Strategy or planning?


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Strategy or planning?

 

There’s a critical difference

As a strategy consultant, I have often been perplexed by the reluctance of many of my prospects to engage in a meaningful conversation regarding their organizational strategy. This is even more baffling because in almost every case they agree that such a process would be enormously advantageous to the success of their enterprise. This conversation often ends with the declaration that “now is not the time.” Such a response in these chaotic times is even more mysterious. This experience has been and continues to be of great interest to me and one I have given a lot of thought to.

I just recently read an article in the January/February Harvard Business Review by Roger L. Martin titled “The Big Lie of Strategic Planning,” which shed some light on why many executives, understandably, are not enthusiastic about discussing strategy.

Martin begins the article with a poignant assertion: “All executives know that strategy is important. But almost all also find it scary, because it forces them to confront a future they can only guess at. Worse, actually choosing a strategy entails making decisions that explicitly cut off possibilities and options. An executive may well fear that getting those decisions wrong will wreck his or her career.” He continues, “True strategy is about placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success.”

The author goes on to outline a typical strategy process by describing what he identifies as the three major parts of a strategic plan: first, the vision or mission statement; secondly a list of objectives; and the third being the financial statements. He sums up this process by saying, “Mistaking planning for strategy is a common trap.”

In essence, his concern is that building a plan to insure financial success is making an assumption that you can control the outcome. He stresses that this approach is basically “cost-based thinking” — reducing expenses versus creating revenue. The problem with this approach is that the organization can only control cost, while it is the customer and the marketplace that control revenue (except in the rare case of monopolies). Revenue is the standard that determines a business’s success. Martin summarizes, “The bottom line therefore is that the predictability of cost [the organization] is fundamentally different from the predictability of revenue (the customer). Planning can’t and won’t make revenue magically appear, and the effort you spend creating a revenue plan is a distraction from the strategist’s much harder job: finding ways to acquire and keep customers.”

Martin is a university professor and consultant whose experience is that managers often “overestimate their ability to predict the future and to plan for it in a precise and technocratic way.” Thus, most strategic plans are misdirected inwardly, where there is more control, rather than outwardly toward the customer’s needs. This inward thinking is mostly a process that focuses on the organization’s desires, rather than on building important relationships that support the needs of the marketplace, thereby producing revenue.

As I have often said, to succeed at reaching their organizational goals strategists must direct their energy and attention toward knowing the trends and countertrends, all the while building an organization that has the dexterity to respond quickly and operate effectively in an uncertain business environment. The focal point to develop a viable organization must be on the customer and the marketplace. The fact that this is usually missing in most strategy plans explains why many in leadership hesitate to follow the traditional strategic planning process, which results in the failure to deliver promised successes.

As Martin says near the beginning of the article, “A detailed plan may be comforting, but it’s not a strategy.” And he ends with this assertion: “If you are comfortable with your company’s strategy, chances are you’re probably not making the effort”. His article presents this dilemma with undeniable clarity, and I strongly recommend reading it in its entirety to get the full benefit of its value and worth.

Jon Craighead is president of Craighe ad Associates LLC. Email him at jon@craigheadassociates.com or visit www.craigheadassociates.com.

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