Essential to making strategy work
Strategic thinking not only requires the ability to anticipate or project one, three, or five years into the future; it requires the ability to look at a business unit, division, or company as a whole. Viewing the organization as a network of interdependencies, each of which relies on the others, emphasizes the need for collaboration at all levels.
A collaboration case study
I worked with a client who was the head of the credit function at a small bank that specialized in small business credit. Their process included three major activities: soliciting applications, adjudicating applications, and if accepted, funding the loans.
This bank was small enough that the money on deposit was not sufficient to support a large portfolio of loans. The client determined that his bank was particularly good at adjudication, however; it was able to identify and quantify risks associated with loans quickly and well.
While the bank didn’t want to take on every loan, those businesses applying still needed that funding—and there were still institutions that would accept the risk. The client asked, “What if we join forces with those other institutions? We’ll take all the applications we can get, adjudicate them, and then decide where to place them. Either we can take it on, or we pass it to another organization that is willing to accept riskier loans at a correspondingly higher interest rate. In that case, we’ll earn revenue for doing the adjudication.”
Of course, to do this, the bank would have to change its processes for soliciting and adjudicating loans, as well as the processes for placing the loan.
This individual was thinking strategically, and now he had to bring the rest of his team on board. He gathered the executives of the different loan functions and asked them, “How do we make this work?”
In this case, collaboration occurred after the high-level strategic thought was put in front of the team. Those people had to determine what the changes would mean for their specific parts of the business, as well as the bank as a whole. All three functions (solicitation, adjudication, funding) had to be in balance or it wouldn’t work.
The collaborative process allowed the executives to see clearly and understand the interdependencies at a strategic level. They had to realize that, no, they were not independent functions; rather they were interconnected components that needed each other. There is, after all, very little for adjudicators to do if no one is soliciting any loans. Nor is there any need to solicit loans if no one is available to fund them.
Collaboration identifies all of the interdependencies that will make the strategy work—or not work. It can be quite useful for organizations to have a third party lead teams through the strategic development process, clarify interdependencies, and ensure collaboration leads to positive results.
When planning strategy, while it is essential to ask, “Where do we want our company to be?” it is equally important to identify all the interconnected parts that have to work together to get it there and make sure they’re moving in the same direction.