When I read management articles about the death of strategic planning, I am reminded by the quote Mark Twain quipped after hearing a major American newspaper printed his obituary:
“The reports of my death are greatly exaggerated.”
Yet there is some truth to the idea that strategic planning is dead. At least the traditional method of strategic planning many companies subscribe to.
Traditional strategic planning is based on a top-down, command and control process. Where the senior management team define “the plan” based on detailed analysis of competitive playing field (industry and market situation), and define a step by step game plan, when executed, achieves their business objectives.
The problem with top-down, command and control planning
Henry Mintzberg, an internationally renowned thought leader in strategy identifies three fallacies of command and control planning:
First is the fallacy of predetermination.
When we believe we can know the future, we are led to create a “rock-solid” plan based on our “predict and prepare” line of thought.
Simply put, we can’t predict the future with any accuracy. There are too many variables (customer attitudes, demographic & socioeconomic shifts, technology innovations, regulations, environmental issues, etc.) and actors (customers, competitors, political agendas, regulators, etc.) who have a say on how the future unfolds.
Second is the fallacy of detachment.
This refers to the tendency of planners to remove themselves from the scene of action. It’s the “Ivory Tower” syndrome. Strategy is delegated to planners and formulated without direct contact with the realities of the playing field.
Third is the fallacy of formalization.
This is when we cast our plans in stone – or what some call the “binder” mentality. We create these detailed and eloquent plans that end up in a binder on the shelf, collecting dust. No on looks at it, thus over time it becomes detached from reality. It represents less and less what a company actually does.
We can’t completely predict the future, so why bother planning for it?
Since the future is difficult to predict, perhaps this is why many companies believe strategy planning is dead. The environment is too dynamic to predict, the strategy will probably be wrong. So instead, don’t waste time creating plans that will most likely be irrelevant as the future unfolds. Instead, be fast and nimble and execute on the fly.
Being fast and nimble, with the capability to execute on the fly is a strategy!
But being fast and nimble without a clear definition of where to play, and how to win, the strategy becomes what Miles and Snow call a reactor strategy. A reactor has no consistent strategic approach; and drifts with environmental events, reacting to but failing to anticipate or influence those events.
Hardly a winning strategy for long-term success.
Integrating top-down and bottom-up strategy to achieve success
Top-down strategy and bottom-up strategy taken in isolation leads to poor strategy. Instead, what is needed is a combination of the two planning methods.
Top-down sets the direction of where a company will play, and how to win. It is expressed as strategic intent, or commander’s intent. It describes “what victory looks like” at some point in the future.
Strategic intent often is articulated in vision and mission statements
From strategic intent, a “deliberate” strategy is formulated. Deliberate strategy outlines exact business intention. It specifies clear goals and objectives, and a series of metrics the organization will use to measure its progress and success.
The business then coaches employees to work together in all aspects of accomplishment of these goals. Employees must think through and discuss all actions in the interest of matching company goals.
Deliberate strategy shouldn’t be confused with the top-down command and control dogma. Deliberate strategy is not about creating a fool proof strategy cast in stone, but rather a clear definition of where to play, how to compete and what victory looks like.
From the bottom-up, strategy emerges
As the organization engages in the market place, it discovers what works and doesn’t work. This when bottom-up strategy connects top-down strategy. And the overall strategy evolves, or emerges, to fit the realities of the playing field.
When strategic intent is properly communicated and understood, employees have the framework to make good decisions, and take necessary actions to win customers and beat the competition.
The actions that an organization takes forms what is called emergent strategy. Also called realized strategy.
According to Mintzberg:
“Strategies can be planned and intended, they can also be pursued and realized (or not realized). And pattern in action, or what we call realized strategy, explain the pursuit.” He goes on to say:
“In practice, of course, all strategy making walks on two feet, one deliberate, the other emergent. For just as purely deliberate strategy making precludes learning, so purely emergent strategy making precludes control. Pushed to the limit, neither approach makes sense. Learning must be coupled with control.”
Strategy making like innovation, is a learning process
I have argued in the past that strategy and innovation are different sides of the same coin. They both focus on where to play, and how to win customers. And both are grounded in the reality that we don’t know what we don’t know.
Like the innovation process, strategy making (versus planning) is an adaptive and learning process that starts with a direction (vision, mission, objectives), defines a set of hypothesis (or assumptions), and proceeds with a set of experiments to discover what’s real, what’s not, what works, and what doesn’t work, to adapt and shape the overall business strategy.
In future articles we will examine strategy making frameworks that integrate deliberate strategy with emergent strategy.
Play to win by knowing where you want to go, and adapting to the realities of playing field.