Every business has a strategy whether it is articulated or not. The outcome if a business would continue on its current trajectory without any changes can be called the ”null-hypothesis” results of this strategy, borrowing a term from statistics. It's simply put the most likely outcome if nothing is done to change the trajectory of the business above and beyond what is already ongoing in the company. This strategy baseline is rarely made explicit or well articulated, even though typically a significant part of strategy definition and incentive schemas are based on comparisons to this baseline.
Furthermore, a significant pitfall with many business strategies is that the results of the business is predominantly viewed as a causal effect of the activities performed by the company, when in reality business outcomes should be evaluated as stochastic events heavily influenced by factors outside company control. In reality, a good outcome could be the result of a poor strategy that happened to have tailwinds due to external factors outside the company control. Or vice versa, a mediocre outcome could be the result of a good strategy that had huge headwinds due to external factors outside company control.
The purpose of any real business strategy effort can therefore be said to be to improve on the "null hypothesis" and achieve a better result (e.g. higher Return on Capital Employed, Revenue growth etc) than what would otherwise been achieved by "chance".
A way to think about strategy to mitigate some of these shortcomings is to define strategy as a portfolio of "Beliefs", "Bets", and "Actions" to be continually adjusted through rapid feedback loops including a solid understanding of what part of the results were due to external factors and what part of the results where do to "successful" or "unsuccessful" strategy and execution efforts.
"Beliefs" - assumptions about critical factors impacting business results
"Beliefs" are defined as critical assumptions regarding what will change and what will stay the same across external and internal factors, current and future, typically including:
External macro factors e.g. Macro economy, Technology evolution, etc (I.e. the top 5 factors with a significant impact on the results of the business that are 100% outside control of the business)
External micro factors e.g. Customers, Competitors, Suppliers, Regulatory frameworks, (I.e. the top 5 factors with a significant impact on the results that are mainly outside control of the business.)
Internal factors (E.g. R&D spend, Capital allocation, Opex, Organisation and Talent, Culture. I.e. the top 5 factors with an impact on the results that are 100% in control of the business)
With these factors defined, it's possible to define the business context clearly i.e. what business is the company in and how will this context likely evolve, as well as the "null hypothesis" of the strategy i.e. what is the most likely trajectory of the business and results in this evolving business context.
"Bets" - investments that can significantly improve business results
"Bets" are defined as specific investments in capital and management attention that should be moving the business away from the "null-hypothesis" towards the wanted results (i.e. non-arguably "move the needle"). "Bets" should typically be:
Accompanied by a capital allocation decision (and other decisions as required to make them actionable) e.g. M&A, R&D investments, Talent acquisitions or similar. No investments, no returns.
Clearly communicated towards internal and external stakeholders (i.e. as required to make it actionable.)
Measurable (i.e. possible to verify the outcome and define OKR's: Objectives and Key Results.)
"Actions" - activities beyond business-as-usual to maximise likelihood of "Bets"
"Actions" are defined as the critical set of activities to maximise the probability of positive outcome of "Bets". "Actions" should typically be:
Activities that are based on doing things different than what is being done today.
Accompanied by OKR's and personal and organisational targets with accountable owners.
Well-defined, possible to execute on, followed-up and adjusted in short feedback loops.
"Real-time feedback and evaluation" - data driven evaluation of progress
"Real-time feedback and evaluation" is defined as a tight feedback loop of critical OKR's and a sound analysis of the results to adjust beliefs, bets and actions accordingly. Some key characteristics should be:
Data-driven and based on as close to real-time inputs as possible from customers and other key data sources to avoid ambiguity and need for interpretation.
Clearly disaggregated into what part of the results where due to external factors and what part was due to successful or unsuccessful execution of the strategy.
Clearly disaggregated into decisions that are easily reversible which should be made with speed as primary factor, and decisions that are by nature more difficult to reverse which can be allowed to run at a different clock-speed.