Strategic Planning: Central for Success or Bureaucratic Requirement?
Expert Piece by Michael Stoica, Professor, Washburn University School of Business
Strategy and strategic planning are topics that ignite interesting, and at times, passionate debate in literature. The following pages include some of the thoughts and contributions to the debate.
Organizations need direction, guidance and goals to work toward. Strategic planning represents the main tool an organization’s leaders use to this end. It represents the process of setting goals and creating a blueprint for the entity’s future.
Since the essence of strategy is to create tomorrow’s competitive advantage faster than competitors mimic the ones you possess today, strategic planning should incorporate and/or reflect the competitive moves and business approaches management employs to steer the company forward. It should summarize the game plan to please customers, position the organization in the chosen market(s), compete successfully and achieve desired performance.
The major tasks of the strategic management process include:
developing a strategic vision and mission
setting goals
crafting the strategy to achieve the goals
implementing and executing the strategy
evaluating and making corrections
Thus, strategic planning should incorporate, in a smart and concise manner, these tasks and should display collective wisdom building, rather than top-down or bottom-up planning.
Below, famous quotes on (strategic) planning could be easily divided into those that praise planning and those expressing doubt about the need for, or the usefulness of, formalizing the management strategic thoughts into a written document.
In resonance with the quotes expressing doubts about strategic planning, Roger Martin published in 2014, and later in 2018, in the Harvard Business Review, “The Big Lie of Strategic Planning,” opining that the typical approach to strategic planning is not useful for companies. The plan might be comforting but it’s not useful.
Indeed, in his view, the typical strategic plan is not action oriented, it does not question assumptions, it uses a self-referential framework, and the income statements (part of the plan) assume revenues within the company’s control.
The word strategy is almost always paired with the word plan, and that constitutes a trap. Thus, strategic planning represents a comfortable exercise but also represents an ambush.
Martin argues that strategy making should be uncomfortable; it’s about taking risks and facing the unknown. The predictability of costs, since strategic planning is almost always cost-based driven, represents another trap. Revenues are consumer dependent, therefore not under the company control, and are hard to predict.
The author suggests ways to escape such traps:
keep the strategy statements simple
recognize that strategy is not about perfection
make the logic of the plan explicit
Mintzberg, in his seminal work published in 1987, advances five different definitions for strategy: plan, ploy, pattern, position, and perspective.
Strategy as a plan is a consciously and purposefully intended course of action, a set of guidelines that are designed in advance of the actions to which it applies. In this sense, strategy is a complete plan, specifying what choices the organization will make for each situation (as such, the definition is borrowed from game theory).
However, for Mintzberg, a strategy can also be defined as a pattern in a stream of actions. The organization does not have a formal plan; yet its strategy can be inferred from the pattern in behavior that can be observed.
Strategy can also be defined as a position, that is, a means of locating the entity in its environment, in the place it generates returns, or, as it is called in management theory, a product-market realm. Strategy as a perspective, as defined by Mintzberg, refers to an integrated way of perceiving the world.
All these definitions are not incompatible with each other. They interrelate: A plan may describe the ploy to outwit the competition, that can ultimately help develop a perspective. A pattern can emerge and be recognized as such within an overall perspective, which in turn will give rise to a formal plan.
Many successful companies, start-ups or well-established and mature ones with revenues in the order of tens of billions per year, do not have a formal strategic plan and, according to their founders and/or managers, never developed one.
There are many thriving companies in Topeka and in Kansas that do not rely on strategic planning, that is, they do not have a formal strategic plan. That does not mean that intentions have never been formulated and articulated by the central leadership.
It means that the management adopted, explicitly or not, their strategy as a pattern, position or perspective as the main approach. Planning is everything, as suggested by Eisenhower, and those companies engage in planning, they just do not ratify it in a detailed strategic plan. Based on their planning efforts (meetings, discussions, debates, analyses, etc.), they manage to develop a perspective and foster a pattern of behavior that is strategic and make their business thrive.
TK
