The importance of a comprehensive mid-to-long-term strategy can not be understated. A clear strategy helps all levels of an organization to work efficiently towards shared goals, and provides workers with concrete objectives, helping boost engagement and productivity. However, as any executive tasked with actually determining the strategy can attest, the process can also be incredibly daunting.
Trying to predict the future is always an intimidating prospect, especially when the wrong decision can have significant negative impact on future career prospects. Determining a clear and effective strategy requires making decisions that will eliminate certain possibilities in the future in favor of other options. The prospect of choosing the wrong path can make most executives uncomfortable, leading to many executives reverting to using low-risk solutions that the organization has already proven adept at.
The Harvard Business Review calls this "an excellent way to cope with fear of the unknown" but "a truly terrible way to make strategy." Discomfort is an unavoidable element of strategic planning, meaning that if you feel nothing but confidence about your current strategy, the likelihood is that it will not be overly effective. Effective strategy always includes difficult decisions, and taking calculated risks.
Many organizations fall into "comfort traps" that keep them from creating a plan towards a more productive and profitable future. By recognizing these traps and staying focused on specific goals and whether they are realistically achievable, it is possible to make the most out of existing resources and steer the business in a positive direction.
One of the most common traps strategists can fall into involves an over-reliance on cost-based thinking. Costs are one of the simplest elements for an organization to control, because in most cases, they enjoy the benefits that come from acting as a customer. It is not overly difficult to determine which departments need to add personnel, to expand production space or purchase the latest industry tools. After all, like any customer, these decisions can be revisited, and it is possible to stop buying a particular good or service without crippling losses.
However, when planned revenue fails to arrive, all of the hours spent carefully analyzing costs are called into question. This is because with cost-based strategic thinking, the organization is making all the decisions. But for revenue, customers are the driving force. With an over-reliance on a cost-based strategy, leaderships can learn a hard lesson that long-term revenue is not always accurately forecastable. The ability to forecast costs is a different animal entirely than predicting revenue. Planning out future costs may help instill confidence, but it does not mean that revenue is guaranteed to follow.
One of the most common symptoms of falling into the cost-based thinking trap is when strategic discussions focus more heavily on expanding existing profit channels instead of finding ways of generating new revenue. After all, it returns to the fear of the unknown. The only way to truly avoid this trap is to create a culture that embraces calculated risk, and realizes that strategy is not about perfection, but rather mitigating potential risk.
Every truly effective strategy will involve executives making a bet on the company's future. Strategic business consulting can help leadership shed some of their fear of making strategic choices, and avoid falling into "comfort traps" that can endanger growth.