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A Strategic Thinking Exercise: Reverse‑Engineer Strategy

Posted by
December 21, 2021
Written by Karin Blair

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As a kid, I was a huge Lego fan. I loved to construct and deconstruct an assortment of creations. My son, part of the generation where Legos mostly come in pre‑designed kits, found much more joy in the deconstruction process. He would deconstruct cars, airplanes, spaceships – endlessly curious about how the component parts created the whole.

I’ve outgrown Legos (only because my son has), but in my work, that same deconstruction process can be applied to strategy.

The realized strategy of an organization results from the resource allocation decisions made by its leaders. In the early days of my strategy career, a leader said, “If the strategy of an organization isn’t clear, look at their key decisions.” When we look back, we can see what those decisions summed up to (or not). In essence, you can reverse‑engineer current strategies, of your business or your competitors, to:

Just as my son would explore each Lego piece and how it fit together with others, we can explore a company’s actions and decisions to construct an implicit strategy. With the benefit of hindsight, what was the possible winning aspiration determined three to five years ago that led to the company’s decisions and position today? What was their direction‑setting strategic intent? 

Reverse‑engineering Strategy: Yours or Your Competitors’

Following is a step‑by‑step process to reverse‑engineer a current business strategy.

Step 1: List notable actions taken over the last three years. What has been done, across the business? 

Actions such as:

    • Product launches 
    • Collaborations, partnerships, acquisitions 
    • Expanding manufacturing capacity
    • Attracting select talent 
    • Licensing, IP protection, litigation 

This list of actions is comparable to the pile of Lego pieces on the floor that my son deconstructed from the airplane he had first built. The elements that make up the whole.

Step 2a: Identify common patterns created by these actions and aggregate them into strategic themes. For our Lego project, it is as simple as sorting the different pieces into categories: the wheels, doors, windows, and rectangular bricks.

In reverse‑engineering a strategy, actions might aggregate into themes around:

    • Where to Play: What choices has the organization made around markets, products, geographies, steps of the value chain?
      • Markets - "Expanding into oncology”
      • Products - "Predominantly focused on a single technology platform”; or “Launching various new offerings along the workflow

    • How to Win: How the organization is trying to create advantaged customer value, relative to competition: 
      • “Building broadest portfolio of products,” or 
      • “Building convenience and ease of use into their offerings” 

    • Key Capabilities: or competencies:
      • "Strengthening e‑commerce and distribution capabilities”

The themes should provide a sense of (1) investment priorities and focus, and (2) the growth‑drivers that resulted in the business position today.

Step 2b: Narrow your strategic themes to the three most significant. Then consider:

    • What interactions can you see between these top three themes? Are they reinforcing each other?
    • Is there greater emphasis in the themes involving where they choose to play, or how they are creating customer benefit? 
    • Is there a theme associated with distinct competencies being leveraged for advantage?

Our Lego metaphor may be stretched here as we move into the creation phase from the deconstructed pieces. Just as my son began to imagine new possibilities to create from the Lego pile, what could you imagine this all might add up to? What could be achieved if you pursued these three strategic vectors you have created?

Step 3a: Define an implicit strategy, intent, and strategic logic that might drive these choices and focus. When you look across the top strategic themes, what “game” do you think they are playing, and what does it mean to win? Who are they trying to become? 

Strategic intents (or winning aspirations) from the life sciences tools market might include “Becoming the…”:

    • “Technology platform of choice” (for example, Illumina’s sequencing platform)
    • “One‑stop shop” ( Thermo‑Fisher Scientific)
    • “Market leader for innovative bioprocessing technologies” (Repligen)

In the world of Legos, crafting a “strategic intent” is easy – the desired end state is what my son wanted to create: a space‑ship, bi‑fold plane, a fighter jet. It is tangible and clear. In the world of strategy statements and strategic intent, it isn’t quite as easy. 

Keep it succinct – a headline‑level thesis that provides clarity of direction and decision‑making. The strategy statement should:

    • Provide focus to what a company will and won’t do
    • Be specific enough to be objectively measurable year after year 
    • Help employees understand how the company seeks to create distinct customer value that is both different from where they were three years ago AND a bet on how it would allow them to remain competitive

Like this strategic intent: “Deliver push‑button genome for $100.” 

The statement is specific. You could probably make “push‑button” measurable. That makes it clear the organization needs to prioritize investment in areas that reduce cost and increase ease of use. And there is an inherent “because” behind that focus – the why behind the statement that contains the seed of your strategic logic: “Deliver push‑button genome for $100 because it increases accessibility to a new customer base and out‑maneuvers the competition’s focus on quality.”

But I am getting ahead of myself. We will come back to the strategic logic behind that strategy statement in step 4.

Practitioners Note: If your curiosity is piqued around creating compelling strategy statements, check out this HBR article that breaks them down into three critical elements: Objective, Scope, Advantage.

Step 3b: Test your implicit strategy statement for the level of strategic decision‑making clarity it provides. First, list what you might expect them TO DO, and what you might expect them NOT to do. If your strategy doesn’t inform trade‑offs and choices it isn’t a very effective one.

For example, a company aspiring to be a “technology platform provider of choice” will likely invest to internally develop breakthrough technologies as well as build and defend its IP position. Its leaders likely wouldn’t invest in commercial channel development at the expense of technology innovation. 

Then, consider the company’s theory of competitive advantage. Is it clear how this company plans to win? What is the organization doing differently than the competition? What are the areas where the company is trying to lead?

For example:

      • Portfolio breadth
      • IP position 
      • Global distribution capabilities
      • Engineering and manufacturing capabilities
      • Mergers/acquisition/integration expertise
      • Access to capital
  • Keep in mind: Determining if a generic list of possibilities is truly an advantage is contextual and relative to the competition. Where does the company appear to be disproportionately investing in certain capabilities, and/or investing in distinct activities and capabilities that sets it apart from competitors?

    Step 4: Identify the driving beliefs and critical success factors that would make this the winning strategy (with customers, relative to competition). What would have to be true for this strategy to succeed? 

    For a company seeking to be the “technology platform provider of choice,” its leaders would have to believe there is a big enough market opportunity and that they could create an IP‑protected source of competitive advantage, as an example. They would need deep technical expertise and the ability to commercialize the platform across multiple markets and applications. 

    To have the “push-button genome” as the guiding strategic direction, they would have to believe my previous assertions about market opportunity and relative competitive position to make this the winning strategy.

    Strengthening Your Strategic Thinking Through Reverse‑Engineering

    With each step of the reverse‑engineering process, you can exercise your strategic thinking muscles without the added complexity of anticipating an unknowable future. As you follow your curiosity, you achieve a deeper understanding of strategy defined as an integrated set of choices— and you start to have ideas about how it could be better.

    Applying it forward, you might start with a list of initiatives that you are recommending for investment. Can you extrapolate the strategic logic and driving assumptions/beliefs behind those recommendations to more effectively describe your strategic intent and how these initiatives are helping you get there?

    Give it a try and see what might emerge.

    Download Strategic Thinking Questions

 
 

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