Strategy Before Systems: Why the Order Matters

Most leaders build their systems backwards. They set up a dashboard, a reporting cadence, and a tracking spreadsheet before fully understanding why it matters to their organization and its clients. Then, six months later, they are drowning in data that tells them nothing useful because it wasn't built on a solid foundation. Building systems before strategy leads to data that isn't useful, which results in garbage in, garbage out.

Building systems before strategy leads to data that isn't useful, which results in garbage in, garbage out.

This is not a new problem, and it's one that I repeatedly see as I support both large organizations and startups. Business historian Alfred Chandler studied major American companies and found the same pattern over and over again. Companies that grew successfully changed their strategy first, then built the structure and systems to support it. Companies that tried to fix structure without a clear strategy stayed stuck no matter how good their new systems looked on paper. His insights have become one of the most repeated ideas in management thinking, dating back to 1962. His book Strategy and Structure is still a great read.

Here's what this means for you: if you do not know what you and your organization are trying to accomplish in the short term or long term, you cannot know how to measure it. This is one of the root causes of the dreaded meetings for the sake of having meetings... a lack of purpose or of linking back to the strategies or vision for the department, region, or organization. As Simon Sinek (2009) says, it starts with why. It's hard to know which reports your team/directors should be sending you and which ones still exist, since they started ten years ago and continue to run week over week and month over month. In my days running a non-profit, I recalled saying in district meetings more than once: just because we always have doesn't mean we should now. Every systems question SHOULD be downstream of a strategy answer. Please skip the strategy step; otherwise, your systems will be busy, cost the organization money, create noise, and drag in debris. They are not useful.

This is why I start every business consulting/coaching engagement I run, and why my foundational group business coaching program begins by going back to an organization's values, mission, and vision before we do anything else. It all starts with why; it creates an anchor and alignment and becomes a beacon when we need to stabilize things, aka putting out fires. Even a brief moment spent there matters because it connects our team and us to our collective purpose. It reminds everyone of how their particular role, as a leader, a business owner, or a director, connects to the bigger picture you sit inside. It is more difficult to set a good strategy for a team, portfolio or business if you have lost sight of why the organization exists in the first place.

This is why we stabilize before we build. In the Ignition Sequence, stabilize means getting clear ground under your feet before you start constructing anything on top of it. Discern means figuring out what actually matters, out of anything that could matter. Once that's done, we proceed to align, which is where systems, structure, and cadence come in. Systems are not the starting point. They are what you build once you know what you are building toward.

Roger Martin makes a similar case in his strategy work with Procter & Gamble, laid out in his 2013 book, Playing to Win. He argues that most organizations confuse having a plan with having a strategy. A plan is a list of things to do. A strategy is a set of choices about where to compete and how to win there. The systems question, what should we track, what should we report on, what should our dashboards show, only makes sense once those choices are made. Ask a systems question first, and you end up measuring effort instead of progress.

In business, this shows up in a specific way. If you oversee several portfolios, each with its own priorities, its own directors, and its own cadence, unique challenges, and outcomes. Before you can decide what information you need flowing up to you, or what your directors should be reporting on, you have to be clear on what each portfolio is trying to accomplish for the year, and how this ladders back to the organization's mission and vision. Not what has or has not been tracked in the past. What needs to be accomplished this year. This also makes it much easier to break priorities down into quarterly goals.

This is why the reflection comes before we talk systems. Before designing what needs to be tracked, clarity is needed first on what the organization and team are building toward, quarter by quarter and across all portfolios. This anchors back to the why of the organization. Once everything is clear, the systems conversation gets a lot easier, as does buy-in from the team, because they can align it with their own team and individual values.

How does one start with what seems like a daunting task? Take time to reflect on what the real work is that needs to be done, and link it to the goals of the team, portfolio, division, and organization. Keep it simple, and if necessary, reach out for support. Sometimes a valued thought partner helps to create clarity.

References

Chandler, A. D. (1962). Strategy and Structure: Chapters in the History of the American Industrial Enterprise. MIT Press.

Martin, R. L., & Lafley, A. G. (2013). Playing to Win: How Strategy Really Works. Harvard Business Review Press.

Sinek, S. (2009). Start with Why: How Great Leaders Inspire Everyone to Take Action. Portfolio/Penguin.