When we think about strategy, much has been said (and written) about focus. In many organisations, credit is given to our ability to choose a focused direction towards which we set the organization, we define a set of focused and clear goals, which we aim to achieve and a set of strategic initiatives, which by focusing our time, attention and resources on, our strategy should manifest into reality.
In a world of relative stability, focus trumps almost everything else. It is a significant lever to use and ample tools and methods are available to choose from, as we apply focused thinking and action, in our work. However, it is not the full story. Focus can, over time, lead to myopia – a ‘rear-view mirror’ perspective of our environment and missing the nuances as to why it is changing. It can generate ‘group-think’ and limit diversity in our leadership conversations, and it can raise our defenses to exploring new avenues for growth and renewal, by starving us of the resources needed to explore such pathways. What fueled our success of yesterday, can become a curse, limiting our ability to navigate an uncertain future and reach our ambitions.
In these uncertain times, optionality is as important as focus. But when we speak about optionality, what do we really mean? Strategic options are, in essence, our creative responses to the external situation that we face. They can be used as stepping stones on our strategic path as well as alternative paths to realise our ambitions. They allow us to experiment, test alternative views in a deliberate manner, making conscious choices and experimenting with alternative actions, beyond the mainstream.
Let’s look for a moment at an organisation which uses strategic options regularly. Many of you may not have heard about Equinor. Formerly known as Statoil, Norway’s state-owned oil company, was outside the so-called ‘Seven Sisters’ or major oil companies of the 20th Century. It made headlines earlier this year, when its valuation eclipsed that of major players in the industry, to become the largest Energy company, in the Nordics. And in an industry coming to terms with the economic shift from fossil fuels to clean generation of power, Equinor has become a world leader in offshore wind power generation, one of the fastest avenues to decarbonization in the sector.
Thinking in options means we begin to see our organisations as a set of capabilities rather than along business or functional lines – capabilities that can be built upon and combined to create a more valuable whole. At Equinor, ‘Ambition to Action’ is the process by which teams go about setting their own targets, finding new options to reach the organisation’s ambition. In fact, over 700 teams across the organisation employ this approach, fostering innovation and testing new pathways to innovation and growth. With that, focus is still maintained, as objectives are set, KPI’s put in place and transparency maintained in measurement and reporting. It’s performance, relative to peers, is published regularly, ranking #1 in Innovation and #4 in its Return on Capital Employed (ROCE) globally. The power of optionality and Focus work together.
That said, the same organisation has also experienced the consequences of lacking optionality. A recent audit report of its US-operations, where the company has been making losses for years, concluded that Equinor ‘formed a consensus that an oil price above 100 USD was a ‘new normal’ and this assumption fueled investments, created a heated market and ultimately turned the onshore industry into a victim of its own success.’ – In short, leadership mindsets became fixed, alternative pathways ignored and options were not considered, despite growing evidence that a singular focus on ‘winning at all costs’ was becoming prevalent in the organisation.
Here perhaps lies the greatest value in building optionality into our strategy work – the value of learning. One can only admire Equinor for putting out there such an explicit account of its US business. It would have been easier to dilute such ‘bad news’ in the midst of its successes in clean energy and newly-found capabilities being recognised around the world. But they chose differently – to learn from the experience – when optionality is ignored, when decision-making goes wrong and a culture of a singular focus is taken too far…
The power of options lies in recognizing that the world calls upon us to, in the words of well-known author Scott Fitzgerald ‘hold two opposed ideas in mind at the same time and still retain the ability to function’. Strategic options provide this bridge between what may seem to be opposing ideas, but in fact can power a distinctive strategy to take shape and become reality.
Have a good weekend everyone.