Creating Prepared Minds
I have discovered another kindred spirit in the form of Eric D. Beinhocker, author of The Origin of Wealth and Senior Advisor at McKinsey & Co. His article at Harvard Business School Working Knowledge, Creating Strategy in an Unknowable Universe, is worth reading carefully, and then reading again.
Here's an extract from the article (my emphases in bold.)
"I once worked with a very gruff, pragmatic senior executive who claimed not to believe in strategic planning, saying that it was a bunch of "pointy-headed nonsense." He was also very successful. He had taken a hodgepodge of industrial businesses in tough markets and managed to squeeze very good growth and margins out of them over a number of years. One day, I saw the advance materials for a strategic planning off-site and noticed that the analyses prepared by this executive and his team were by far the best in the binder.
The next day, I asked him, given that he had claimed not to believe in strategic planning, why he and his team had put so much effort into the analysis. His reply was, "I don't believe in planning. I do this so that we have prepared minds." Once I recovered from hearing this no-nonsense executive quoting Louis Pasteur ("chance favors the prepared mind"), the almost Zen-like wisdom of his remark sunk in. As he explained it, he and his team did not use the tools of conventional strategy analysis to make crystal-ball predictions about the future. Rather, they used the tools to provide context for making real-time decisions and to help them deal with all the uncertainties they knew would come their way. As we continued our discussion, he explained that the strategic planning exercise was a critical way to get his senior team to communicate. It gave them a common frame of reference for their businesses, a shared understanding of the facts, and a language for talking to each other.
A former senior executive at GE Capital told me about a similar philosophy he had in planning for acquisitions. He saw the point of strategic planning not as predicting the future, but as a learning exercise to prepare people for a future that was inherently uncertain. For example, he noted that he never knew when an important acquisition opportunity might arise. Even though he did not have a plan that said "we will buy companies X, Y, and Z," if company X did come up for sale, his team could get an offer on the table more quickly and with fewer contingencies than anyone else could, thus increasing the probability of success. The members of his team could do this because they had already gone through the discussion about the market, knew a lot about company X, understood how it would impact their economics, and so on. They already had a shared view on what the acquisition would mean for them. In other words, they had prepared minds.
The message is not to tear up your strategy books, but to think of the tools of conventional strategy analysis as having a different purpose. The purpose is not to get to the "answer" of a single focused five-year plan based on predictions of the future, but rather to create "prepared minds." This requires thinking about whose minds it is important to prepare and how one can best go about doing that.
For most companies, this shift in perspective implies a major redesign of the strategic planning process. Most processes are focused on creating plans and making decisions rather than learning."
Yes, yes and again, yes. This is EXACTLY what this whole thing that we call strategy is all about. NOT on a soviet-style grand plan, but about creating the resilience that the firm needs to achieve its objectives no matter what the market may choose to throw at it.
Hat tip to Systematic HR.
Comments as always are most welcome and may be posted below.
Rob: Thanks for the link and a reiteration of the HBS article. You said it much better than I did - not about a grand plan, but about resilience.
-Dubs