A Better Form of Strategic Planning

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    Recently, we referenced a news item about the results of some research on the topic of strategic planning — and how it wasn’t really as useful as it could be. The authors of that research — Michael Mankins and Richard Steele, both with consulting firm Marakon Associates — have written an article for the January 2006 issue of Harvard Business Review, which is worth blogging about (which you can buy in reprint form here).


    So, if your organization doesn’t do strategic planning, how exactly do you get from here to there?


    According to the article strategic planning in most companies goes wrong in two ways.


    First, it typically happens once a year, frequently near budget time Business unit managers put on a “dog and pony show” for senior executives. There’s little tie, timewise, to those moments in a company’s journey where decisions need to be made that can have true impact on performance. These seemingly pop up haphazardly like mushrooms after a rain. (The authors define these strategic decisions as having the “potential to increase company profits by 10% or more over the long term.)


    Second, strategic planning almost always takes place business unit by business unit. Cross-unit planning is a rarity among companies. Often, the article says, these meetings “amount to little more than business tourism. The executive committee flies in for a day, sees the sights, meets the natives, and flies out. The business unit, for its part, puts in a lot of work preparing for this royal visit and is keen to make it smooth and trouble free.” Frequently, what’s presented is what shows that unit in its best possible light. Constructive dialogue is a rarity.


    How do you get out of this rut?


    The approaches vary from company to company, and the article shares the details of several success stories. A key aspect is to “separate — but integrate — decision making and plan making.” This means taking executive decision making out of the track of traditional planning and running it in parallel. As they write, “Identifying and making decisions is distinct from creating, monitoring and updating a strategic plan…”


    This parallel process focuses on the most important issues facing the organization. These probably cut across business units and the annual nature of traditional planning. The themes or decisions that emerge can, in turn, help drive the units in specific ways by driving updates to the budget, capital plans and operating plans.


    Another characteristic of the new approach to strategic development is its form as a continuum. Reviews are spread throughout the year, with a focus on one or two issues at a time, until a decision is made (a product is launched) or market conditions change (a competitor is acquired by another competitor). As one issue is resolved, another can be added to the plate.


    Last, the strategy reviews are intended to “produce real decisions.” One company dedicates two half-day sessions to its issues. The first half-day is spent agreeing on the relevant facts — profitability of markets, actions of competitors, purchase behavior of customers, and a viable set of alternatives. The second half-day is focused on evaluating the alternatives strategically and financially and selecting the “best course of action.” Whereas the average company reaches 2.5 strategic decisions in a year, this subject — Textron — resolves eight to 10 issues in a year using its approach.


    I always thought tacking on the word “strategic” to “planning” when it came to executive-level thinking was padding the obvious. After reading this article — and pondering back to the planning meetings I’ve been involved in through the years — I’d have to say, the authors have a point. If truly strategic decisions tend to pop up under the traditional strategic planning process like mushrooms, why not develop a mushroom cultivating operation where you have more control over conditions and output?


     

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