Laureen Knudsen is the Chief Transformation Officer of Broadcom Software, Member of Power50, Top 100 Women in Tech.
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In years past, it wasn’t uncommon for business leadership to establish five-year plans and then remain focused on execution for the duration. Clearly, those days are over.
Today’s leaders are contending with the specter of a persistent pandemic, wars, inflation, changing trade dynamics, digital transformation and a potential recession—and those are just the issues we’re facing now. The reality is that for globally interconnected businesses, these disruptions continue at an accelerating rate.
The aftershocks of the pandemic revealed some organizations were far better equipped to adapt than others. Many companies implemented agile practices, created DevOps organizations and amplified value streams to improve the flow of work throughout the organization. These businesses have made strides in boosting agility and value.
However, across the board, a significant percentage of leadership teams still lacked the skills and systems they needed to contend with all the strategic uncertainty being presented in recent years.
Introduction To Strategic Optionality
The ability to pivot quickly—and intelligently—in response to unfolding opportunities or competitive threats only continues to get more critical. More than ever, thriving amid disruption is how wealth is generated. When you look at the big success stories emerging in recent months, it’s the businesses that reacted quickly and intelligently when market factors were disrupted.
In times of upheaval, leaders are forced to make consequential bets. When they bet right, they can realize massive rewards. However, when they bet wrong, the penalties can be devastating. Given these high stakes, an emerging discipline has started to gain increasing attention: strategic optionality.
Strategic optionality offers leaders a way to make these bets with increased rigor and intelligence. In this way, teams can start to embrace uncertainty in terms of what the future business environment will be like. Strategic optionality is a practical concept managers can readily apply to their businesses.
Another way to frame this concept is in the fundamental nature of this approach. Rather than simply employing traditional risk management approaches to protect current business models, teams applying strategic optionality start to embrace more significant shifts in the way they deliver value, whether creating new offerings or establishing new business models.
Key Approaches
There are far-reaching requirements and implications of employing strategic optionality. The following are some of the key areas to address.
1. Culture: Within many organizations, teams have long been accustomed to adopting a plan and sticking to it. Now, across the organization, teams need to be continuously monitoring progress and adapting to evolving dynamics. It’s vital to build an organization with people willing to make course corrections and embark on entirely new routes, even when in midflight. Through advanced value stream management (VSM) and strategic optionality practices, teams can begin to support this cultural shift.
2. Leadership Approach: To successfully employ strategic optionality, leaders need to have a blend of courage, optimism and realism. These characteristics are vital in fostering the buy-in and commitment of teams and stakeholders. Leaders need to listen to many perspectives, engaging with as broad of a range of stakeholders as possible. It’s also important they keep an open mind, particularly in rethinking past approaches and decision-making processes.
3. Intelligent, Data-Driven Planning And Decision Making: Strategic optionality represents a process of establishing numerous strategic options and applying more rigor to how those strategic options are evaluated and selected. To make this work effectively, teams need to leverage data to gain improved insights into opportunities and threats and how to respond. Leaders need intelligence to gain a clearer picture of the options available and to choose among these options based on concrete data rather than conjecture. In addition, here are a few integral supporting elements:
• Agile Funding: Funding must be allocated in a more agile fashion, which is key to pivoting teams and resources quickly.
• OKRs And Metrics: Teams need to be given clear priorities and objectives and key results (OKRs) so they’re focusing on the right work. Further, mechanisms need to be in place to ensure there’s consistent clarity, even as iterations occur.
• Multidimensional Investment Plans: Investments in money, time and staff need to be organized around product lines so these investments can be tracked and mapped to key business outcomes. This is key in enabling teams to prioritize based on a clear picture of business outcomes, market realities and available financial and human capital resources.
• Strategic Road Maps: Teams need capabilities for assessing current road maps and evaluating how products are performing. These road maps should also support what-if exercises to enable leaders to intelligently assess the trade-offs of potential changes.
The Payoff: Optimized Value Streams
Strategic optionality can play a symbiotic role in an enterprise’s larger VSM initiatives. By successfully moving to embrace strategic optionality, teams can establish the discipline that optimizes value streams. Over time, these benefits become a virtuous cycle: Teams make more informed pivots, and through optimized VSM, they can move more rapidly from designing the initial concept to delivering the actual customer value.
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