In Edition #8, we located the translation boundary: the point where a strategic decision becomes the signal presented for execution. In Edition #9, we followed that signal into the measures we use to judge success and separated completion from fidelity.
This week, we follow it one step further, into the next strategy.
Every planning cycle begins with what the organization knows about itself: last year's results, the current cost structure, the pricing in effect, the capacity in place. Leadership treats that baseline as the factual starting point, and it should. The question is what the facts contain.
Return to the expansion from Editions #8 and #9. A year later, leadership sits down to plan the next phase. The market is established. The baseline shows the realized margin, the discount levels customers now expect, and the capacity operations built to meet demand.
Each of those figures is accurate. Nothing in the baseline shows whether any of them was decided.
The margin reflects a trade-off that was never resolved at origin. The discount levels reflect precedents set by teams supplying an open parameter. The capacity reflects demand produced by those discounts. The baseline records what execution supplied and presents it as the condition the organization operates within.
This is the Inherited Baseline: the operating conditions a new strategy accepts as given, produced by choices the previous strategy left unresolved.
The new strategy may be rigorous. It can model the market, stress-test the targets, and survive executive review. But it is modeling from a starting point that already contains the previous signal's open variables, now carried as facts.
The pull of that starting point is well documented. McKinsey's research on corporate resource allocation found that, across industries, the capital a business unit received in a given year correlated at 0.92 with what it received the year before. In a related experiment, executives shown the previous year's allocation anchored to it, while those without it allocated according to the market outlook.
McKinsey frames this as inertia. Through the lens of the signal, it is more specific: when last year's figures anchor the plan, whatever those figures absorbed from unresolved choices carries forward with them.
Retroactive Intentionality, which we examined in an earlier edition, describes how organizations reframe drift as intent after the fact. The Inherited Baseline is quieter. No one needs to explain the drift, because it no longer appears as drift. It appears as the business.
In the sequence of Alignment → Decision → Action → Creation, what the organization creates becomes the ground the next alignment stands on. If creation carried an interpretation rather than the decision, the next cycle begins aligned to the interpretation.
This is how distortion can compound without anyone repeating a mistake. Each cycle can be executed well. Each strategy can be sound against the baseline it was given. The deviation travels forward inside the inputs.
At human speed, a long-tenured operator might remember why the discount floor sits where it does and question it. As more of the baseline is assembled by systems that record what happened rather than why, that memory carries less of the load. The data preserves the result. It does not preserve whether the result was chosen.
So the question at the start of a planning cycle is not only whether the baseline is accurate. It is which parts of the baseline were decided, and which were supplied by execution and never examined.
A strategy can only be as aligned as the conditions it inherits.
Action does not create the signal. It carries it.
The standard is alignment.
Source: McKinsey & Company, “How to put your money where your strategy is,” McKinsey Quarterly.