Strategy Versus Strategic Planning
Posted By Rob Millard - 0 Comments -
Strategic Planning, some say, is a contradiction in terms. All planning that is done centrally should be of a strategic nature anyway, they say, or why waste the time. Yet others remind us of the need for strategy to be able to evolve with the market, which precludes grand, "Soviet style" long term planning. This may all sound a bit semantic, but in fact there are some very fundamental reasons why crafting strategy around a grand "strategic plan" often leads to poor [or no] execution.
Perhaps the best description of the most fatal fallacies is to be found in Henry Mintzberg's classic, 'The Rise and Fall of Strategic Planning' (1994.) In his book, Mintzberg rails against the over-formalization and control that had become prevalent in strategy:
"The whole nature of strategy making - dynamic, irregular, discontinuous, calling for groping, interactive processes with an emphasis on learning and synthesis - compels managers to favour intuition. This is probably why all those analytical techniques of planning felt so wrong.... Ultimately, the term "strategic planning" has proved to be an oxymoron."
The three "fallacies of strategic planning" that Mintzberg describes, are as follows:
The Fallacy of Predetermination. Strategic planning only makes sense if the strategist can predict (or alternatively control) the likely future of his or her organization. This implies predicting or controlling the market and other external variables, too.
The belief that predicting the future with any degree of precision is no longer held by anyone in possession of his senses. While seasonal variations and other obvious fluctuations might be predictable in some circumstances, forecasting is a notoriously unpredictable art. The obvious deduction from this is that a firm's strategy needs to be resilient enough to yield competitive advantage under a range of possible future scenarios. This, by definition, precludes the use of a rigid plan.
The Fallacy of Detachment. Traditionally, strategy has been something that is 'done' by a strategy committee or the business's executive, with little reference to the people who would actually execute it. This meant that the "detail," (i.e. data that was critically needed to determine what was appropriate and even possible,) was excluded from the process. The strategists sat in an "ivory tower," poring over reams of analysis and thinking up the best theoretical strategy that the "hard data" indicated.
The result, again, was a complete failure in execution. The people responsible for execution realized the gap between what the plan required and what the "real world" dictated and, being sensible, defaulted to the latter. "Hard data" and analysis have significant shortcomings if they are used as foundations for strategy, rather than tools to assist the process. These include:
a.It is often very limited in scope. Numerical data in a client survey does not convey the body language of the client, or the questions that were not included in the survey that would have yielded very different data. Yet this kind of qualitative, as opposed to the far neater quantitative data, is much more difficult to collect or analyze. It does not make for tidy pie charts and trend graphs.
b.It is often too aggregated to be of much use in strategy. In an effort to reduce information overload, and also to create graphics that present a neatly summarized picture, data is often over-summarized and aggregated. Does "3.5 out of 5" as a score on a survey question mean answers all grouped between 3.4 and 3.6, or widely ranging between 1.1 and 4.9? Clearly, this level of detail is critical. Is the sample size in a firm of, say 500, 50 or 450?
c.It lacks timeliness. Much of the data that is collected and analyzed is historical in nature, which makes it of limited value for determining future trends. (See the 'Fallacy of Predetermination' above.) By the time that sufficient data is available to indicate a trend, a disruption in the market (e.g. entry of a new competitors, new technology, changes in a major client, or the defection or recruitment of key talent) may have changed the trend looking forward, fundamentally.
d.It is unreliable. Data is often far less reliable than the attractiveness of its presentation by a consultant or the firm's internal analysts suggests. Blindspots, flaws in the collection process, inadequate sample sizes and other distortions both intentional and accidental all take their toll along the way from the real world, to where the strategist uses the data to base decisions upon.
The Fallacy of Formalization. This fallacy holds that the myriad variables and contingencies that need to be addressed can be formalized into a strategic plan. Like innovation and creativity, strategy by definition needs to exist outside of "boxes." A rigid strategic plan assumes that systems are more effective at managing the task of navigating the firm through a changing environment, than human insight, creativity and innovation. This is patently false.
So, what is a firm to do? The responses have been varied. One is to just keep on practicing, taking each day as it comes, without much of a plan except to serve clients and do work. Another common response has been to shorten the planning cycle, but still to rely on plans. (Let's face it, whether at the strategic level or the tactical level, some level of planning is still required if anything is to be achieved.)
The solution, of course, is not to scrap planning entirely, but rather to focus on developing resilience and agility in the firm so that when it does become necessary to change direction, one does not have to go back to a laborious planning cycle. In the best firms, it is not so much the process of strategy that has changed, as the ability to move through the strategic cycle of watching, thinking, executing and learning far more quickly and decisively. It is the ability to iterate continuously between strategy formulation and execution that keeps the firm's direction fluid enough to seize opportunities and ward off threats as they emerge, without losing its sense of direction.
As recently as five years ago, this was fine in theory but extremely difficult to achieve in practice. Today, however, we are seeing tools emerge that are going to fundamentally change the way in which people in firms communicate with each other, and with their external environment. It is extremely likely that as soon as three to five years from now, the archaic approaches to strategy that preoccupied us in the latter years of the 20th century, will go the way of the dinosaurs.
By the way, Mintzberg's book Strategy Bites Back is also absolutely essential reading for the 21st Century professional service firm strategist!
