Eddielogic

– Thoughts on Strategy and Management

“De-Stranding” the Strategic Planning Process – Follow-up

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I promised to follow up my latest post about the AT Kearney article on Strategic Planning with some more thoughts. Here are some issues on which I want to elaborate a bit further.

The authors write

‘As most people are painfully aware, few … were able to foresee the chain of events in 2008 that plunged the world into recession. Of those who did foresee the meltdown, still fewer were able to prosecute a strategy to mitigate relevant risks. It is not surprising, therefore, that in a survey of global business leaders conducted last year by our Global Business Policy Council, more than half of all leaders were focused on improving their strategic planning processes and tools in the aftermath of the 2008-2009 recession.’

This is true, but it is too simple a conclusion that an improved strategic planning process would help to foresee events like those in 2008 and – even more – to mitigate relevant risks. I completely agree with the authors that today’s world is on of increased instability, volatility and complexity. I also agree with the fact that businesses need to improve their strategic planning activities and that this will help them to navigate through our volatile world. However, if they succeed in doing so, they will navigate directly into the next dilemma. Imagine you have identified serious warning signs of another meltdown or a development that hast the potential to shake your whole business model. The question is not only how to prepare for it. This would be difficult enough. However, there is a chance that the event in question will or will not occur. Can you prepare for both possible futures? For which one will you decide?

There is one phrase in the article that gives direction for these questions:

“To monitor developments in real time and develop contingency policies to respond to predictable and less than predictable events, companies need to create an ongoing, living process.”

Such contingency policies will be of two parts – what to do when a major event occurs and what should best be done before such an event occurs. Here businesses need to decide how much they are willing to invest in advance in order to prepare for some uncertain future events. If the event really occurs, this may become the best investment they ever made – if not it may be just sunk costs. If business leaders intend to improve their strategic planning process they have to be willing and prepared to take such decisions.

Another thought. Despite this good advice I am afraid it will be difficult enough for businesses to realize the proposed improvements in their strategic planning activities. Moreover, this will require some serious investments in time, manpower and management capacity. This is not a one-off investment where some changes are made and all is fine. If there already is a strategic planning department it may be enough to do different things or to do things differently (What a good opportunity to get rid of some old activities that don’t really deliver useful results). Nevertheless, even than business leaders need to be willing to invest more time in strategic thinking on an ongoing basis – more of their own time and of their whole management team. So if a company seriously intends to improve its strategic planning process and expects real results from it, it also has to solve this capacity problem. I am sure it is worth the effort.

My last point: We all agree that strategies need to be adaptive in our times of uncertainty and volatility. On the other hand, strategies are by their very nature long-term plans. That means that today much more than in the past companies need to balance the fine line between their long-term orientation and objective on one hand and the changing needs of a changing world on the other hand. This has always been a complicated task. It did not get easier over the last couple of years.

If a company is too often forced to amend its long-term orientation due to a changing environment, it risks serious damage to the culture and the common believes that hold the company together. New strategic initiatives will inevitably lose credibility and support along such a way. I think one solution to this dilemma might be the development of a long-term stable vision of what the company wants to be or wants to become. Such a vision has to be open enough to endure a volatile world with its necessary strategic shifts, as well as precise enough for not being completely random and exchangeable. Here we have the next complicated task.

But nobody ever said that strategy is easy.

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