities for

river nutrient management

• Drinking water suppliers for

water quality management

•

•

Economic Benefits to farmers,

land managers, suppliers and

other stakeholders

Social Benefits to farmers,


other stakeholders

Engage with XXXX

Stakeholder Advisory Group to

develop & Validate an XXXX

R&D Strategy

Researchers secure funding

for and conduct XXXX

research in line with the

strategy

A Validated XXXX R&D

strategy which is widely

supported by stakeholders

Environmental Benefits to

farmers, land managers,

suppliers and other

stakeholders

Cultural Benefits to farmers,


other stakeholders

Sustainably viable

organisations creating XXXX

and complementary products

and services

Regulators create and

disseminate better and more

effective regulations guided by

XXXX

Better and more effective

regulations (guided by XXXX)

are in place and understood by

end-users



Step 2: Evidence

• A SubStrategy identifies what we would like to happen

• We need to add Evidence to be sure that it really will happen

• Evidence is information which ‘validates’ the Links between Projects, Results, Uses and Benefits

• This answers the question: “Will it work?”

57


Data vs Evidence

• What’s the difference between data and evidence?

• How significant is this difference for

– Strategy validation?

– Performance management?

• Look out for policies which say they are ‘evidence based’ and ask yourself if they are merely ‘data-based’

Evidence

• Evidence is information which confirms ‘cause-

and-effect’

• It is not just ‘data’ or ‘facts’ or ‘numbers’

• Evidence describes the cause-and-effect impact of

the Links in a SubStrategy

• So Evidence confirms whether or not:

– Projects contribute to Results

– Results contribute to Uses

– Uses contribute to Benefits


59


Evidence sits on

the Links

between

Projects,

Results, Uses

and Benefits

The most

important

Evidence sits on

the Links

between Results

and Uses

60

Exercise

Worksheet

• Data?

• Correlation?

• Evidence?



Step 3: Value

• Determine a ‘Value’ for Benefits ($B)

• Identify costs of Projects ($P) plus costs of Uses ($U)

• To proceed with a Project….

$B must be greater than $P + $U

• This answers the question: “Is it worth it?”

62

Benefits ‘realisation’?

• So who creates/delivers/ensures/realises Benefits?

• Organisations and project managers cannot ‘create’

or ‘deliver’ or ‘ensure’ or ‘realise’ Benefits

• Only Users create/realise Benefits

• Therefore organisations must:

– totally understand Uses and users

– make their Results (assets) attractive and easy to Use

– tell people about the Results


63

• Are these ‘Benefits’?

– Skilled leaders

– Motivated staff


Exercise part 1

Working in groups, create a high level SubStrategy

(4-8 boxes) on a simple topic of your choice

Expand your high level SubStrategy into a more

detailed SubStrategy of maybe 30 or more boxes:

• Start with identifying the main Uses

• Add Benefits

• Add Results


65

Exercise part 2

Reduce your SubStrategy to no more than 15 +/-

5 boxes:

• Cluster similar ideas together

• Summarise each cluster


66

Exercise part 3

Carefully rewrite your SubStrategy of 15 +/- 5

boxes so that each box contains a complete

sentence of up to about 20 words

Note: The key reason for this exercise is to be

able to describe Projects, Results, Uses and

Benefits so that anyone can understand them


67

From Projects to Programmes and Portfolios – linking multiple SubStrategies

• Horizontally

– Across themes

– Across demographic groups (users)

– Across organisations (providers)

• Vertically

– High level aspirational strategies

– Mid-level guidance strategies

– Low-level operational strategies

• Sequentially


68


Cycling, walking and buses SubStrategies

Combined cycling, walking and buses OpenStrategy

021

69

Exercise: where do you feel most comfortable working?

Aspirational Projects Results Uses Benefits

Level

SubStrategies

Guidance Projects Results Uses Benefits

Level

SubStrategies

Operational Projects Results Uses Benefits

Level

SubStrategies


70

Review #1

• A strategy is ‘an action plan and a rationale’

• Organisations create assets and enable people to use

them to create Benefits (for themselves and others)

• Strategies should improve the above process

• Stakeholders need to understand a strategy – it has to

be simple

• PRUB is ‘the smallest amount of strategic information

that has the highest value to the most people’


Review #2

• Only Uses create Benefits, so strategies must

understand and enable Uses

• Evidence is not the same as data or correlations (and

there can be different levels of confidence in the

Evidence)

• To be Validated a strategy:

– must be logical, and

– there must be compelling evidence it will work, and

– and it must be worth it



‘Wanting’ or ‘Doing’

• Compare and discuss these questions:

– Would you like better public transport?

– How often would you use better public transport?

• Compare and discuss these questions:

– Would you like more cycle paths?

– How often would you use new cycle paths?


‘Wanting’ or ‘Doing’

When you ask people: “what do you want?” they think

about what you can give them.

As a result, they often don’t take much responsibility for

their answer

When you ask people “what do you want to do?” they

think about what they want to do

As a result, they take much more responsibility for their answer


Orphan Results

P R U B

P R

P1

P2

R1

R2 U B

Abandoned

Orphan

Result

Adopted

Orphan

Result

Management environments and management styles

• Management environments

• Management styles

• Examples

• Your own management environment/style

• Summary



4 Management Environments

• Simple – eg laying bricks

• Complicated – eg fixing a Ferrari

• Complex – eg understanding a rainforest

• Chaotic – eg responding fast to an earthquake


Simple environments

• Repeating patterns and consistent events

• Clear cause-and-effect

• Right answer exists

• Facts

• Known-knowns

The domain of best practice/rules eg laying bricks


Complicated environments

• Expert diagnosis required

• Cause-and-effect discoverable but not obvious

• More than one right answer possible

• Facts

• Unknown-knowns

The domain of experts eg servicing a Ferrari


Complex environments

• Unpredictability

• Many competing ideas

• No right answers

• Patterns (not facts)

• Unknown-unknowns

The domain of emergence eg understanding a rain forest


Chaotic environments

• High turbulence

• No clear cause-and-effect

• No right answers

• No time to think

• Patterns (not facts)

• Unknowables

The domain of rapid response eg responding fast to an earthquake


Managing Simple Environments

• Sense, categorise, respond

• Proper processes

• Best practices

• Communicate clearly and directly

The domain of best practice/rules eg laying bricks


Managing Complicated Environments

• Sense, analyse, respond

• Panels of experts

• Listen to conflicting advice

The domain of experts eg servicing a Ferrari


Managing Complex Environments

• Probe, sense, respond

• Create environments where patterns can emerge

• Seek information, listen, learn, generate ideas,

encourage dissent and diversity

• Manage starting conditions and monitor for

emergence

The domain of emergence eg understanding a rain forest


Managing Chaotic Environments

• Act, sense, respond

• Look for what works, not right answers

• Take immediate action to re-establish order

(command and control)

• Direct clear communication

The domain of rapid response eg responding fast to an earthquake


Summary of strategic environments

• There are 4 management environments – Simple (known-knowns)

– Complicated (unknown-knowns)

– Complex (unknown-unknowns)

– Chaotic (unknowables)

• These 4 environments require 4 different management styles – Simple (best practice/rules)

– Complicated (experts)

– Complex (emergence)

– Chaotic (rapid response)

PRUB is simple…. the world is complex

• The world of Projects and Results is simple (you can

only implement “known-knowns”)

• The real world of Uses and Benefits is complicated and

complex (characterised by “unknown-knowns and

unknown-unknowns”)

• PRUB links the necessarily simple world of Projects

and Results to real-world complicated and complex

Uses and Benefits


87


Exercise: Assess your own management style

1. Do you prefer to work in a simple, complicated,

complex or chaotic environment?

2. Do you want to build up skills in:

1. ‘best practice/rules’ for simple environments, or

2. being a technical ‘expert’ in complicated environments, or

3. research & investigation in complex environments, or

4. wisdom to think and act rapidly in chaotic environments?

3. How does this impact on your other preferences:

1. in the PRUB-sequence?

2. re Aspirational, Guidance and Operational level strategies?


Engaging with stakeholders

1. What is the nature of the strategic environment you are

working in?

2. Do your individual stakeholders prefer to work in a

simple, complicated, complex or chaotic environment?

3. Do individual stakeholders prefer to operate at high,

aspirational levels or grass-roots operational levels?

4. Do individual stakeholders prefer to focus on Projects;

Results; Uses; or Benefits?

5. How do your own preferences impact on working with

multiple stakeholders?


Performance measurement & management

Measurement

Make measurements within each P, R, U, and B

– Indicators (the thing that you are going to measure)

– Targets (the number you are wanting to achieve)

– Measurements (what you actually measured)

Management

One ‘PRUB-step’ to the left (lead and lag indicators)

Exercise

Worksheet

• Indicator?

• Target?

• Measurement?


Exercise (if time)

Working in pairs, rapidly

• create a high level SubStrategy (4-8 boxes) on a simple

topic of your choice

• expand into ~ 30 boxes:

– start with Uses

– add Benefits

– add Results

• Repeat


92

OpenStrategies review #1

• Strategy failures

– poor strategy language (taxonomy, syntax, semantics)

– cognitive limits exceeded for many stakeholders

– lack of focus on organisation’s core functions

• PRUB

– PRUB = what organisations actually do

– Create assets (PR) Use assets (UB)

– BURP for planning, PRUB for implementation

• Orphan Results

– Abandoned Orphans

– Adopted Orphans



• 3 levels of strategy

– aspirational (governance)

– guidance (middle management)

– operational (implementable action plans)

• 4 strategic environments

– simple (rules, best practice, facts)

– complicated (experts, facts)

– complex (emergence, research, patterns)

– chaotic (act, patterns)



• There are no shortcuts. Effective strategies must have

Projects which must produce Results which must be

Used to create Benefits

• Strategies must be Validated, hence PRUB-Validate:

1. Theoretical/desired SubStrategy

2. Cause-and-effect Evidence that it really will happen (THE most

important Evidence is on the Link from Results to Uses)

3. Value (is it worth it) i.e. is ƩVB > ƩCP + ƩCU

• Understanding Uses is paramount

• Only Uses ‘realise Benefits’



OpenStrategies is a comprehensive management system based on PRUB

• Develop strategies

• Validate strategies (protect services, save money)

• Implement strategies/manage processes

• Performance measurement and management

• Stakeholder engagement/consultation

• Integrate levels of strategies

• Integrate strategies on many topics, demographic groups and geographical areas

• Integrate strategies across organisations (collaboration)

• Integrate sequential strategies

Contacts

[email protected] +64 (0)21 0236 5861

[email protected] +44 (0)7973 498603

Web www.openstrategies.com

Book http://www.gowerpublishing.com/isbn/9781472427816




http://www.openstrategies.com/

http://www.gowerpublishing.com/isbn/9781472427816

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