A question keeps cropping up in my conversations with CEOs – is strategic planning still relevant? In a world with rapidly changing markets and constant access to big data, decisions need to be made frequently. Surely strategic planning holds you in a bind, unable to react?
These CEOs do still have problems that they don’t want. They have people throughout the business making decisions which seem at odds with their view of the business priorities. They almost always have an ever growing number of projects going on throughout the business, with no defined priority or accountability, sucking up resources. They might have a set of measures that don’t reflect their priorities, often biased towards finances, which encourages short term decision making.
Would strategic planning be able to help them address some of these problems, and support adaptability?
To understand why there is this negative view of strategic planning, I found it very useful to differentiate between the purpose of a strategy and the approaches often used to embed it.
The purpose of strategy
At the highest level the purpose of strategy is to:
•Gain clarity over how you will serve your chosen market, keeping both the top and the bottom of the organisation focused on delivering customer value,
•Ensure a collective understanding in the organization from top to bottom of this purpose, inspiring people in its successful delivery,
•Allocate resources to the priority areas to ensure you deliver that purpose, and ensuring things get done.
When I overlay these objectives onto the needs of an organization going through rapid change all of them still hold true.
In fact, maybe they are more important. If you need employees throughout the organization to be able to quickly respond to the information they are getting, then it is critical that they understand the high level priorities, the non-negotiables and have a common understanding of any new information arising in the market.
Strategy implementation as a straight jacket
So my next question is why is strategic planning not perceived as being useful in this world of change?
I think that this is due to the way that some strategic planning processes have been implemented. Organizations that assume that good analysis they can predict the future often lock it in with budgets and a command and control framework. They then drive the organizations in one direction no matter what.
Strategy can only ever be a hypothesis. Setting the intended direction but having a process that allows for the strategy to be frequently reviewed and to evolve, creates a powerful tool that considerably enhances understanding of the organization and the environment it operates in.
Implementing a flexible strategy management process
How do you avoid implementing a process that is too rigid? Here are my top tips for implementing a strategy that is adaptable:
1.Formulate a strategy that is just enough to give direction and inspiration without creating restriction on the organisation. I would suggest as a minimum you have a strategy that states what objectives your stakeholders and customers want from you and therefore what processes and capabilities you need to successfully deliver on this. This can be complimented with a few high level measures.
2.Supplement this with clear accountabilities and responsibilities for key decisions. Some decisions are obviously strategic and it is important to know who will be involved in the decision making process and who will ultimately make the decision. There are other decisions as a one off do not appear strategic, but can make an important impact on the strategy. For example, pricing. One division could reduce a price and this could have a large impact somewhere else, or put up a price on one product that impacts the life time value of a customer. Clear accountability gives people throughout organization the ability to adapt flexibly in the field and ensure that the right people are involved in decision making.
3.Ensure transparency of information across the organisation. Often the data on changes to customer preferences will be coming in to customer facing parts of the organization. Sharing date will ensure the whole workforce can sense and respond to the information. This can be supported with processes that promote the engagement of customers, the use of cross functional teams, or the involvement of the whole workforce
4.Implement a Governance Processes that enables you to regularly review and update the strategy, so you can pivot quickly. This is a different conversation, from “are we doing things right?” to “are we doing the right things?” The how frequently you do this will depend very much on your organization and industry, but commonly involve quarterly reviews that adapt the strategy with less frequent reviews that formally scan external data and the competitive information.
5.Embed a budget that allows for flexible resource allocation. Distinguishing the strategic budget from the operational and capital budgets ensures that resources are also prioritised on delivering the longer term strategic objectives. The initiatives that draw from this budget will be reassessed in line with the strategy update meetings.
A flexible strategy planning process provides freedom within a framework. The framework supports people to make quick decisions everyday which are in line with the priorities of the organisation. But the surrounding processes ensure the framework adapts as and when required.
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