- “Planning is not the panacea for lack of a cohesive strategy”
Walk into a pottery centre and you will see craftsmen (or women) seated at their pottery wheel, crafting a pottery design of their own. Slapping on a lump of clay, combining their hands in a skilful motion of their nimble fingers, the potter begins to gently shape the clay as the wheel rotates, raising and smoothening the sides of the lump of clay, to craft an ornament, the image of which, is in his/her mind.
There are no drawing in front of them, there are no written specifications that guides their thinking nor the movement of their hands and fingers or the design of the ornament. Yet, going by previous interactions with their customers, they have a good idea as to what would appease them. The design, colours, sizes, finesse and utility value are all arising as a result of their previous experiences, interactions, skills, learning; combined and delivered to the delight of their customers.
This is strategy in the making! An iterative process, where an integrated set of decisions are made to determine a combination of choices that optimally guide the rest of the choices in the business, to generate a sustained superior performance over time. This is not strategic planning, rather a process that compels entrepreneurs/managers to think strategically in crafting a strategy that will deliver the desired results.
It is very common to see senior management of companies looking to carry out a strategic planning exercise to overcome organisational slack or in situations where performance requires transformational change. This is because of the belief that strategic planning process leads to the discovery of a strategy! Does it really?
What is a plan? A plan is essentially a coordinating and control document. Considering the limited resources that an organisation deploys to implement its pre-determined programs to achieve specific results in a defined period, a firm must ensure that such activities/programs are executed in a timely manner within the resources allocated and then monitored to ensure desired results are achieved.
Planning by nature is a formalised, rational process to produce an articulated result. Such rational planning implies that those who are planning has the ability know the attributes of the future; can accurately assess the strengths and weaknesses of the organisation; and be able to manage the desired change process that will align the organisation with projected future.
Think for a moment… is this the reality? In the real world, does the external environment you assessed remain constant during your planning period? Does your competitor go into hibernation, whilst you are engaged in your annual planning process? Are you able to sustain your performance with the strengths and weaknesses assessed, including the filled gaps during the planning process for the rest of planned period? Let’s look at a local situation.
Most organisation would have finalised their strategic plans for 2019/20 or longer, by February 2019 the latest. They step into the new financial year, buoyant with their new look strategy to achieve the lofty objectives they have set forth to achieve by the end of the year.
The carnage on 21 April, takes the whole nation by shock and a catastrophic hit on the entire economy. Do you think that any organisation would have had predicted such a phenomenon to occur? Did they factor this factor into their strategic plan? The tourism industry, one of the main sectors to be affected, are struggling to come out of this catastrophe. Is the resulting consequence effecting the strategic proposition of the firm? How do we respond? Go through yet another strategic planning process and come out with revised strategic plan? Is this the answer? We must realise that Planning is not an end unto itself.
Strategy of an organisation and strategic plans are not the same. Neither do strategic planning necessarily lead to developing a strategy for the firm. Crafting a strategy for the firm is better managed through strategic thinking, whilst planning and plans help codify such strategies and facilitate execution. Therefore, strategic planning is not a panacea for a lack of a cohesive stagy for the organisation.
Let us now try to understand what strategy is in the context of a business; a concept which in most instances is commonly misunderstood. To do so, it will be good to understand strategy from a position when firms feel that they do not have a strategy or that the strategy pursued is not robust enough.
Planning is not an end unto itself A firm must make choices that fit together in a holistic manner consistently, to succeed in its operating environment. Those choices are the essence of strategy Firms must continually question whether the core assumptions guiding their business are still valid?
Corporate management must go beyond the mundane stuff of signing-off annual strategic plans, monitoring achievements and taking corrective action to, simultaneously engaging in structured strategy discourses
They feel so when firms find; difficulty in growing their returns; gain market share; demand is slack; it difficult to face onslaughts from competitors and the like. What it essentially means is that the firm’s actions, while appears to be effective on a standalone basis, does not bring about the desired overall result. In other words, the different actions pursued by the firm, is devoid of a unifying logic!
For example, a firm pursuing a cost reduction program may successfully reach its target of costs to be reduced by slashing costs all round, but may in the process de-rail a staff development program that is designed to provide a unique and differentiating service to its customers.
Strategy of a firm must be determined by two fundamental decisions: Choosing where to compete and choosing how to compete. Simple in outlook, but the depth to which answers to these two fundamental questions are pursued determines the effectiveness of the strategy itself. Its purpose is to create a sustainable competitive advantage that generates superior, sustainable financial returns over the long run.
To attain this purpose and simultaneously answering the two fundamental questions means firms must strategically decide on an integrated set of choices that will lead to optimally guiding the rest of its choices. Narrowing down to the right set of choices is no easy task. This is where a combination of insights, foresight and cross-sight come into play.
A successful strategy will demonstrate consistency; consistency in regard to the several fundamental questions it must answer throughout its journey. Therefore, a firm must make choices that fit together in a holistic manner consistently, to succeed in its operating environment. Those choices are the essence of strategy.
Firms therefore, on an ongoing process, should be revisiting its fundamental questions, ask even more harder questions and keep renewing its choices in guiding the destiny of the firm. Firms must continually question whether the core assumptions guiding their business are still valid? Will such core assumptions be valid for the next five to 10 years to come by? This is managing your strategy.
Strategy forces us to confront the future, which we can only predict amidst uncertainties, ambiguities, complexities and volatilities. This means taking decisions about the future, over which we have very little control. In reality senior management may well fear of getting such decisions wrong, which can affect his/her career. Hence, the natural reaction is to make the challenges less formidable by translating it to be a problem that can be solved with tried and tested tools.
Psychologically the fear is removed. This is a high risk approach. Real life strategy is about placing bets and making some hard choices. It is about increasing your odds of success. Strategy is crafted through a simple, yet grinding process of thinking through what it would take to gain a market dominating stance and then assessing whether it is pragmatic to make the move.
So, how should we manage the journey of our business? We must understand that there are two major components to manage in this process. The strategy of the firm itself and the execution. These two elements should not be considered as a looping or a sequential process, but rather as a parallel process, with each element providing inputs to the other. It should be continuous and not an annual event. Strategy reviews must be spread throughout the year. For execution to have an impact, firms must make strategic decisions on a continuous basis, through the continuous identification and systematic resolution of strategic issues.
What we are discussing here, therefore, is an approach where decision making and planning are eventually integrated, though carried out separately. The two sets of tasks; one, identifying strategic issues and making decisions is distinct from the second, creating, monitoring, and updating a strategic plan, yet integrated.
Strategic discussion, debates must be focused on a few key emerging themes in the context of the industry(s) you are engaged in. For example, the impact of digitalisation, growth potential of a particular market, cyber security and so on. Once the firm agrees on a series of strategic issues by priority, the strategy discussions can be set up to discuss an issue at time over a period of time.
During these dialogues, the team will focus on reaching agreement on the facts surrounding the issues and then identify viable alternatives; such alternatives are then subject to evaluation (financial and other) from which the best option is selected. The decision on the selected best option is then transferred to the planning process, plans are updated to reflect the new option and integrated with the execution and budgeting processes. The result is an organisation that is current and relevant to the market, and in possession of an updated plan and budget.
For organisations that practice traditional planning processes to manage their businesses, may find it difficult to shift to a continuous review of strategy and decision making due to the established structures and how time is allocated between different management meetings.
However, organisations that wish to grow successfully must maintain a view of the long term opportunities for growth, whilst keeping focus on the short term. Normally, our eyes move together because of the way it is structured in the human body. Just imagine if we could move our eyes independent of each other. We can then focus one of our eyes on the near distance, whilst using the other eye to look further ahead, whilst walking. The management of the strategy journey is similar. We need to have a clear focus of both, the short term and the long term.
Organisations can set up different mechanisms to do so. Essentially firms must have in place a rolling six to 12 month agenda for its strategy dialogues and structure such dialogues to produce decisions. In order to ensure that there is agreement at the conclusion of each review, it will be prudent to organise such discussions/debates around facts, alternatives and choices.
Carried out with dedication and commitment, the continuous review and decision making will have a positive impact on the firm’s performance and long term growth. Whilst the company continues to focus on the future based on facts, alternatives and choices, the plans being executed at any given time will be relevant and deliver the desired results. Such practice will also bring about a culture of continually looking into the future, gain a better understand of the challenges the company faces and will improve the dialogue between staff at different levels.
Strategy dialogues stimulates strategic thinking. In the words of Henry Mintzberg, strategic thinking is about synthesis; it involves intuition and creativity. Strategy emerging from such an exercise must be free to appear at the right time and place and cannot be scheduled to be carried out annually to fit into the planning cycle of the firm.
The classic example of Honda Corporation entering the USA market illustrates this point very clearly. Honda entered the USA market with a clear aim to enter the big, macho motorcycle market that America was known for. However, after a failed attempt with the 350cc motorbikes, Honda’s success eventually came with their 50cc cubs. The rest is history.
Corporate management must go beyond the mundane stuff of signing-off annual strategic plans, monitoring achievements and taking corrective action to, simultaneously engaging in structured strategy discourses. Such mundane stuff are best left to operational staff. It is the review of the strategic issues, the selection of alternatives and deciding on choices that will provide healthy growth for the organisation.
(The writer is a Consultant Strategist and specialises in strategic thinking, growth management, leadership and change and international trade. He is a Senior Fellow of the Institute of National Security Studies of Sri Lanka. He can be reached at [email protected].)