I first built my strategy expertise with Whitbread PLC - today, a dominant corporation in the hospitality industry.

Whitbread started out, back in 1742, brewing beer! For 250 years, the company grew to be one of the UK’s top brewing companies.

But in the 1980s, the company faced existential challenges. International beer brands were taking over. And competition authorities would soon force the decoupling of beer production from distribution and retailing. Whitbread was in trouble. Their business model was about to get broken. 

Creating a new future.

However, people in the UK were increasingly eating out, away from home. And Whitbread had the real estate and cash to open up that opportunity – and to exploit it.

It was the mid-1980s when I joined Whitbread as director of Retail Strategy. So what was my job? To design the strategy for creating a powerful new corporation - a very rare example of true "strategic transformation".  

My job was to build a strong strategy.

And we certainly made that future happen! Over the next decade, we developed ten powerful restaurant and hotel chains, creating new markets and pushing competitors aside as we went. One of those successes came from acquiring the tiny Costa Coffee 10-store chain - later a global force, sold to Coca-Cola for over $3 billion.

Taking that experience, I moved on to teach strategy at London Business School. But everything I knew about strategy was about to change. 

From static strategy to dynamics.

The strategy tools I started teaching at LBS were OK, but they fell short of what the team and I at Whitbread had actually done. We didn’t just say, “That’s the place in the market we want” – we had comprehensive, joined-up plans, continually updated, to turn that aspiration into reality.

Luckily, my LBS colleague John Morecroft showed me what “system dynamics” could do. A straightforward method developed at MIT in the 1960s that captures how the real world works (... and not just for business but for any economic, social or environmental field). 

It’s all about “resources.”

At the time, Strategy academics were interested in how “resources” enabled a business to perform. However, they misunderstood what those resources are, and how they work together, like a machine, to drive sales and profits.

But that was precisely what system dynamics could do! All I needed was to specify those resources correctly and figure out how they were connected, then build the system model and kick it into life. 

That key piece of paper.

I can still recall sitting in that Boston hotel lobby, trying to figure it out. An hour later, I had this picture - a visual structure for how any business works.

The logic of this structure is simple, but unavoidable ...

Customers drive sales and revenue

Products, marketing and price win and retain customers

Staff and capacity provide the means to satisfy customers' needs

Staff, capacity and marketing drive costs

Take those costs from revenue to get profit, which grows our cash

Some cash we re-invest; some pays tax and interest; the rest goes to the owners

Certain cases need small adaptations, such as for cost-of-goods and gross margin, or for intermediaries like retailers. But this is essentially the “strategic architecture” of any business, and indeed many non-business organisations. 

Bring strategy to life.

Add the numbers to everything on that picture and how those numbers depend on each other. Suddenly, your business model is not some stone statue, but a living entity - a "digital twin" that matches the real business. So I realised that we can simulate our plans against any range of scenarios with real-world data, helping to make bullet-proof, joined-up decisions.

Any issue, initiative or challenge

The next thing I realised was that the principles that can get us to a whole-business plan also work for any part of the business. And that means we can tackle any issue, initiative or challenge - in any function or team, of any scale. From fixing a local service quality issue up to planning and implementing a major product launch or improvement program.

(Looking back, I might have expected to crack the 'parts' problem first, before putting the parts together - but no, this is how it happened). 

Beyond the spreadsheet - way beyond!

It was all very well having a rigorous and comprehensive view of how a business system works. But how to actually model that system, with numbers, to mimic the system's quantified behaviour?

Right from getting those first insights, it was never likely that this could be done with spreadsheets - you can't get your head around the arithmetical relationships around a system of multiple, interdependent factors by peering at rows and columns of numbers. Visual modeling software was already available, but was clunky and technically hard to use. So I had the 'Silico' app developed (or at least it's great-grandma), to work in the best way possible for business purposes.

This changes the way you make plans and decisions.

Seeing your business through these digital-twin business models transforms how you develop plans, tackle challenges, and make decisions. Because instead of looking at isolated, static numbers, you will look at how the whole system works. You can see the few key levers and how to use them to steer that system.

Ever since I drew this picture, I've taught this method at business schools worldwide. Written books. Built models to solve business challenges. Developed simulation-based learning games. Created courses for leaders and analysts.  

Embraced by leaders

Senior leaders and analysts across diverse industries have used the method. From banking to software. Consumer brands to transport.

Leaders and analysts use this framework to make strong plans and big decisions. From optimising marketing impact to averting business collapse; fixing service quality to raising finance for new ventures.

Today, I would like to share this with you.  

Your planning and decision-making are about to get a whole lot better.