Lean Strategy Making

In lean manufacturing, the goal is to establish precise procedures for making products in the safest, easiest, and most efficient manner possible. When critical processes become standard work, variation decreases, throughput increases, costs fall, and quality rises. Companies as diverse as Toyota, Amazon, Intel, and Nike leverage this approach in their operations to great effect.

In contrast, strategic decision-making is the epitome of nonstandard work at most companies. Strategic decisions are often thought to be unique—like snowflakes—with each one requiring a bespoke process. Consequently, similar decisions—for instance, about whether to enter new markets—are frequently handled in vastly different ways within the same company. That inconsistency leads to slower, lower-quality decisions—a problem that’s starkly clear in the feedback Bain & Company received from the executives at 350 large companies we surveyed about their strategy processes. We discovered that:

• Though nearly 50% of the survey respondents reported that their companies used standard templates for developing strategic plans, very few firms followed a consistent approach to making critical decisions. In most cases the process was left to the discretion of the executive in charge or varied with the type of decision.

• One quarter of the strategic decisions made by companies proved to be suboptimal in hindsight, according to the executives. Leadership frequently chose a course of action that was either incorrect or inferior to other options. Many of those decisions were costly or impossible to reverse, forcing companies to live with the consequences for years.

• Decision-making at the respondents’ companies was also too slow more than 45% of the time. As a result, even when the right choice was eventually made, performance often suffered because market and competitive conditions had shifted during the delay.

• On average, the respondents’ companies achieved less than 70% of the results their strategies aimed for. That shortfall was often blamed on poor execution, with the assumption that the strategy itself was sound. However, in many cases the strategic decisions themselves were unclear, leading to uncoordinated—or even conflicting—actions that produced mediocre outcomes. In other cases leaders believed they had made a decision when they really had only articulated a desired outcome without defining the actions needed to achieve it. Performance fell short because there was nothing concrete for the organization to execute.

If a manufacturing process had a 25% defect rate, exceeded targeted cycle times more than 45% of the time, and experienced a yield loss of more than 30%, it would be deemed unacceptable. Yet many companies tolerate those levels of inefficiency and ineffectiveness in their strategy making.

It’s time to redesign the strategy process to achieve better results. There’s no reason that strategic decision-making can’t become standard work, just as critical manufacturing processes are. By adopting a rigorous approach to it, companies can reduce waste, move faster, make smarter choices, and gain a competitive edge.

Several leading companies that we have worked with and studied offer a blueprint for standardization that others can follow. Their lean approach to strategy typically has three components: (1) setting strategic priorities, (2) tackling them in an ongoing fashion, and (3) monitoring the results. In this article we’ll go into detail about what each component involves and describe how successful companies incorporate all three into their strategy process.

Setting the Priorities

Lean strategy begins with articulating (or revising) a company’s multiyear performance ambition, which typically includes both financial objectives, such as revenue and operating profit goals, and strategic goals, such as relative market-share growth and improvements in customer satisfaction.

A performance ambition is not a typical target—meaning one that senior leadership believes it can meet or exceed. Targets often hinder effective strategy development. They can become politicized; business units may understate their potential so that they can secure lower targets, while the corporate center pushes for higher ones, suspecting that the units are sandbagging. Targets become a negotiated settlement, not an effective guide for strategy making.

In contrast, a performance ambition is aspirational. It’s designed to motivate business and functional leaders to surface breakthrough ideas that can significantly enhance a company’s performance. The ambition should be realistic yet beyond the reach of the current strategy.

Google’s 10x thinking is a notable example. Introduced over a decade ago by Google’s cofounders, Larry Page and Sergey Brin, it encourages leaders to aim for solutions that are 10 times better than existing ones. That mindset has become a core principle of Google’s strategy and is deeply embedded in the company’s culture.

The 10x approach has fueled remarkable innovations at Google. When Gmail launched, for example, it offered users 100 times more storage than competing services did. Google Street View photographed more than 10 million miles of road, adding unique value to search results. Google X, the company’s experimental R&D unit, took on the development of self-driving cars, leading to the creation of Waymo, which now operates a fleet of autonomous vehicles serving passengers in Phoenix, San Francisco, Los Angeles, and Austin.

The next step is to compare the performance ambition against a multiyear outlook (MYO), which projects what a company’s future performance will be, given the decisions and resource commitments its leadership has already made. Critically, the MYO does not account for decisions that haven’t been made yet, even if they’re likely to be made in the future.

It’s also important to note that the MYO is not a plan. It doesn’t include assumptions about productivity gains, favorable pricing changes, improved asset management, or other factors often incorporated into financial plans or forecasts. Instead, the MYO is designed to capture the likely strategic and financial trajectory of each business if current strategies remain unchanged. It should also recognize that competitors are continually working to better their competitive positions. As a result the MYO often depicts a deteriorating competitive position that must be strengthened.

There should be a sizable gap between the ambition and the MYO. If they’re too close, the ambition isn’t enough of a stretch and should be revised upward. The gap will be closed by addressing issues on what we call the strategic backlog—a document that captures the company’s highest-priority strategic, operational, organizational, and financial challenges. Those issues should be prioritized using two criteria: value at stake, or the economic impact of effectively resolving the issue; and urgency or critical path—whether the issue must be tackled immediately to avoid missing a crucial opportunity or to help address other important problems. The backlog should guide decision-making throughout the current year and beyond. Typically, companies have multiple backlogs: one for senior leadership, encompassing cross-enterprise issues, and separate backlogs for the business units, addressing their specific challenges.

The issues on the backlog need to be described in careful detail to ensure their proper framing. As we all know, it’s hard to find the right answer if the wrong question is being asked. Yet many leaders define strategic priorities in ways that limit the field of vision (for example, by asking, “Should we acquire Company X in order to enter Market Y?” rather than “How should we increase our penetration of Market Y?”), unduly constraining their options. Or leaders widen the aperture too much, making the issue impossible to address effectively (as with “How should we adapt our strategy to best respond to global climate change?”). In either case cogent plans are never developed, and problems go unresolved for years.

Each item on the backlog should be tied to one or more decisions that must be made to address it. For an example, let’s look at Dell Technologies, the infrastructure technology giant. In 2015 its leadership determined that to achieve breakthrough performance, it needed to fundamentally redesign the company’s go-to-market model. To carry out the redesign the company would have to decide the following:

• the optimal number of products for Dell’s sales team to represent

• how sales territories should be defined to maximize productivity

• what coverage model best ensured the appropriate level of customer contact

• the best way to provide product-specific technical support to salespeople

After carefully reviewing the best available data and weighing the options, Dell’s leadership made each of those decisions, effectively resolving the go-to-market redesign issue. The company hired more than 2,000 additional sales representatives to expand coverage, redrew territories to better align reps with technical support, and reduced the number of products most reps were asked to sell. Those and other changes helped Dell gain market share in commercial PCs, servers, and storage.

Business is a game of choices, and good choices start with strong alternatives. But most companies fail to consistently explore multiple options when making strategic decisions.

The final step is to create (or update) a decision calendar, which outlines when each item on the strategic backlog will be addressed and notes the leadership team member accountable for recommending the best course of action (after getting the input of experts and others). Typically, the calendar is aligned with the schedule for executive committee meetings, business unit leadership team meetings, and other leadership forums, where time is set aside to focus on decisions in the backlog. Done correctly, the calendar establishes a steady cadence or “drumbeat” of decision-making, ensuring that the gap between leadership’s performance ambition and the company’s MYO gets closed at an efficient pace.

Once the strategic backlog is defined and the decision calendar is set, lean strategy making becomes a continuous process. As each issue on the backlog is resolved, it’s removed and replaced with a new one.

Ongoing Strategic Management

With every issue on the backlog, leadership follows a standard decision-making process that guides resource allocation. It entails two distinct strategy sessions:

Facts and alternatives. During this session, leadership works to fully understand the issue, identify its causes, and come up with a range of ways to address them. The goal of this meeting is not to select the best alternative but to engage in an expansive dialogue that will help the team develop a comprehensive set of viable options.

In these discussions it’s important to examine the critical facts. Most strategy development efforts include a phase in which facts are collected to assess market trends, customer purchasing criteria, competitor performance, and the profitability of the company’s products and services in each segment. While that information is valuable, it often fails to reveal the underlying causes of underperformance and deficiencies in the company’s strategic position. For example, if leaders seek to accelerate growth in a market segment, they must first understand the primary impediments to growth. Otherwise the company risks treating symptoms—such as low returns on ad and promotional spending—without fixing the cause, such as a cumbersome product that’s difficult to use and buy. Identifying the true reasons for underperformance often requires gathering facts beyond those typically collected in market or competitive scans or involves a deeper analysis of existing facts.

Careful consideration of alternatives is equally important. Business is a game of choices, and good choices start with strong alternatives. Unfortunately, most companies fail to consistently explore multiple options when making strategic decisions. Their approach often boils down to “We’re doing this now; that seems better, so let’s do that.” While such thinking may lead to incremental improvements, it frequently causes companies to miss opportunities for breakthroughs.

Worse, the alternatives companies do consider may be false choices. People often stack the deck by presenting leaders with three options: one that implies doing next to nothing, one that’s akin to killing your firstborn, and a third that’s the path they really want to pursue. Or they simply present “Goldilocks” choices—one too extreme, one too weak, and one in the middle. Both practices undermine the quality of decision-making.

The most successful companies embed the formulation and evaluation of alternatives into their strategy process. Strategies are proposed only after a range of options have been carefully considered. These companies also clearly define and in some cases standardize the criteria for assessing alternatives—for instance, impact on the firm’s future cash flows—rather than leaving it up to individual business unit or functional leaders to decide how to evaluate competing strategies and make recommendations.

Choices and commitments. In this session leadership reviews evaluations of the alternatives, uses agreed-upon criteria to select the best one, defines performance milestones for it, and identifies the resources it will require. The outcome of this meeting is a final decision, which includes committing resources in exchange for expected performance improvements.

It’s surprising how often strategy goes off the rails at this juncture. Nearly 30 years ago, Michael Porter observed that “the essence of strategy is choosing what not to do.” Yet in many companies, it’s difficult to determine precisely what leaders have decided to do—let alone what they have chosen not to do. After a typical board strategy review, the answers to key strategic questions often remain unclear or open to interpretation. Strategic decision-making falters when critical trade-offs aren’t assessed and concrete choices are left unmade.

In many companies strategy resembles an elaborate description of a desired end state, without a clear path for getting there. Such firms rarely define what actions will be immediately stopped, continued, or started. Without that clarity, however, execution becomes challenging. Worse, strategies can face a silent veto in lower levels of the organization, where employees may be skeptical of leadership’s vision. In both cases, performance will fall short. A strategic plan needs to be prescriptive and specify how to achieve the future it outlines.

The best companies follow up their strategy reviews by creating an explicit decision log. It captures the choices made by leadership, documenting the range of alternatives considered, the reasons certain options were rejected, and the rationale behind the chosen path. This eliminates ambiguity. Strategy is no longer subject to hallway debates or passive resistance from those who claim not to understand the decision or who wish to pursue their own alternatives.

Commitments also matter: Strategic decision-making must drive the allocation of resources, including operating expenses, capital, and talent, over several years. Otherwise, the budgeting process will dictate what gets funded and, by extension, shape the company’s strategy.

The best companies embed leadership’s strategic choices in a written, two-way performance contract, where the corporate center provides essential resources in exchange for improved performance from business units and functions. Such contracts formalize the strategy.

For over a decade, Dell has adhered to this standard two-session formula when making decisions, regardless of their complexity. In his book Play Nice but Win, Michael Dell encourages readers to “trust the scientific method,” highlighting how his team applied it to calls about everything from reestablishing Dell’s market leadership in servers; to the divestment of Quest Software, SonicWall, and other software businesses; to renaming the company Dell Technologies following its merger with EMC. Thanks to this approach, Dell’s leadership has accelerated the pace of decision-making without sacrificing quality, resulting in a 10-fold return on the investment Michael Dell made in the company when he took it private, in late 2013.

Monitoring Business Performance

In companies that practice lean strategy, the organization’s success at meeting its performance commitments, as well as the allocation of necessary resources by the center, is regularly assessed at business performance reviews. When things are on track, leadership proceeds as planned. However, when discrepancies arise, the discussion shifts to whether corrective actions are needed. In extreme cases—such as when market or competitive conditions have changed significantly—leadership may decide to return an issue to the strategic backlog. That allows the team to gather new facts, explore new alternatives, potentially make a different choice, and establish new commitments and performance contracts.

This is significantly different from what companies typically do in business performance reviews. Most reviews resemble weather reports, with the business unit and functional leaders comparing actual performance against the budget or operating plan. While they often highlight variances, the common response is to tweak the plan or task leaders with quickly addressing discrepancies. However, the true purpose of these reviews should be to determine whether the company needs to alter its strategic direction. It’s not enough to merely note that sales fell short of the plan. Leaders must probe deeper into the reasons behind such misses and determine whether corrective measures are needed.

Few strategies, no matter how well crafted, can be executed without adjustments over time. Market conditions and competitor strategies are always changing, often requiring companies to revise or fine-tune their strategies. Business performance reviews are the ideal forum for assessing whether such shifts are needed. Leadership should ask, Have the facts changed enough to suggest a better strategic alternative? If the answer is yes, the issue needs to be revisited. If the answer is no, leadership may still choose to intensify efforts in certain areas while scaling back others to realign performance with the company’s goals.

Amgen, a $33 billion biotech pioneer, has successfully implemented this type of rigorous performance monitoring. At its monthly operating team meetings, which are attended by its top 30 executives, time is set aside for “performance dialogues,” which examine whether the team is executing on the commitments made against the company’s strategic backlog.

Amgen has also developed Sensing, a metric-monitoring platform that tracks performance using both leading and lagging indicators. For instance, “new prescriptions written” serves as a leading indicator of pharmaceutical revenue, while “patient enrollment rates” predict trial speed, helping assess whether a drug is on track to meet its development timelines.

Before every performance dialogue, operating-team members review key metrics for each of Amgen’s therapeutics, geographies, and functions. If a business area is underperforming, the executive who owns it presents the variance, identifies its cause, and proposes a solution to close the gap. If the gap stems from a fundamental market change or regulatory shift, the responsible executive may suggest adding a new issue to Amgen’s prioritized agenda so that the team can reassess the company’s position, develop new alternatives, and revise its strategy as needed.

Amgen’s performance dialogues also highlight successes. Each session dedicates time to exploring the causes of overperformance. For example, after observing higher-than-expected trial enrollment for a medicine in development, the team identified successful practices, such as increased engagement with investigators, that boosted awareness and enthusiasm about the therapeutic’s benefits and people’s eagerness to enroll eligible patients.

By standardizing the performance dialogue process, Amgen has strengthened its performance culture, improving execution and financial results. In 2013 it had three blockbuster drugs (meaning drugs with annual sales of more than $1 billion); by 2025 it had 14, and during those 12 years it saw its market value grow more than threefold, from less than $50 billion to more than $160 billion.

. . .

For too long leaders have treated strategy as nonstandard work, resulting in decisions that are often incorrect or poorly timed. To address this, they need to adopt a systematic approach to strategy, clearly defining priorities, gathering facts that reveal the causes of problems, developing strong options to choose from, making choices explicit, creating a specific plan for implementation, and tracking execution. If every unit and function follows the same approach, leadership can confidently delegate decision-making to lower levels in the organization, and the firm can improve the quality of all its decisions and make them faster. Only then will the results companies achieve reach new heights.

Copyright 2025 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.

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