Is Strategic Planning Still Relevant?

In March 2010, Fast Company ran a piece entitled “Strategic Planning is Dead, Long Live Strategy Execution,” a few weeks earlier the Wall Street Journal declared that “Strategic Plans Lose Favor.” So is strategic planning another victim of the economic tsunami that has washed over the world?

It is easy to jump on the bandwagon and declare that in today’s volatile and uncertain world strategic planning is irrelevant. Amidst all the talk of flexibility, agility, speed and responsiveness, strategic planning seems oddly out of place. After all how useful can a long-term view of future be when our predictive ability is so poor?

The Management Mythbuster by David Axson   Most of the management practices upon which organizations rely are broken beyond repair. At no time did this become clearer than in 2008. Within the space of a few months, much of the framework of modern management practice came crashing down. Corporate titans were humbled, long established compensation practices failed, and the only certainty about any forecast was that it would be wrong. All of this upheaval is causing executives in every industry to rethink the conventional management wisdom they had so implicitly trusted. Taking a seriously irreverent look at some of the more popular management myths, The Management Mythbuster features short chapters on many of the theories, tools, and behaviors that continue to govern decision-making in today’s business world, such as: Missions, visions, and other expensive pastimes Strategy and stuff like it Gurus, consultants, and other advisors Forget success, focus on failure Budgeting – A Modern Vision of Hell (Well, Purgatory at Least) The Futility of Forecasting Total Quality, Six Sigma, Process Re-engineering, and more Pay for Performance? Failure Pays Very Well These Days The Business of Spin Why Accountants Rule the World And much more!

However, before we discard strategy lets back up, maybe the problem is not strategic planning itself but the way in which we apply the technique. As Michael Porter author of numerous books that are essentials in the library of any strategic planner commented: “Strategy is a word that gets used in so many ways with so many meanings that it can end up being meaningless.”

Porter is right. The whole subject of strategy has become too confusing. It seems that everything is strategic; otherwise, it is not really that important. We have become overwhelmed with strategic plans, strategic vision, strategic thinking, strategic insight, strategic management, strategic information, strategic marketing, strategic branding, strategic positioning, and even strategic bombing. Appending strategy or strategic to anything elevates its significance and that of anyone associated with it. “Oh, I’m working on a strategic project,” marks you as a very important person who is going places. Frankly we have lost the plot. Today you can define strategy just about any way you like, and that is a large part of the problem. Here are just a few definitions ranging from the confusing to the merely stupid:

• Strategy bridges the gap between policy and tactics.
• Strategy is the means by which policy is implemented.
• Strategy is the art of distributing and applying resources to fulfill the ends of policy.
• Strategy answers the question: What should the organization be doing?
• Strategy is a plan, a “how,” a means of getting from here to there.
• Strategy is a pattern in actions over time
• Strategy is position; strategy is perspective.
• Strategy emerges over time as intentions collide with and accommodate a changing reality.

However, none of these make my top three listing of the most absurd definitions of strategy. In best beauty pageant form, here they are in reverse order, with my comments in italics:

3. “Strategy has no existence apart from the ends sought.” I love this one as it reminds me of late-night, alcohol-infused philosophical discussions while in college on the meaning of life or the real message behind Led Zeppelin’s “Stairway to Heaven.”
2. “Strategy is a broad, ambiguous topic. We must all come to our own understanding, definition, and meaning.” Well, that clears things up doesn’t it?
1. “Strategy is what top management does that is of great importance to the organization.” Ah, so that is what they do!

Clearly, there is no clarity! Yet strategic planning should be both important and valuable provided it is kept in perspective—strategies are not five-year budgets, obscure aspirational statements that have little grounding in reality, or excuses for each new management team to put its own stamp on an organization. Done right, strategy lays out a direction and focus that guides an organization’s actions. Instead of handicapping management in times of uncertainty, strategy provides a foundation for fast, confident decision-making.

Keeping strategy simple makes it very easy to ask basic questions as ideas, opportunities, or events arise that impact an organization such as: How should we respond to these unforeseen events? What are the implications? At U.S. retailer Target, the question is always, “How does this decision reinforce the brand?” Effective strategies work in both good and bad times. Warren Buffet’s investing strategy has barely changed in fifty years through all manner of economic cycles.

The truth is that very few organizations or managers are truly strategic. When push comes to shove, strategic thinking flies out of the window as the pressure to make budget or hit the quarterly numbers takes over and anything that does not directly contribute to making near-term goals gets ignored. During 2008, billions of dollars worth of strategic plans were tossed out the window. It is interesting that Apple did not abandon its strategy of creating beautiful and innovative products, IBM did not toss its “Smarter Planet” strategy out of the window, and BMW gained share from its luxury rivals even as industry-wide sales slumped.

Unfortunately, for many organizations strategy has many similarities to the excessively complex financial instruments (think—credit default swaps and collateralized debt obligations) that were at the heart of the credit crunch. We need to get back to basics: with strategy, if you don’t understand it, you can’t execute it; with a financial instrument, if you don’t understand it, don’t invest in it. Simplicity is key. I like the way General Electric described growth strategies in its 2003 Annual Report, “The best growth strategies take companies to places where only a few can follow.” I understand that, and it provides a test I can apply to any strategy: will it create distance between our competitors and us?

A GE alumnus offered some of the best advice on strategy. Larry Bossidy was Jack Welch’s number two at GE for many years before becoming Chairman and CEO of AlliedSignal and then Honeywell. I had the pleasure of working with him early in his tenure at AlliedSignal during the early 1990s, and his candor and clarity left you in no doubt what he was thinking. In the 2002 book Execution: The Discipline of Getting Things Done, co-authored with Ram Charan, Bossidy described strategy thus: “It’s a roadmap, lightly filled in, so it gives you plenty of room to maneuver.”

I like that; it’s simple and readily understandable. You have a destination in mind, and you’ve worked out a rough direction or route for getting there, but you haven’t necessarily planned out every restroom break or constrained yourself to a single road. You have options to take alternative routes if needed and maybe even change the ultimate destination based upon events along the way.

Building upon this I would add one further dimension—speed. How fast do you want to get there? Strategies that clearly describe a direction, a destination, and a speed provide a solid foundation for planning. For example, the command, “Go west young man,” offers information as to direction but provides little guidance for planning. If I am sitting in New York, will getting to Pittsburgh be good enough, or do I need to go all the way to San Francisco?

If the destination is defined as San Francisco, you now have more information to start building a plan to get there, but you still have a lot of choices—walk, ride a Harley, cruise in a Corvette, or fly on the Learjet. If speed is added to the equation in the form of “head west to San Francisco and try to get there in less than 24 hours,” planning just got a whole lot easier. You can eliminate walking, riding your motorcycle, driving, or catching the train as options since none of these tactics will get you there in time.

Strategic planning is not dead; we just need to get to the basics. In today’s uncertain world remember three key points:

1. Strategies increase flexibility, rather than reducing it.
2. Good strategy simplifies planning by taking certain options off the table. Often the most valuable section in a strategy is the one headed: “Things we will not do.” Interestingly, it is often the one section in voluminous strategy documents that is missing.
3. The ultimate test of a good strategy is that it remains relevant in bad times as well as good. That’s why Apple, Johnson & Johnson, WalMart, Tesco and Berkshire Hathaway consistently outperform their rivals.

This article is adapted from David Axson’s recently published book The Management Mythbuster (Wiley 2010).

David Axson, author of The Management Mythbuster, is President of the Sonax Group, a business advisory firm. He is a former head of corporate planning at Bank of America and was a co-founder of The Hackett Group. He is a sought-after speaker and writer on business strategy and management and is widely regarded as a thought leader in the industry. To read David’s complete biography, click here.

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