Coherence & Alignment

Back on track

Friends,

A couple of weeks ago, we introduced the concept of coherence, defined in terms of cohesion, logical interconnection, understandability and consistency. In complexity-coherent strategy (CCS), it stands in contrast to the traditional notion of alignment, which often amounts to little else than an expectation that employees stand in line and “stick to the plan”. Time, effort and resource is then wasted either trying to course-correct after an unintentional misstep or circumventing the rigid constraints in order to get anything done, in turn leading to a highly inefficient organization.

Coherence, on the other hand, relies on trust, transparency and accountable autonomy. Instead of ordering people precisely what to do (under the poorly disguised assumption that management knows best), the idea is to allow them the freedom to solve problems as they see fit in their relevant context - (a) within defined boundary conditions, (b) against a set overall direction and (c) according to the available facts.

(a) Coherence to boundaries

The strategic boundaries are what one might call the corridors of freedom; they define the outer limits of what is permissible at that moment in time as established by the overall strategy.

Unlike traditional strategic methodology whereby one explicitly defines what to do and thereby implicitly what not to do, boundary setting is about doing the exact opposite. It is a way of enabling desired behavior by the negative or apophatic - what Nicholas Taleb called via negativa in Antifragile. The benefits are manifold: from resilience-building to increased innovation capacity and an improved ability to deal with uncertainty.

Boundaries can be applied to any strategic endeavor. For example, for marketers, they can establish what market segments not to target (thus effectively inverting the standard approach). Anything that remains between the boundaries is then fair game, as eminent strategist Paul Bailey recently wrote. The point is to allow whoever is making the decision to act freely within the set limits and optimize their behavior to context. In return for this autonomy, they are expected to be transparent and own the decision.

(b) Coherence to direction

For the purposes of the overall strategy, boundaries are insufficient in and of themselves; it would be entirely possible to move in a circle between them and get nowhere. Ultimately, any organization looking to thrive therefore also has to have an overall sense of direction. This should be defined by the strategic ambition and shared understanding of success, or what Roger Martin would call the company’s winning aspiration.

Coherence to direction, as one might expect, thus means that actions should be taken with the intention of nudging the organization towards the appropriate point of compass.

Crucially, direction is different from targets, objectives or goals. While they can be used as tools with which to steer the company in a set direction (a topic to which I shall return in the coming weeks), they do not define it. Timebound achievements are never more than box checks; all companies act on a time continuum between inception and demise, which means that idealized future states, even if somehow reached, will cease to exist the very moment that they come into existence.

(c) Coherence to facts

Lastly, actions taken in an organization have to be coherent to the reality in which the strategy is intended to be executed. This includes (1) organizational facts and (2) environmental facts.

Organizational facts refer to limitations that restrict movement and can be either extrinsic (e.g., laws or regulations) or intrinsic (e.g., capital requirements needed to enable scale economies that make the endeavor financially viable). Any action taken that is incoherent to these facts will inevitably hurt the company in some way or another.

Environmental facts, meanwhile, are what we know about our surroundings. Dave Snowden has explained it thusly:

“My favourite illustration of this is to say the while we know evolutionary theory is incomplete, and much of what we now know may need radical change, it is coherent to the facts and thus a legitimate direction. Crude creationism on the other hand is incoherent to facts and not worthy of any intellectual effort. Coherence gives us a simple way of getting out of the nonsensical post-fact argument which picks up on an error or change of mind and uses it to justify rejection of the whole, or an all hypotheses are equally valid type of argument.”

Put differently, what it infers is that actions should be taken based on available evidence such as primary or secondary research. To reiterate what I wrote earlier, the idea is to create accountable autonomy - one should be able to argue why a project would carry a realistic expectation of positive impact. Ideally, this should be done before it is started, either to management or, if not possible or needed, by writing it down for future reference, so as to avoid potential halo effect analyses post hoc.

Combined, coherence to boundaries, direction and facts allow for what one might (admittedly rather sloppily) call relevant emergence; enough flexibility and adaptability in the proverbial trenches to allow solutions to emerge, but also a biasing of the outcomes so that they are relevant to the organization.

As we shall see going forward, the concept has massive implications for not only strategy but adjoining fields such as financial planning and performance management. Before we get to that, however, we are going to break down a couple of practical examples of all of that which I have just detailed. For paying subscribers, that is next in line.

Until then, have a lovely weekend.

Onwards and upwards,
JP