Chapter Seven

Align interdependent decisions

The launch of the IKEA-Skanska Boklok project highlights that decision makers must often integrate decisions in multiple domains of choice when solving complex problems. As strategy scholar Michael Porter pointed out, ‘a firm’s strategy defines its configuration of activities and how they interrelate’.2 Part of the challenge is to define upfront the domains where decisions are needed. Often in strategy-setting exercises, top decision makers only focus on one or few domains of choice – say, identifying target markets and product features – leaving the rest to lower levels of the organisation who are meant to execute these high-level decisions. However, if the exercise leaves out critical domains that need to be closely aligned with other decisions – say, setting the speed of implementation, sequencing the strategy roll-out, figuring out partnering approaches – the overall strategy is put at risk because the decisions will eventually be made by lower-rung managers who don’t have the big picture perspective required for creating alignment across decisions.

This chapter gives you guidance on how to align interdependent decisions. It also introduces frameworks that may be useful, depending on the nature of your challenge.

IDENTIFY WHERE OTHER DECISIONS ARE NEEDED – LINE UP YOUR BABY DRAGONS

FrED addresses your dragon, but what kind is it? Recall from Chapter 1 that dragons come in two types: big dragons and baby dragons. If FrED is your big dragon, by finding a way to deal with it, you have defined your strategy. But if FrED was just one of the various baby dragons that need to be addressed, you must now address the other baby dragons in the family; that is, you need to make decisions on the other domains of choice that, as a whole, amount to forming a strategy.

Formulate your problem as one big dragon or as a family of baby dragons

Complex problems in general, and setting strategic directions in particular, usually have many moving parts. Effective strategies harmonise these various decisions to transform efforts into outsized results, enabling an organisation to overcome obstacles or making it difficult for others to replicate its success. Consider the case of IKEA: A competitor might be able to copy one part of its value proposition – say, relying on self-­assembly of furniture. But emulating IKEA’s whole model – using the innovative store layout, providing childcare and restauration, placing stores in optimal locations, employing in-house designers focused on production costs, providing catalogues and so on – is a lot more challenging.3 Yet it is unclear whether an organisation that didn’t provide the fully integrated offer would be competitive. So complex problems are, well, complex and there’s only so much complexity that you can remove through clarifications. Then, you have to deal with whatever intricacies are left, however convoluted they remain.

That leaves you with taking one of two routes. Formulating your problem as dealing with a single big dragon is attractive because by going through a single FrED process, you develop your strategy. However, in some settings, this approach can be prohibitively taxing. Imagine creating a how map that integrates all the decisions you must make when planning a wedding: how much to invest, where to do it, whom to invite, what food to serve, whether to have live music, what seating arrangements to have for the dinner, and so on.

That how map would be massive! It also wouldn’t be particularly helpful as you’d struggle to compare alternatives with numerous parts. For instance, how would you compare (a) a wedding set at a remote countryside location with live country music and a BBQ where all of your friends and extended family are invited to (b) a downtown wedding at an intimate luxury hotel with a five-star dinner, inviting only your closest family and friends? Here, it might make more sense to decouple these decisions into baby dragons, first deciding the overall size of the wedding (one baby dragon), and only then moving into other decisions, periodically checking that they support one another or, at least, that they remain compatible.

So, if one approach is to treat your problem as dealing with a single big dragon, at the other end of the spectrum, you can treat it as dealing with a family of baby dragons. Each baby dragon will have its separate FrED, each with its own quest, alternatives, criteria, and evaluations. This approach, no doubt, reduces the complexity of the decision for each individual FrED. But it doesn’t address the need for aligning choices across different domains. So, should you treat your problem as one big dragon or a bunch of baby dragons?

Beyond your personal preferences, let the problem guide your approach

In our experience, there is no one-size-fits all. We have thought long and hard about this issue and had many heated debates – this is one of our instances of dissent-and-commit that we’re the most proud of! – but the fundamental dilemma of balancing complexity and alignment remains. So our short answer is ‘don’t let your personal preference dictate your approach’.

A great golf player doesn’t just use the club she prefers but, rather, the one that makes most sense for each shot. Similarly, treating your problem as dealing with one big dragon or with a set of baby dragons shouldn’t just be a matter of personal preference.

Although there are no hard and fast rules, answering a few questions might help you choose your approach:

• •Are the decisions you face fairly independent? If they are, consider treating them as a set of baby dragons. If, on the other hand, they are strongly interdependent, go the big-dragon way as the interdependencies will create incompatibilities that might be hard to manage in a decoupled process (e.g. decisions about products and markets are usually tightly connected.).
• •Is one decision significantly more contested than the others? If so, it might deserve being a priority baby dragon that you address by itself first. For instance, we just completed a workshop for a large med-tech company where the senior team wanted to chart out a five-year strategy for their business unit. This included decisions about R&D, production, quality, and marketing and sales. Since R&D was a hotly debated domain of choice where the members of the team disagreed, they prioritised this domain, discussing it at length before moving on to the other choices.
• •Is one decision significantly more important than others? Sometimes there are various decisions required, but settling one brings lots of clarity. To illustrate, management scholar Richard Rumelt offers an example: Imagine that you are running a small grocery shop in the suburbs of LA. Facing increased competition, you must find more customers. You list the actions that can help you: extending opening hours, adding more speciality food for target segments, adding parking and other conveniences, and so on. Considering these choices simultaneously can be overwhelming, as the number of permutations is immense. Instead, it might be more sensible to first make one key decision that would help you in your other choices. For instance, you might decide to first identify the primary market segment you want to serve, say, choosing between (more price-sensitive) students or (more convenience-sensitive) professionals.4 Each entails distinct trade-offs and requires different choices. Once you make this high-level decision, you dramatically reduce the complexity of the other decisions. For instance, if you target professionals, it’s much easier to decide whether to open more cash registers after 5 pm, whether to add parking spots, whether to modify your product offerings (e.g. substituting munchies with higher-quality food), or whether to limit opening hours.
• •Would full integration result in an overly complex big dragon? If folding all decisions into one – like in the wedding example above – gives you an intractable problem, you might be better off disaggregating them.
• •Do you need to involve different people in the different decisions? If so, treating them as baby dragons might make more sense as it will enable you to have all and only relevant people for each decision.

CONSIDER USING EXISTING FRAMEWORKS

Many problems you face are highly specific. For these, you have to define a custom-made strategy that you develop from scratch. Every now and then, however, you might face a more common challenge; here it might be useful to leverage an existing framework from a closely related problem or, leveraging analogical thinking, from a more distance source.

Imagine, for instance, that you are developing a strategy for your organisation. Instead of figuring out from scratch all the baby dragons that you need to address to generate a strategy, you might use Hambrick and ­Fredrickson’s Strategy Diamond model.5 The model proposes that developing a strategy requires you to make decisions in five key domains: arenas, differentiators, vehicles, staging and economic logic.

If you find that the Diamond model is insightful for the challenge that you’re facing, you might use these five domains of choice as a checklist of decisions that you will need to make.

Similarly, imagine that you want to (re-)define the business model for your organisation. Here, Osterwalder and Pigneur’s Business Model Canvas (BMC) can be useful.6 The BMC provides nine domains of choice – partners, activities, resources, cost structure, value proposition, customer relationships, channels, customer segments, and revenue streams – that you can use as a list of the baby dragons that you need to address. Other frameworks that might be useful include Galbraith’s Star, Porter’s Five Forces, Ansoff’s Growth Matrix, SWOT, PESTLE, and others.7

Using an existing framework can be immensely useful. By helping you identify what to consider in a decision, it enables you to outsource some of the hard thinking required to a management scholar. However, using frameworks can also be dangerous. A structural weakness of existing frameworks is their lack of insightfulness for the specific problem that you are facing. Since they have not been designed to address your specific challenge, they might include points that are not particularly relevant to you, or they might break down the problem in a way that doesn’t add much value. Some widely used frameworks also suffer from a lack of MECEness.8

This point is particularly salient, as strategy is often taught in business schools as applying pre-made strategy frameworks. During their MBA, students see two or three dozens of those. Fast forward a couple of years, and they might remember a handful. Give them another couple of years still, and all they remember is two or three – and they will force-fit these frameworks to whichever challenge they face. In the words of psychologist Maslow, ‘I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail’. Well, we’ve seen these strategists with their, say, PESTLE hammer trying to use that framework to analyse whatever problem comes their way. Sometimes it works, but in general the result isn’t particularly glorious. And because using a framework gives them the illusion that they’ve done a quality analysis when they haven’t, it can be a dangerous practice.

So, should you use an existing framework for your problem? Well, look at it this way: An existing framework is a great servant but a terrible master. If your problem happens to closely resemble one for which a framework has been developed, then, by all means, consider using it. Otherwise, no problem: You now know how to make your thinking MECE and insightful; therefore you can develop your own framework, one that is tailor made for the issue you face. And that, dear reader, is miles ahead of many strategists out there!

CHAPTER TAKEAWAYS

Identify other decisions needed so that your strategy is a consistent whole.

Existing strategy frameworks often do not fully cover your individual requirements. But don’t be too focused on adapting the framework to your specific needs; if no existing framework applies well, no problem, just develop your own! ‘All’ you have to do is think MECE and insightful.

If you’re dealing with more than one dragon, align the decisions resulting from each of these analyses so that they are self-reinforcing.

Existing frameworks may be great servants but are terrible masters. You can leverage one for assistance, but it’s unwise to outsource your thinking to someone who knew nothing about the intricacies of your problem when they devised their framework.

CHAPTER 7 NOTES

1.   1Burgelman, R. A., M. Sutherland and M. H. Fischer (2019). BoKlok’s Housing for the Many People: On-the-Money Homes for Pinpointed Buyers. Stanford Case SM298A.
2.   2See p. 102 of Porter, M. E. (1991). ’Towards a dynamic theory of strategy.’ Strategic Management Journal 12(S2): 95–117.
3.   3Porter, M. E. (1996). ’What is strategy?’ Harvard Business Review.
4.   4See pp. 86–87 of Rumelt, R. P. (2011). Good strategy/bad strategy: The difference and why it matters.
5.   5Hambrick, D. C. and J. W. Fredrickson (2001). ’Are you sure you have a strategy?’ Academy of Management Executive 15(4): 48–59.
6.   6See pp. 14–44 of Osterwalder, A. and Y. Pigneur (2010). Business model generation: A handbook for visionaries, game changers, and challengers, John Wiley & Sons.
7.   7For more examples of frameworks see, for instance, Planellas, M. and A. Muni (2020). Strategic decisions. Cambridge, Cambridge University Press. Also pp. 72–74 of Chevallier, A. (2016). Strategic thinking in complex problem solving. Oxford, UK, Oxford University Press. Also, pp. 109–111 of Baaij, M. and P. Reinmoeller (2018). Mapping a winning strategy: Developing and executing a successful strategy in turbulent markets, Emerald Group Publishing.
8.   8See, for instance, Grönroos, C. (1997). ’From marketing mix to relationship marketing-towards a paradigm shift in marketing.’ Management Decision 35(4).