A strategy for strategic planning
For many companies, strategic planning is one of the most important and time-consuming exercises they undertake (hopefully) on a regular basis. Without a doubt, a well crafted strategic plan can improve competitiveness, business performance and morale. Since companies are not equally profitable or competitive it would not be a stretch to suggest that bad strategy is responsible for many of the differences between them.
Obviously, capabilities, competition and financial position have a major impact on plan success. However, I have learned through consulting to dozens of organizations that bad strategy can result from problems in their strategic planning approach – if there is one.
Weak thinking = poor plans
Strategic plans that miss the mark share many characteristics, including:
- Aping one’s competition – Firms are often under the mistaken belief that they can go down the same strategic path as their competitors but somehow achieve better results. Management over-reliance on benchmarking and best practice analysis can easily lead to “copycat” strategies that do not deliver strategic differentiation and are not a good fit with the company’s capabilities and culture.
- Over-emphasizing the customer – It’s natural for strategy to fall out of a focus on the customer, with lots of attention paid to the value proposition and branding. Giving short shrift to other vital areas of the business – supply chain, HR and customer service – creates significant operational and financial risks and reduces the likelihood that the company will capitalize on opportunities.
- Using fuzzy metrics – In their zeal to measure progress, managers often create a laundry list of (often conflicting) goals, which masquerades as strategy. In other cases, firms neglect to choose any metrics making measurement impossible. Goals are the outcome, not the source, of a strategy.
- Lacking practicality – Weak strategic plans are overly long, lack focus, are full of fluff and short on actions. All too often, manager’s substitute disciplined planning for blue sky thinking with no clear idea how to get there.
A number of process and psychological factors lie at the heart of bad strategic thinking, including:
- Vanilla approaches – Too much strategy is developed as a ‘fill in the box exercise’ using templates that have little relevance to the business challenges or available expertise. These exercises rarely feature the deep strategic thinking (e.g., counterfactual analysis or simulations) needed to craft high potential/low risk plans.
- Hubris – Anyone who has ever participated in a SWOT analysis knows that managers regularly overestimate their firm’s strengths and underestimate their competitors, the potential threats they face, execution difficulties or the resources required. Furthermore, many cultures have an inward-looking bias that assumes their capabilities are market-beaters – which they usually are not.
- An inability to choose – Strategy is as much about what not to do and as it is about what to do. High levels of management ego and consensus-based decision-making will create conditions where firms are unable to focus on a few strategic priorities, resulting in tepid or confusing plans.
Getting strategy right
How can senior leaders ensure that the optimal level of strategic thinking takes place without stressing the organization? I have distilled down 20 plus years of strategy development and research into 3 best practices for creating winning strategy:
Get the right people meeting often
Strategy is best developed by a senior team representing the key functions and lines of business. These individuals should have an intuitive sense of the business and where it is going – what the Germans call a fingersptizengefűhl or fingertip feel. To foster healthy debate, participants should hold key personality traits such as critical thinking, open communications and introspection as well as being regularly engaged in the process.
Utilize the right process
Without a doubt strategic frameworks like Porter’s Five Forces or SWOT analysis are useful to understand a firm’s market position and recognize opportunities. However, an effective planning approach should also include other tools such as business simulations, failure analysis and game theory. These techniques will help produce breakthrough ideation, challenge assumptions & bias and dissect competitive threats.
Does it pass strategic muster?
Great strategy is powerful yet practical. It should:
- Emphasize a few, actionable priorities that will directly drive profitability and competitive position;
- Include a coherent operational plan that is coordinated between functions and business partners;
- Feature tight integration between the customer and operational sides of the business;
- Have an eye towards long term competitiveness and strategic flexibility without sacrificing its medium term focus;
- Demonstrate aspects of strategic uniqueness that can not be easily replicated by others.
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