Yesterday as a manager and today as an entrepreneur, I confirm the complexity and multitude of the dimensions that the company faces in its strategic design process. Despite what the “experts” say it is difficult to consider the strategy as something defined once and for all, involving only economic variables and don’t deviate from its timeline. I do not think big decisions can arise without regularly updating our knowledge of our environment or without being attentive to the collaborators that are the basis of our development. I think that strategic planning in the seventies version has fizzled out and it has to make room to an updated version, in contact with realities and mainly more collaborative.
«The science (if we chose to focus on the knowledge and the methodology) or the art (if we give priority to the experience) of the completed, voluntary and difficult human activity […]: Completed, meaning oriented towards the objectives or goals precisely identified; voluntary meaning that the will (linked to the duration) of the active unit represents a fundamental condition for the achievement of the objective; difficult, in the measure where this achievement demands substantial and prolonged efforts to overcome obstacles including generally the adversaries provided with competing strategies, which are high enough to maintain the uncertainty, at least for a while, on the final result.»
Henry Mintzberg2, for his part, propose different definitions of strategy that complement one another and take into account the complexity around it:
- A strategy can be a plan or a model. A plan (proposed strategy) that is focused on the future and a model (executed strategy) that is the sum of past behaviors.
- A strategy can be also deliberate or emergent. However we will notice that it is relatively rare to see a totally deliberate strategy. Which means an strategy that first will be defined and after implemented without any modification.
- Finally, the strategy can be seen as a position on a well-defined market or as a perspective reflecting the distinctive characteristics of each company.
- Occasionally a strategy can be also an answer to a specific situation, a stratagem.
This important number of definitions reveals that the principles of the strategic development process depend on the perspective from where we observe. For many years now, a number of theories have emerged and have enriched the strategic management.
If it is very hard to identify an unique model for strategy development, it is because as the company and its environment, the strategy is not static. It is dynamic and precursor of change.
The «strategic planning» phenomenon
One of the most intriguing management phenomena from late 60’s and the early 70’s has been the rapid spread of the strategic-planning concept. Supported by systems theory3 and cybernetics4 it will see the birth of teams of planners that in coordination with the CEO, will develop plans for trying after to manage them.
In 1971 S.R. Goodman without any poetry, sees strategic planning as:« The manifestation of a company’s determination to be the master of its own fate…to penetrate the darkness of uncertainty and provide the illumination of probability »
In 1973, Louis V. Gerstner Jr. was already analyzing the drifts of strategic planning when it loses sight of its original purpose. The main findings especially report the difficulty that companies face when going from the plan to the decision making process. Notably opposed to 5 year operational and financial projections. These ones could not be efficient as strategic planning tools for a fundamental reason, they are based on the implicit hypothesis that no significant changes will affect the economic and competitive environment during the 5 years.
Then, he proposes 4 guidelines to strategic planners for solving this problem. Here, our interpretation:
1. Make decisions rather than making plans
To start, it is vital to clarify the critical questions. If there are more than five or six questions, they are really bad. If these questions don’t include the biggest risks, the investments or the change in the competitive position, they are really bad. In other words being ready to make this “creative leap”, critical during the strategic planning process. The purpose of the strategic analysis it’s not to create a plan but to imagine and formalize the courageous decisions of the moment.
We can see that these advises if they were today related with the recent collaborative decision making tools, could represent a real competitive advantage for those who would implement them.
2. Manage external risks
Often, planning systems are not designed to provide decisions as the final product, but for producing financial forecasting, setting objectives or describing actions. These systems often result from an excessive internal focus in the planning process. Thus, it is common to talk about “momentum” planning, as opposed to dynamic planning, which is more agile and takes into account the reality of external changes. In 2009, Henry Mintzberg5, addressed the limitations of planning school when the actors take ownership of the processes and finally the processes dominate them. The risk is that it has progressively moved from a results logic to a means logic forgetting and forget the purpose of the project.
Three aspects of strategic analysis are particularly important to identify problems and key decisions:
- Evaluate competitive strategies
- Development of a contingency plan
- Evaluate environmental forces
3. « Top-down » leadership – Really?
The objective of strategic planning is to make fundamental decisions for the future of the company, it should then be responsibility of the CEO and his senior managers. Top management must be actively involved in the planning process. On the other side, our ecosystems are becoming increasingly complex, our employees working capacity is source of competitive advantage6, management can not be exempted of their knowledge. The implementation of a more transversal and flexible organisation, taking into account a leadership finally distributed between the managers, the teams and the context where they evolve, can again allow organisations to make the difference. It is therefore to enrich strategic planning with the knowledge of our employees. Collaborative decision-making tools can help us too.
4. How to allocate the resources?
Far too often companies undermine their strategic planning programs when reducing the major decision for the allocation of financial resources to purely budgetary decisions. All the requests are valid, regardless from which service or products line they come from as long as they demonstrate their likely contribution to one of the financial indicators. Of course, when requests exceed the available resources, a rating system is used. A new decision rule is then equally applied to all the requests.
Another simple and effective approach is to divide the business into three broad categories:
- The sources of growth (Future earnings)
- The current and intermediate revenues
- And the sources of immediate cash flow
Thus, we can imagine a business lifecycle curve from which new perspectives for allocating resources can emerge.
While the structure of the organizations change, the strategic planning remains the same. However, to find its new mechanisms, strategic planning must take into account specific characteristics of today’s ecosystems.
- The emerging nature of the strategy
- Conversation as a mean to spread information
- Thirst for agility, simplicity and transparency
- A management based on trust….
For being in line with the current challenges and connect the company’s environment with the decision-making centres, the strategic planners need to be equipped with new tools. New collaborative decision making tools and collaborative project management tools should be part of these new resources. But, are we ready to prepare, decide, implement and manage collaboratively?
English Translation by Paula Andrea Gómez Gutiérrez (web marketing – Advanseez)
Updated by Christophe Hervé on: Jun 14, 2019
- Montbrial de T., Klein J. (2006), Dictionnaire de Stratégie, Paris, Quadrige / PUF, p. 527. [↩]
- Mintzberg H., Ahlstrand B., Lampel J., (2009) Safari en pays stratégique, Paris, 2e édition, Pearson, p.19. [↩]
- Systems theory refers to the set of theoretical principles that explain the systemic as a scientific method. Using a global approach, it allows to address complex subjects that were resistant to the fragmented approach of the exact sciences of the Cartesianism. [↩]
- Cybernetics is a general science of regulatory communication mechanisms in natural and artificial systems. It is the science of systems control. It can be defined as the set of monitoring sciences, which means the mechanisms controlling the evolution of a system towards a defined goal. [↩]
- Mintzberg H., Ahlstrand B., Lampel J., (2009) Safari en pays stratégique, Paris, 2e édition, Pearson, (p. 77 et 78) [↩]
- Hamel G. (2007), The Future of Management [↩]