For the past eleven years I have been teaching a class at the Wharton School of Business on strategic thinking/planning, and in preparation for my return in a few weeks for year number twelve, I decided to take a hard look at where the practice of strategic thinking and creating organizational strategy stands today.
During the past decade the velocity of change, hyper-fast technological shifts, globalization and turbulence in the global economy has dramatically impacted the way organizations create strategies. I have some very strong opinions about this, which I will share with you at the end of this article, but I thought this wonderful blog from the Harvard Business Review would be a good place to start a discussion on strategy, strategic thinking and strategic planning.
Don’t Let Strategy Become Planning By Roger Martin
I must have heard the words “we need to create a strategic plan” at least an order of magnitude more times than I have heard “we need to create a strategy.” This is because most people see strategy as an exercise in producing a planning document. In this conception, strategy is manifested as a long list of initiatives with timeframes associated and resources assigned. Somewhat intriguingly, at least to me, the initiatives are themselves often called “strategies.” That is, each different initiative is a strategy and the plan is an organized list of the strategies. But how does a strategic plan of this sort differ from a budget? Many people with whom I work find it hard to distinguish between the two and wonder why a company needs to have both. And I think they are right to wonder. The vast majority of strategic plans that I have seen over 30 years of working in the strategy realm are simply budgets with lots of explanatory words attached. This may be the case because the finance function is deeply involved in the strategy process in most organizations. But it is also the cause of the deep antipathy I see, especially amongst line executives, toward strategic planning. I know very few who look forward with joy to the commencement of the next strategic planning cycle.
To make strategy more interesting — and different from a budget — we need to break free of this obsession with planning. Strategy is not planning — it is the making of an integrated set of choices that collectively position the firm in its industry so as to create sustainable advantage relative to competition and deliver superior financial returns. I find that once this is made clear to line managers they recognize that strategy is not just fancily-worded budgeting and they get much more interested in it.
Obviously you can’t execute a strategy without initiatives, investments, and budgeting. But what you need to get managers focused on before you start on those things is the strategy that will make these initiatives coherent. That strategy is a singular thing; there is one strategy for a given business — not a set of strategies. It is one integrated set of choices: what is our winning aspiration; where will we play; how will we win; what capabilities need to be in place; and what management systems must be instituted? That strategy tells you what initiatives actually make sense and are likely to produce the result you actually want. Such a strategy actually makes planning easy. There are fewer fights about which initiatives should and should not make the list, because the strategy enables discernment of what is critical and what is not.
This conception of strategy also helps define the length of your strategic plan. The five questions can easily be answered on one page and if they take more than five pages (i.e. one page per question) then your strategy is probably morphing unhelpfully into a more classical strategic plan. This definition of strategy can be disconcerting to those who have spent a lifetime generating traditional strategic plans. Not long ago I facilitated a day long strategy session with the senior team of a very successful $10 billion company with an outstanding CEO. By the end of the day (in part thanks to a goodly amount of pre-work by the head of strategy), we got to a nice set of integrated choices. I congratulated the group on its great thinking and working and affirmed what I judged to be an excellent strategy.
My enthusiasm notwithstanding, the CEO was troubled. I asked him why. “Is that all we have to do?” he asked, as if he thought he had cheated on an exam. I am sure he expected that he had to fill binders and long lists of initiatives to feel that he had been thorough in this year’s strategic planning process. I reassured him that he had given strategy anything but short shrift. And that day strategy prevailed over planning. I suspect that CEO will never go back.
So if you pass the five-page mark is time to ask: Are we answering the five key questions or are we doing something else and calling it strategy? If it is the latter: eject, eject!
Roger Martin (www.rogerlmartin.com) is the Dean of the Rotman School of Management at the University of Toronto in Canada.
Five questions, five pages, not a budget… I agree completely with all of these, I very much like the way Roger Morton approaches the idea of strategy and strategic planning. Let me share with you some other fantastic thoughts from a gentleman named Max McKewon who wrote a superb book called: “The Strategy Book” (super creative title!!). Here are a few samples of what resonated with me out of Max’s book…
“There are strategy tools and processes that can help, but the real heart of strategy is the strategist. It’s what you know, how you think, and how you get people to care enough about what you’re doing to achieve your goals.”
“There is no guarantee that the future will turn out the way you want. Just writing a plan does not mean that the plan will happen. The world is more complex than our ability to plan, but that’s part of what an effective strategist learns to accept. You learn that reacting and responding to events is just as important as planning.”
“Strategy is about the shortest route between means and ends. It’s either about out-thinking the competition – or – even better – about finding new, even greater opportunities. Opportunities that the competition hasn’t found yet, or opportunities the competition doesn’t understand because it hasn’t been doing the kind of thinking that you have.”
“It’s possible to be a strategic thinker without using any strategy tools, but it’s not possible to create brilliant strategy without being a strategic thinker. There is an important difference between creating strategy documents and creating strategy to get you where you want to be. There’s also a valuable difference between managerial thinking and strategic thinking.”
“It’s difficult for some people to accept that reacting (not just planning) is a good thing. Managers have been taught the value of being (or looking!) organized. They have learned that being “proactive” is what the business world wants. They have been told that being reactive is a bad thing. It’s good to plan but it’s bad to think that you can plan for everything. You need a prepared mind ready to recognize unplanned opportunities.”
Reactive as well as proactive – being a strong strategic thinker- understanding that the complexity of today’s business world is too great to plan long-term – yet that it is still imperative that you make a plan… again, I find myself in very close agreement.
Here are a few things that I’ve learned in more than a decade of thinking about and teaching strategic thinking/strategic planning and conducting hundreds of strategic planning retreats…
Effective strategy = valued differentiation x disciplined execution
Please reread the equation I just presented, it is deceptively simple and extremely powerful.
One of the main talents of a great strategic leader is figuring out what NOT to do.
Again, please reread the idea I just presented, it is deceptively simple and extremely powerful.
Max said in his book, but I will reiterate it here, it is impossible to create great strategy without being a great strategic thinker – unfortunately the vast majority of managers/leaders that I work with do not invest an adequate amount of time in building their business acumen and exposing themselves to great/unique/different/new ideas – which is exactly what they must do if they endeavor to become a strong strategic thinker. The first step of being a superior strategic thinker is being a lifelong student of business, strategy, marketing, positioning, branding… all the elements that create differentiation.
This is exceedingly simplistic, but I basically see the entire process of creating an effective strategic plan as six core steps:
- Investing time and real effort in “strategic learning.”
- Combining strategic learning with your actual industry and organizational experience.
- Looking for patterns/anomalies/trends that would point to a potential strategic competitive advantage.
- Creating a dynamic strategic plan that offers true valued differentiation to your target customers.
- Creating a very specific, measurable and binary strategic execution plan that ensures your great ideas will turn into effectively executed actions that can be tracked, measured, coached, improved and amended as changes occur in the marketplace/competition.
- Review and evaluate the effectiveness of the plan often – return to step one and start the process again.
As I look over this list a few things come to mind:
- Far too few leaders spend enough time in strategic learning.
- Far too few leaders spend enough time looking for patterns.
- Unless you work in a highly stable industry – most strategic plans today only look out about 18 to 24 months.
- Most organizations do not revisit their plan often enough to keep it fresh, agile and adaptable.
- Far too few organizations invest an equal amount of time in strategic planning – and strategic execution planning. The best ideas in the world are useless if they are not effectively executed, therefore the leaders of the organization should invest a significant amount of time in ensuring that their spectacular strategic plan will be efficiently and effectively executed with high levels of both personal and mutual accountability across the entire organization.
- Far too few organizations take the time to do an “after action review” of the strategy from the last year – whether it was successful or unsuccessful – so they never truly learn from their failures or successes.
- Far too many organizations, as was mentioned in the blog post above, are basically run on a budget that is called a strategic plan – managed by numbers and financial goals – not by a true strategy that would allow them to create a defendable advantage through offering something unique, differentiated and highly valuable to the marketplace.
Well, I think that’s enough for right now, my main goal in this memo was simply to get you thinking about strategy, strategic thinking, strategic planning and strategic execution.
I very much welcome your questions, comments, thoughts and suggestions – there’s still much to be learned about the art of strategy.
Take good care, and as always if you need anything please do not hesitate to send a note or a call, I’m here to assist in any way I can – John
John Spence has twice been named by Trust Across America as one of the Top 100 Business Thought Leaders in America and has been recognized by that organization as one of the top 100 Thought Leaders in the world in the area of “Trustworthy Business Behavior.” Other recipients of this award include: Sir Richard Branson, CEO of the Virgin Group, Howard Schultz – CEO of Starbucks, Tony Hsieh - CEO of Zappos, acclaimed business consultant Ram Charan, internationally renowned author Thomas L. Friedman, and business authors Patrick Lencioni, Tom Peters, Rosabeth M. Kanter and Jim Kouzes. In 2011 John was also selected as a leading small business influencer in America along with Malcolm Gladwell, Seth Godin and Apple.