The CFO and strategy – part 1: the nature of strategy
In this series of four reports we aim to help CFOs and aspiring CFOs think about strategy and what they might do differently while recognising there is no one best approach. In part 1 we suggest how CFOs can explore the nature of strategy as a first step in supporting them in their strategic role.
How will this series help you with your business strategy?
- Build strategic experience and consider role aspirations
- Continuously develop strategic knowledge and skills
- Reflect on strategic experience
Strategy is about how organisations deliver their vision, mission and high-level objectives. Board members and executives CFOs and FDs have a key role to play in strategising. It became clear from conversations we’ve had with CFOs that they tend to favour a pragmatic approach to strategy and tailor their approach to individual circumstances, rather than advocating strategic theories.
In CFO and business strategy: the nature of strategy, we start by briefly discussing the traditional distinctions between vision, mission and strategy and whether such distinctions matter. Then we highlight some definitions of strategy and discuss how strategies come into existence. Why? We believe revisiting definitions, possibly long forgotten, may in itself generate useful ideas when considered with the benefit of greater experience. Improvements in strategising can be achieved by reflecting on what strategy is, how your organisation’s strategy comes into being and comparing it to other approaches.
We then focus on the positioning of organisations along a continuum of planned and emergent strategy and consider the advantages and disadvantages of each extreme.
Planned versus emergent strategy
|Planned strategy||Emergent strategy|
A planned strategy is conceived and well-structured before it is executed. A step-by-step process is followed as much as this is possible. This usually entails an analysis of an organisation’s circumstances and potential, the development of a vision, mission and high-level objectives, followed by establishing how the organisation will achieve them. A planned strategy is articulated in a top-down plan at a sufficient level of detail to guide team and individual actions.
The plan, supported by detailed budgets, serves to allocate resources in advance and provides the basis for assessing progress towards the organisation’s vision and objectives. The strategy and plan is reviewed and amended periodically.
An emergent strategy comes together without detailed planning. As the organisation reacts to the environment, experiments with different ideas and seizes opportunities, a coherent pattern of actions emerges which coalesce into a strategy.
The organisation’s vision, mission and culture provide some sense of direction and place boundaries on the business ideas that are explored and developed. However, the focus is on agility and empowering people throughout the organisation to experiment, pursue successful ideas and make decisions. As a result the strategy constantly evolves.
We conclude our findings by offering advice on strategising in practice and how to facilitate effective strategic discussions and develop strategic understanding.