Paradoxically, open strategy faces a constant challenge due to openness – its key component: openness challenges the formation and execution of strategy because there is “a risk of dysfunctional escalation of openness”. Opening up the strategy-making process to external stakeholders in an uncontrolled way can cause not only internal complexity, but also chaos and, eventually, the dissolution of the process as a meaningful unity. Openness is thus not unconditionally desirable and productive. To prevent the dysfunctionality of openness, the strategy-making process should be controlled. In other words, openness should not be encouraged and pursued without having clear boundaries and a deep understanding of the process itself.
3 phases of strategy-making
To better understand the concept of open strategy, it is useful to explain the typical process of strategy-making. Strategy is developed in 3 distinct phases, which require finding a solution that would help balance openness with secrecy:
1. Idea generation. Organizations can benefit mostly from including a large crowd with diverse expertise in the first stage of the strategy-making process. Including the crowd offers new viewpoints as well as legitimizes a new idea. In the idea generation phase, there is no need to share too much organization-specific information to generate ideas. During this phase, maintaining secrecy is the easiest.
2. Strategy formulation. To get meaningful results, a significant amount of information should be shared. Most organizations thus tend to involve mainly their own staff or select a small group of external people, whom they ask to sign non-disclosure agreements (NDAs). It is recommended choosing an equal number of employees and outsiders to gain more advantage from the process.
3. Execution. To benefit from cooperation, organizations have to share specific knowledge with all the participants of the strategy-making process. Although openness is risky as competitors might use that information to their advantage, its benefits outweigh possible dangers. To keep sensitive information protected, the main participants of the last strategy-making phase should be employees and business partners, while the number of outsiders should be reduced to the necessary minimum.
Balancing open and close strategies
It is worth stressing that adopting an open strategy is not recommended for all kinds of projects at all times. In fact, organizations might need to keep switching between open and close strategies, depending on the situation. For example, the development of Google Android OS began as an open strategy, and later became closed. Open strategy is thus an alternative worth considering when projects can significantly benefit from opening up the strategy-making process to external stakeholders, while at the same time keeping a pulse on what is happening within the organization and in the market.
Open strategy and leadership
Senior leaders tend to open less than one-third of their strategic initiatives to people outside the executive team. However, those initiatives generate half of their organizations’ revenues and profits. That gives advocates of open strategy a strong argument for promoting more widespread adoption of open strategy. It should be noted that senior executives should not expect that the crowd will come up with an outstanding strategy, releasing them from responsibility. Opening up strategy-making will not turn into a democratic process. Senior managers will still have the final say. The only difference is that once involved, staff tend to support the strategy that emerges as a result of that cooperation.
References: Leonhard Dobusch, Waldemar Kremser, David Seidl and Felix Werle, link.springer.com | Christian Stadler, Julia Hautz, Kurt Matzler and Stephan Friedrich von den Eichen, hbr.org | Andrew Hill, ft.com