The CFO and strategy – part 1: the nature of strategy
This report on the nature of strategy is part one of a series of resources designed to help CFOs and aspiring CFOs craft an appropriate strategic role. Use this report to take a step back and revisit your understanding of strategy as a valuable first step in developing your strategic role.
Strategy is about how organisations deliver their vision, mission and high-level objectives, as we explore in our series of CFO and strategy resources. 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 the 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.
The CFO's role in Strategy
Read our sections on CFO's role in strategy, which form the second part of a series of resources designed to help CFOs and aspiring CFOs contribute to an organisation's strategy.
We examine the many roles the CFO can play, based on interviews with CFOs and a review of the literature. We also explore what drives the nature of the CFO’s role and provide practical advice on how to overcome barriers to taking on a greater role in strategy.