Why Does Strategic Planning So Seldom Result in…a Strategy?

Having been involved in strategic planning over my corporate career, I thought it pretty standard that the purpose of strategy development was to come up with a “strategic plan”. A document that dutifully incorporated a vision and mission, that laid out the numerical aspirations for revenue growth or gross margin, that identified the sources of new revenue or margins improvements and then, once beautifully edited and designed, made its way onto the managing director’s shelf…never to be seen again.

It certainly wasn’t lost on those of us on the management team that creating a plan for attaining an uncertain future in an uncertain environment was “challenging” and required a leap of faith in our ability to foresee the future. Nonetheless, it was the thing that management teams did to provide good governance and strong leadership, so we conformed to this traditional thinking. We lifted the bar by presenting this carefully crafted plan to our senior leadership in a clear and polished manner to show them that their management team had its hands firmly on the reins – we could see the future and it was clearly in our strategic sights. What we didn’t do was make a difference…

Colorful document binders: SWOT, competitor analysis, operation and financial report place on graph analysis and business plan chart, concept to business plan management

Planning blinds us to the need for strategic action

These strategic plans shared a common trait with many strategy-making approaches – although rich in planning analysis they were low in strategic action. It’s because strategic thinking is uncomfortable – it brings you face-to-face with the unknown. It forces business leaders to contemplate and, ultimately, commit to a strategic direction for which there is no certainty of success.

To ease our discomfort and create the much-needed illusion of certainty, we retreat to the analytical environment. We embrace the traditional strategic planning processes of in-depth cost-based analysis for demonstrating how financial targets and metrics will be achieved. We develop the business case to justify expenditure on strategic initiatives, infrastructure investment or geographic expansion. Far too often, we create new organisational structures that seem better suited to deliver the business’s financial goals.

However, it ignores the fact that the business might well be able to control its own cost and organisational structure, but control over revenue is firmly vested in our customers. How the market will evolve and where customers choose to spend their money is a highly uncertain proposition. The business’s influence over that environment is usually fraught with trial and, God forbid, error. No amount of planning will make revenue magically appear – only action will.

As a result, too few of the questions that are hard to answer get asked…

  • What could we do differently that would make the market sit up and take notice?
  • What service or product could we start offering that is missing in the marketplace?
  • What problems are our customers having that we could help them solve in a way that no one else is?
  • How do we offer exceptional value at an attractive price?

This means that we often give little thought to what is arguably the most important part of any strategy: what you’ll DO differently or better to attract and retain customers in a way that matches your business aspirations. Most importantly, there is little to inspire the organisation to action or to serve as a guidepost for a thriving, new business direction.

If you struggle to implement your strategic plan, you’re not alone

Research shows that the success rate for the implementation of strategic plans is dismal, with the percentage of failed implementations ranging anywhere from 63% to 90% depending on the research. In fact, Robert Kaplan of the Balanced Scorecard fame (1996, 2000, 2008) estimates that 90% of strategies fail due to poor execution.

McKinsey & Co have found that only 23% of companies use a formal process to operationalise important strategic decisions. In 52% of companies, these decisions are made by a small senior group and poorly communicated to the rest of the organisation.

As the business world becomes ever-more dynamic and strategic planning cycles shorten (from 5- to 2- or 3-year plans is now the norm) it becomes even more difficult for your business to connect a high-level strategy with execution; particularly, when “the plan” doesn’t include an execution strategy.

Move strategy from planning to doing

To keep up with the pace of today’s business environment and get better at strategic activity, stop creating plans and start doing projects. This seems counter-intuitive. Surely, you need to plan projects – not just go out and start doing them. Absolutely. However, the major fallacy with strategic planning is that you can create a structured plan for the unknown and, in some cases, the unknowable. Clarity comes on the other side of action not planning.

By translating your strategy into a portfolio of projects allows the business to imbue its strategic vision with action. America’s Cup captains don’t simply plot a course then adjust the rudder and trim the sails to follow that course. They read the wind and the water and make manoeuvres that take advantage of the conditions at any given moment. Then they look for the impact on boat speed and direction to ensure that they’re going as fast as possible while still heading toward the next mark.

By all means, do business planning but let strategic action inform your plan rather than trying to plan your strategy. In his excellent 1994 book The Rise and Fall of Strategic Planning, Henry Mintzberg made the powerful distinction between “deliberate” strategy, which is intentional and carefully planned, and “emergent” strategy, which is a company’s strategic response to the changing business environment. More than ever, the need for a less deliberate strategy and more of the emergent strategic approach is required to thrive in today’s volatile and disruptive environment.

Incorporating a project approach into your emergent strategy enables the following:

  • Collaboration rather than communication. In Forbes FD’s 2010 Strategic Initiatives Study, they found that 90% of CEOs and Strategy Managers believe that communications is critical to the success of a strategic initiative and the study identifies “buy-in” between strategy developers and executors as the single biggest reason (~50%) that they fail. Although effective communication may be a means of starting to close this gap, collaboration is better. A project framework creates a collaborative environment for strategy execution that allows buy-in to shift to ownership.
  • Fail fast. There is ever-greater pressure on organisations to see a positive return on their strategic investments as resources (time, people and capital) become scarcer. This has the unintended result of making strategic initiatives safe – often uninspired and lacking creativity. Short, sharp projects that explore viability or pilot new offerings allow you to test ideas in practice with minimal investment and/or business risk. This allows management teams to become more experimental or adventurous in their strategic exploration. It affords the opportunity to get comfortable with the discomfort of the strategic landscape.
  • More effective teams rather then re-organisation. By focusing on creating effective project teams first and then deciding on the organisational structure that best supports those teams, you create a foundation for better engaging your people and leveraging your leadership. As you start to use cross-functional project teams, you will see your organisational structure as more of a hierarchy that supports and cares for your people rather than one that commands and controls strategic activity.
  • Attention out rather than direction in. Projects can be brought to bear on the uncertainty of the external – on your customers and your market. Rather than directing and measuring the activities associated with a carefully crafted strategic plan, management can create projects that explore how to create greater value for your existing customers or be compelling to a new market segment. By testing new products and services, exploring ways of reducing product or operational costs or determining the levels of service that keep customers coming back, you generate the strategic activity that creates meaningful value for your business.

By maintaining a portfolio of projects that translate your strategy into operational action, you can continuously adapt your company to the shifting market and keep moving towards the business that you aspire to be. More likely, you’ll discover new paths to success and even greater strategtic possibilities will emerge out of the changing business landscape. It will allow your business to move your strategy from being a planning activity to being the basis for what your people DO every day.

Questions for consideration

  • Does your strategy-making approach consist of planning or doing?
  • How successful are you at implementing your strategy?
  • Is your strategy embodied in a plan or reflected in the value you deliver to your customers every day?

I’d love to hear your thoughts and experiences in the comments below.

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  1. […] Having been involved in strategic planning over my corporate career, I thought it pretty standard that the purpose of strategy development was to come up with a “strategic plan”. A document that dutifully incorporated a vision and mission, that laid out the numerical aspirations for revenue growth or gross margin, that identified the sources of …  […]

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