The House of Strategy
Distillations in this newsletter: The House of Strategy – an ‘explainer’ video
STRATEGY DISTILLED:
A monthly concoction of insight, learning and things you might have missed for anyone who works on strategy, works with strategy or just loves strategy.
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This month …
I’m trying an experiment with this month’s newsletter – an explainer video on one of the most popular strategy models on the Goal Atlas website. It would be great if you could ping a reply to me indicating if you’d like more of these or would rather I revert to the newsletter and podcast format.
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House of Strategy – what it is and how best to use it
(16-minute video)
Video Transcript (lightly edited for reading)
The House of Strategy is one of my favourite models, and one that I hope, once I’ve explained it all to you, you may come to love too.
There are two sides to strategy, really. One of them gets a bit complicated pretty quickly. There are all sorts of models, Porter’s Five Forces, Where to Play, How to Win, Red Ocean, Blue Ocean, Diagnosis, Guiding Policy, Coherent Actions. These are all good tools and approaches to strategy, but they do get quite complicated quite quickly. If you’re either new to strategy, or if you’re trying to explain strategy to somebody less familiar with it, it can get quite involved. You have to summarise what all the models are. You have to explain which is the best one for your particular situation and why. And then you’ve got to try and explain the model itself.
What I want to argue is that there’s a much cleaner and simpler approach, and that is just to focus on alignment. So, what do we mean by alignment? Well, I think all of us would recognise that within our organisations there’s a lot of misalignment. There are lots of people working pretty hard but not actually doing what they would hope to do, and in particular, perhaps, not driving strategic change. So, one of the things that strategy sets out to do is to get people within the organisation aligned so they’re all pulling in the same direction, or in this case, levering in the same direction, and, for a similar amount of effort, you actually get movement or change. So, this alignment, I think, is a much simpler way to start thinking about strategy, and indeed, Richard Rumelt said there is competitive advantage in just having a strategy, irrespective of what’s in the strategy and how good it is, simply because it gets people within the organisation better aligned and pulling more in the same direction. That, of course, assumes that the strategy brings about more aligned actions than would have happened if you didn’t have a strategy.
That’s really the starting point for what I want to talk to you about today. The House of Strategy, for me, is a great tool for thinking about and driving alignment strategically across organisations. It shows what needs to be aligned for strategy to work, which means maximising the impact of that strategy within your organisation. The model is a good visualisation, but I also want to convert it into a template. This has all the same parts that we have in the model: there’s vision, opportunities, threats, values, strengths, weaknesses, mission, heritage and, of course, strategy is in the middle. So, we’ve got the same component parts, but the value in turning it into a template is that it’s something that you can actually work on. I’ll give you a version of this template where you can actually fill out the boxes and you can see how strategy is going to interconnect with all of these other parts in the House of Strategy in your own organisation. Now, the key thing to note looking back at the model is that strategy is the gap in the middle, bounded by all the other parts. When you write a strategy, you need to fill that triangle in the middle. You need to try and work out what it is that will enable you to get from your mission through to your vision. How are you going to do so whilst remaining true to your values? How are you going to make sure you respond to opportunities and threats? So, the whole point of this model is that we’re trying to frame strategy with other parts of the organisational fingerprint, if you like, the other things that characterise your organisation, like vision, mission and values.
Let us now start walking through the component parts so that we understand what the elements of House of Strategy are. So ‘mission’ is why you exist right now. It’s your core purpose, focus and distinctiveness of your organisation, providing a sense of identity. One definition that I love is that mission is the thing that other people would miss if you disappeared. So, if your organisation no longer existed tomorrow, what would people miss? That effectively, is a good description of your mission. Your mission, of course, might depend on your heritage. In some organisations where they have a long or distinguished heritage that’s really important. For others, they may have a much shorter heritage, but, still, a good definition of their founding principles might still be really important. Why was your organisation founded in the first place?
Then, in contrast to the mission and heritage we have vision. Vision is where you are NOT right now, but where you want to be. It’s a picture of the potential of your organisation. It’s an audacious dream of the future.
It’s in contrast to mission, because strategy is what gets you from why you exist right now to where you are not now but want to be – that is one of the key roles of strategy. But of course, strategy doesn’t operate in a vacuum. You don’t want to get from mission to vision by any possible way. You need to stay in line with your values, and your values are shared principles and beliefs that get that guide decisions and actions of everyone across the organisation. So, values can support and enable the achievement of strategy. Or they could be in tension with strategy. Everyone in the organisation might say, we are not the kind of organisation that will behave in a particular way, so values can be both enablers and limits on the ways in which your strategy can get you from mission to vision. And then, of course, we have opportunities and threats. They can be internal or external, and we have strengths and we have weaknesses. And again, strategy needs to get you from mission to vision whilst recognising the opportunities and threats, strengths and weaknesses within your organisation.
There’s also another part, though, to House of Strategy, and this is one that is often neglected. There is no point in trying to think about strategy if there is an ‘elephant in the room’ that nobody is talking about. Is there, for example, a pressing financial issue that, if not addressed, might challenge the very existence of the organisation? Is there a massive opportunity that could see unparalleled growth in the organisation over the next few years. Is there a possible merger or possible takeover? Is there a legal or regulatory change looming? Were you the market leader in your particular sector for the last five years, but now a competitor is just about to overtake you? These are the kind of things that often get missed off strategy documentation but are absolutely vital. So, we must be careful when we’re doing this House of Strategy that we don’t look at our circumstances in too insular a way. If there is an elephant in the room, we need to be clear about it, and we need to declare it as part of this analysis.
The House of Strategy template is where you can start writing your own content about your organisation. This will give you a profile of what is important to your organisation now and for the future, and how strategy should emerge from that context, from that framing.
Let’s just assume that we’ve done that. We’ve filled out this template, and we’ve got all of the things that are relevant to our organisation within the House of Strategy template. Now what? Well, there are several things we can do with it. Firstly, we can look at alignment, up and down the House of Strategy, so we can see whether vision, mission, values and heritage are all coherent and aligned. Are our values conducive to reaching our vision, or is there any conflict there? If we reached that vision, would some of our values be in jeopardy? What about mission and heritage? Are they going to be a good foundation for achieving our vision? Because if your mission and heritage is not a good foundation for reaching your vision, perhaps you haven’t got the right vision. These are some of the questions you can ask to check that vision, values, mission and heritage are all aligned, and that strategy is the means of gluing them all together. Secondly, we can do a SWOT analysis, but this is SWOT analysis on steroids, because it’s not just SWOT on its own. It’s showing how your Strengths, Weaknesses, Opportunities and Threats align with and inform mission vision, values and strategy. If, for example, you have a vision and mission that do not recognise the strengths, weaknesses, opportunities and threats, then they are ill-informed and will probably lead you to the wrong strategy. So, alignment and coherence is really important, and a great way of doing that is making sure that the strengths, weaknesses, opportunities and threats are in line with everything else that is in the House of Strategy.
Thirdly, and finally, we have the ‘elephant in the room’, and as I’ve said, we need to try and describe what that is, and we need to make sure that our SWOT analysis reflects this elephant in the room, that our vision takes it into account and that our strategy addresses it explicitly.
So, how do we use House of Strategy, if we already have a strategy? Let’s assume we’re in an organisation where the strategy has been written, it’s been approved and it is in operation. How could we use this House of Strategy analysis? Well, hypothetically, we may discover that the strategy that we have got is perfectly in tune with our values and works really well. Similarly with our vision. It states a vision, and it has a clear path to achieving that vision. It recognises the threats, it acknowledges the weaknesses. It also is clear that there is, or perhaps isn’t, an elephant in the room that we need to take account of. It takes account of our heritage, our mission and our strengths. But maybe it isn’t clear enough about the opportunities that we face. Maybe this strategy is weak on opportunities. Maybe the analysis wasn’t done, maybe the circumstances have changed since the strategy was written. Now this kind of conclusion from House of Strategy analysis could be really useful, because it raises a couple of possibilities. The first is, you need a new strategy. You need to have a strategy that is fully aware of all the opportunities that are faced, and perhaps you’re not refreshing your strategy frequently enough to keep up with the ongoing flow of opportunities that your organisation faces. Alternatively, you might conclude that the strategy is pretty good as it is, but we just need to make sure, as we convert our strategy into a strategic plan that we have heightened awareness of the changing opportunities that we face. We also need to put processes in place to update our strategic plan often enough to continue to reflect the opportunities we need to exploit, even though our strategy is giving us still a good, clear account of how we get from mission to vision, incorporating values and strengths, weaknesses and threats. It just isn’t doing a particularly good job on the opportunities.
How about House of Strategy applied to the development of a new strategy? How would House of Strategy help there? Well, first of all, it will tell us a lot about what the foundation of this new strategy is. We may, for example, have a vision and mission already written for the organisation. If they are well aligned with other elements of the House of Strategy (for example, they are well aligned with the strengths, weaknesses, opportunities and threats we think the organisation is facing) then maybe keeping that vision and mission as they are would be a pretty strong foundation for the strategy. In this case, what the strategy needs to do is explain how we’re going to move from our existing mission to our existing vision. On the other hand, we may not have a vision and mission – this cannot, therefore be the foundation for our new strategy. Our foundation might, then, be our opportunity analysis. We think there are great things that we could reach for as an organisation, and therefore we need to take that, our opportunity analysis, as our foundation. Alternatively, we might think that competitor analysis is our foundation. We might think customer analysis is our foundation.
Then we can look at the House of Strategy and try and identify what are the elements that are mostly determining where the focus of this new strategy is. Where are we going to apply pressure to bring about the change that will shift our organisation from where we are now to where we want to be in the future?
House of Strategy can also define some of the boundaries around our new strategy. We may decide we’re not willing to go in a particular direction because it will conflict with our values. We’re also not willing to go in another particular direction that we don’t think we can mitigate effectively. So, House of Strategy can give you foundation, focus and boundaries for a new strategy.
Overall, I believe House of Strategy is a way for you to keep conversations about strategy focused and simple. How to we bring about organisational alignment, focused on the changes that matter most to us as an organisation? And if you can get organisational alignment, then, as we said right at the beginning, having that organisational alignment is a competitive advantage on its own.
I hope that is a useful introduction to House of Strategy, and I hope you’re able to use the templates to do House of Strategy analysis within your own organisation.
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We, at Goal Atlas, work as strategy facilitators. We provide frameworks, tools and hands-on advice and guidance to support your leaders, managers and front-line teams to develop the strategy that works for you.
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If you enjoyed reading this newsletter, don’t forget to forward it to friends or colleagues who might also find it of interest.
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