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Strategic planning has become a tiresome ritual

Aug 17, 2007 Business Daily, Strategy

“…the annual strategy review frequently amounts to little more than a stage on which business unit leaders present warmed-over updates of last year’s presentations, take few risks in broaching new ideas, and strive above all to avoid embarrassment. Rather than preparing executives to face the strategic uncertainties ahead or serving as the focal point for creative thinking about a company’s vision and direction, the planning process “is like some primitive tribal ritual,” one executive told us. “There is a lot of dancing, waving of feathers, and beating of drums. No one is exactly sure why we do it, but there is an almost mystical hope that something good will come out of it.””

Eric D. Beinhocker and Sarah Kaplan, The McKinsey Quarterly (2002)

Did that just describe your company? If you’re nodding your head vigorously, you’re in a lot of trouble!

Beinhocker and Kaplan are consultants at McKinsey, and they were writing in a special edition of the consulting firm’s journal. They conducted a survey of 30 leading companies, and found something quite startling: most large companies conduct an elaborate strategic planning process; few seem to find it of any real value.

The consultants found that much time and effort is expended in formal annual reviews; yet few executives think this time-consuming process pays off, and many CEOs complain that their strategic-planning process rarely yields new ideas and often is just a set of predictable PowerPoint presentations.

Why is this? The answer is very simple, but rarely understood: strategic planning is not strategy. Strategic planning is the end-point, the plan that is put together to make strategy happen. It is not the strategy itself. Strategy is an altogether more creative, more thoughtful thing – one that cannot emerge from a planning process. Strategy is about far more fundamental things – directing, positioning, and competing.

So what can your company do to craft such a strategy? Is strategy just in the realm of the genius leader, and are management teams only there to implement the loose-but-great thoughts of the visionary in the company?

Not necessarily. Beinhocker and Kaplan identified two things that should be part of formal strategy development. The first is to build “prepared minds”; the second to increase the innovativeness of strategic initiatives.

It is important to get senior management teams together to talk strategy – but not to imagine that they will sit and develop an authoritative, comprehensive, exhaustive strategy in one go. Life just isn’t like that. Good strategy most often evolves: it emerges from a process of thought, planning, trial – and error. So when you get your people together, get them to think about and understand the issues around the strategy: the strategic context. This includes thorough discussions about customers, competitors, products and industry economics. The point: to give managers enough understanding to grapple with strategy when it is actually formulated – in real time.

Creativity can be encouraged by allowing managers to pursue many strategic ‘experiments’ – to discover the truth about various hypotheses. Again, this recognises that there is no single, perfectly correct strategy that is discovered in a particular collective ‘a-ha’ moment during a strategy retreat.

Prepare your management team to meet opportunity; challenge it to try new things out. Then watch your strategy evolve and emerge.

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