Strategy Is a Hypothesis You Constantly Adjust

With today's best strategies, calling an audible is part of the design.

Amy C. Edmondson | Harvard Business Review

Paul J. Verdin | Harvard Business Review

The widely accepted view that strategy and execution are separable activities sets companies up for failure in a fast-paced world.

In our research on strategic failure, we discovered a common pattern: What started as small gaps in execution spiraled into business failures when initial strategies were not altered based on new information provided by experience.

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Strategy starts with situation assessment and analysis and must be tested through action.

A better perspective conceives of strategy as a hypothesis rather than a plan. Like all hypotheses, it starts with situation assessment and analysis – strategy’s classic tools. Also like all hypotheses, it must be tested through action.

With this lens, encounters with customers provide data that is of ongoing interest to senior executives – vital inputs to dynamic strategy formulation. We call this approach “strategy as learning,” which contrasts sharply with the view of strategy as a stable, analytically rigorous plan for execution in the market.

Strategy as learning

Strategy as learning is an executive activity characterized by ongoing cycles of testing and adjusting, fueled by data that can only be obtained through execution.The key indicator of a strategy-as-learning approach lies in how managers interpret early signs of gaps between results and plans.

Are they seen as evidence that people are underperforming? Or as data that indicate the initial assumptions were flawed, triggering further tests?

Strategy as learning requires senior executives to engage in an ongoing dialogue with operations across all levels and departments.

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An indicator of a strategy-as-learning approach is how managers interpret gaps between results and plans.

The people who create and deliver products and services for customers are privy to the most important strategic data the company has available. And the strategic learning process involves actively seeking deviations that challenge assumptions underpinning current strategy.

Deviations and surprises must be welcomed for their informative value in adapting the strategy. Executives who adopt a strategy-as-learning framework understand that pushing harder on execution may only aggravate the problem if shortcomings are, in fact, evidence of inadequate market intelligence or flawed assumptions about the business model.

Fusing strategy and execution

Companies that fuse strategy and execution, continually making adjustments and periodic dramatic pivots, demonstrate what strategy as learning can look like in action.

Of course, embracing a learning approach at the top of the organization is not a new idea.

What is new is the idea that closing the gap between strategy and execution may not be about better execution after all, but rather about better learning – about more dialogue between strategy and operations, a greater flow of information from customers to executives and more experiments.

In today’s fast-paced world, strategy as learning must go hand-in-hand with execution as learning – bypassing the idea that either a strategy or the execution is flawed – to recognize that both are necessarily flawed and both are valuable sources of learning, improvement and reinvention.

This article first appeared on Harvard Business Review and was republished with permission.

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Amy C. Edmondson is a professor of leadership and management at the Harvard Business School.

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Paul J. Verdin is the strategy and organization chair at Solvay Brussels School of Economics and Management.

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