Why business strategy is an iterative process

The Greek philosopher Heraclitus famously said that change is the only constant in life.

The world is, and always has been, changing. Throughout the centuries, companies and people have adapted to those changes by learning new ways of doing things. To move forward, you need to be able to both exploit what is and create what is not yet.

In their book Boardroom Creativity, Fennemiek Gommer and Anne Mieke Eggenkamp argue that leaders need to take more time to explore and design the future of their business, and that this requires a more creative and iterative approach to strategy development.

We are in a period of accelerated change

According to Fennemiek, although change in society might not be anything new, the speed of change is currently unprecedented, especially in the field of technology.

“Accelerated change means shorter business cycles and a higher risk of being disrupted by competitors with new innovations based on new technologies, new offers and new business models”, she says.

Fennemiek points to a study by Constellation Research which shows that since 2000, 52% of companies in the Fortune 500 have either gone bankrupt, been acquired or ceased to exist because of digital disruption. The average company lifespan on the S&P index was 61 years in 1958; it has now dropped to 18 years.

When talking to their clients about the fast turnover of businesses, Fennemiek and Anne Mieke use Charles Handy’s second curve model. The model shows that businesses should design their next future direction or “curve” while they’re still in their current phase or of success and growth.

The pair ask their clients to consider where on the curve they would currently position their own business.

“Given the average lifespan of 18 years, we end up working with companies on their third, fourth or even fifth curve, sometimes even in parallel. Intellectually this is easy to understand, the challenge is a human one”, says Anne Mieke, explaining how the process of planning is ongoing.

“You need to start exploring and designing the next curve while you’re still successful with your current cycle, and in fact haven’t even reached the peak of your success yet. It’s a comfortable phase to be in, while the transition to a new curve comes with chaos and uncertainty. In this growth phase of business, we are all prone to being complacent.”

Fennemiek recognises that although it might be easy in hindsight, it’s difficult to know when to start looking ahead and designing the second curve for long-term growth.

“It’s always a challenge to predict how fast trends will become reality”, she says. “Some developments happen as we predicted them, others not at all, but mostly we struggle with the timings of foresight because they don’t develop in a linear way.

The Club of Rome, for example, already warned in 1972 that we’d reach the limits of growth by 2000, many are convinced that the turning point is today, but others feel we still have more time. Another example is digitisation. When news started to become available via the internet, it was predicted that paper newspapers would become obsolete in 10 years’ time, and they are still around.

“It’s good to be aware that our human biases tend to favour the status quo and that we generally underestimate the speed of change,” Anne Mieke says. “Dealing with uncertainty means you need to be prepared for various scenarios and make room for experiments to explore what the next curve could look like.”

Look beyond linear business strategy

Anne Mieke and Fennemiek encourage business leaders to look beyond the linear strategy development approach that often works for making the most of their current business.

Instead, they emphasise that a combination of both iterative and linear strategy, what they call a “both/and approach” should be applied to strategy and leadership development.

“A linear strategy approach is effective when your main objective is ‘exploit’: growing your current business”, Fennemiek tells Business Chief. “You start from analyzing the status quo of your own product-market combinations and those of your competition, and you plan the different steps from A to B, execute, finish, and evaluate. The scope of the project is defined at the beginning, with clear expectations, responsibilities and stage-gates to decide when to go to the next step.”

Designing the future of a business however is not so black and white. You start from the end, what people imagine the future to look like, and then repeat actions until the desired outcome is reached.

“You learn by doing, experimenting, failing and adjusting along the way. Setting up pilots and learning from those is a major component. An iterative process is a messy process, circling back and forth but moving forwards nonetheless”, continues Fennemiek.

Innovation labs make a space to design business futures

Allocating dedicated time to explore what a business’s future could look like and working through iterative processes is an essential part of designing a company’s future. To get this started, Anne Mieke and Fennemiek recommend regularly organizing innovation labs in which a team of hand-picked young talent creates solutions to the design challenge.

“Ask: ‘What if our current business would cease to exist – what would our future business look like?’. These sessions with creative sprints result in ideas for pilots to test the new strategic direction”, says Fennemiek.

“These innovation labs should be designed as an intensive and iterative design sprint”, adds Anne Mieke. “The added advantage of designing strategy development this way is that your team learns by doing and develops the skills that make them future-ready. We see innovation as a learning process.”

Using a different kind of entrepreneurial mindset

“In an iterative process it takes creative courage to keep on trying, even when your previous attempt has failed and you’re not sure what’s next. It requires a different type of mindset and skills, which to me is the biggest difference between an iterative and linear strategy process”, says Anne Mieke.

“The exploit side of business requires an executive, more left-brain-dominated style of leadership, while explore requires an entrepreneurial leadership style. I’ve done research into the differences between the two, the results are summarized below.”

To be future-ready businesses need both/and: linear and iterative strategy development, and executive and entrepreneurial leaders, argues Fennemiek.