Massimo Garbuio and Samuel Loher
Strategy in a pandemic crisis: how agile is your approach to strategy?
All companies have had their approach to corporate strategy tested by the global pandemic crisis. It is one thing to take decisions and allocate resources in the frame of an annual budgeting cycle. It is a different story to do so in the face of the daunting uncertainty, closed borders and locked down cities.
The key insight
We have observed that companies operating their strategic engine with a portfolio approach, were able to handle the disturbing ripple effects of the pandemic with astonishing effectiveness.
Their strategic resource allocation and decision-making processes must have elements of what we define as “portfolio-driven approach” to strategy.
Here are three things that such agile champions do differently.
- Top management’s alignment on the few strategic initiatives that are paramount to the company’s prosperity increases decision making speed and helps with communication and acceptance of decisions throughout the organisation.
- Support effective resource deployment for strategic long-term initiatives, while operative short-term activities can be stopped as a consequence of the unfavourable top-line development.
- Management teams are skilled in delegating decision-making to the initiative teams. This act of empowerment increases the decision-making speed and effectiveness in dealing with uncertainty.
At the same time, we observed companies that did not have the same level of clarity on strategic priorities and did not have an agile management process in place were not able to adapt and fell into a reactive mode of rigid resource management, questioning every project, initiative and expenditure beyond a predetermined cash amount.
Companies operating with one strategic plan are severely set back by such disruptive events, as they require more time and effort to reorient themselves.
Companies that embrace uncertainty with a portfolio-driven strategy approach can avoid such crippling crisis-paralysis. They might even gain traction as they can identify and seize rising opportunities faster, giving them a competitive advantage over their more rigid competitors.
Staying agile during a crisis
To prevail amidst such encompassing and sudden uncertainty, agility is required on the strategic level, where decisions are made on direction, priorities and ultimately resource allocation – the fuel for transformation and progress.
We have observed that companies that operate their strategic engine with a portfolio approach, dynamically steering and driving a set of strategic initiatives forward, were able to handle the disturbing ripple effects of the pandemic with astonishing effectiveness. Such an approach to strategy has been adopted by companies already facing substantial amounts of disruption and uncertainty in their core business before the pandemic hit. You find these agile champions across various industries, such as automotive, telecom, retail, financial technology and healthcare.
Outstanding examples include Moderna and Pfizer, who have been able to develop, produce and distribute vaccines in record time. Their strategic resource allocation and decision-making processes must have elements of what we define as “portfolio-driven approach” to strategy. Here are three things that such agile champions do differently.
- Top management’s alignment on the few strategic initiatives that are paramount to the company’s prosperity increases decision making speed and helps with communication and acceptance of decisions throughout the organisation.
- Support effective resource deployment for strategic long-term initiatives, while operative short-term activities can be stopped as a consequence of the unfavourable top-line development.
- Management teams in such organisations are also skilled in delegating decision-making to the initiative teams. This act of empowerment increases the decision-making speed and effectiveness in dealing with uncertainty.
Falling into crisis-paralysis
At the same time, we observed companies that did not have the same level of clarity on strategic priorities and did not have an agile management process in place were not able to adapt and fell into a reactive mode of rigid resource management, questioning every project, initiative and expenditure beyond a predetermined cash amount.
The lack of alignment on priorities resulted in halting all projects, both operational or strategic, leading to frustration and in-fighting for resources within teams. Time and resources ended up being spent to prove their contribution to the overall strategy. This resulted in months of lost time which could have been used addressing strategic initiatives, lack of trust in the strategic acumen of the management, frustrated project teams that do not feel empowered to take their own decisions, and no effective way to handle any new external shock that might come in the still gloomy post-COVID economic environment.
The company you work for probably resembles one of these two extremes. Both types might have been very successful in the absence of a crisis. However, their initial reaction to the pandemic and the chain of actions and reactions in the following months could not be more different. Here are some dimensions in which these two extreme cases differ.
| Companies with a portfolio-driven approach (agile in the face of crisis) | Companies with a strategic planning approach (rigid in the face of crisis) | |
|---|---|---|
| Perspective on strategy | Strategy as a set of initiatives, steered dynamically, that in the sum find the best path to drive the company towards its ambition | Strategy as one grand plan that will propel the company towards its ambition, if only executed correctly |
| Perspective on uncertainty | Embracing uncertainty as inherent element of business, avoiding “big bet” decisions | Attempting to eliminate uncertainty by extensive analysis, so that the one plan can flourish |
| Resource allocation (e.g., finance, people) | Rolling resource allocation to strategic initiatives; in crisis, flexible reallocation across priorities with a transparent process understood by the entire organisation | Calendar-driven budgeting on a granular level; in crisis, re-active micro-management of resources, cutting spending dramatically across the board, even on strategic projects |
| Speed of decision-making | Empowering fast decision-making down to the front-line. based on clear and communicated strategic priorities | Every small decision reviewed and vetoed by multiple layers in the hierarchy, crippling speed of decision-making |
| Impact on people in crisis mode | Building trust and empowering people to find new ways under uncertainty with new technologies and approaches | Top-down micro-management approach and fighting for even the smallest resources, destroying morale and trust |
Ultimately, we are convinced that effective decision-making and resource allocation under uncertainty are critical capabilities for companies in all industries, and the COVID pandemic has tested this capability all around the globe. Companies operating with one strategic plan are severely set back by such disruptive events, as they require more time and effort to reorient themselves. Companies that embrace uncertainty with a portfolio-driven strategy approach can avoid such crippling crisis-paralysis. They might even gain traction as they can identify and seize rising opportunities faster, giving them a competitive advantage over their more rigid competitors.
This is an edited version of an article by the authors published in California Management Review.
Image: Possessed Photography
Dr Massimo Garbuio is an Associate Professor in Entrepreneurship at the University of Sydney. He's passionate about helping students and business leaders become master strategists.
Samuel Loher is a strategy nerd driven to find more effective ways to strategise. He is the co-author of the book “Strategic Agility”, a hands-on playbook for modern strategists. He worked as a strategy consultant for 5 years and is currently in a strategic role for a global industrial company.
