Debunking urban myths in management wisdom II

Myth 2:

Traditional strategic planning and copying currently most admired or successful organizations is a useful and beneficial way of creating a successful strategy.

Let us briefly look at what we a talking about here.

Strategic Planning traditionally concentrates on three areas of investigation and planning:

·        Microeconomic analysis of competitive markets which has sought to explain profitability differences amongst firms. Most quantitative research seeks to support hypothetical explanations for profitability using correlation methods.

·        Scrutiny of firms’ cost structures and margins, generally termed “Value chain analysis,” which is looking for drivers of cost and value in order:

  • to discover opportunities where costs can be reduced or value added, so as to boost profitability
  • to seek opportunities where adding cost in one area can either reduce cost elsewhere or enable higher pricing
  • to seek opportunities where cost and value improvements can arise by collaboration with suppliers and customers

·        Crystal Ball gazing, using ‘expert’ opinion and studies to create future industry scenarios into which approaches and actions can be coordinated accordingly to maintain relevance and profitability.

Both value chain analysis and statistical approaches to understanding & enhancing profitability are essentially static tools and the third one is lucky guesswork at best.

Now, it is already very difficult to manage an organization vis-à-vis a dynamic target environment with static management tools, so when it comes to planning a strategy the resulting ‘Lottery Environment’ becomes much less persuasive.

In my professional lifetime strategic planning has been announced dead, superfluous, waste of time, etc. at least fifteen times only to have been resuscitated sixteen times over.

So, is strategic planning in our highly dynamic and complex environment really a practice that belongs to yesteryear and should put out of its misery, or is there more to it?

Let’s have a look at it.

First, it is a very human sentiment to try and predict the future
Second, it is a very human sentiment to wish to plan to increase security and performance

But does it make economic sense?

It depends. (A typical consultants’ answer, I know) It depends on the what and the how. And the why.

We believe, the ‘why’ we can easily agree on:

One would like to find ways of increasing future performance, to make this performance sustainable, and also to maintain & increase its own relevance.

The ‘what’ as well as the ‘how’ are more difficult and more complex.

To answer these aspects, allow me to first look at the traditional organization and then to postulate a revised set-up for the high-performance organization of the future.

Organizations were and predominantly are set up to maximize returns for the owners, be it owner managers or shareholders. Subsequently, strategic planning concentrated on increasing moneys earned. Now, over the years planners recognized that the future money earning capability of an organization depended on other planning aspects than just addressing bottom-line items in their plans, but if one crystallizes planning the increase of money was the overarching target. So planning looked at market shares, value chains, the cost of operations, supply chain cost, efficiencies, likely future industry scenarios in order to maximize returns in the respective scenario, one looked at approaches and processes of organizations currently successful in monetary, growth, or valuation terms etc. etc. Strategic advantages were seen in becoming technology or cost leaders.

We strongly believe that this organizational environment is fast becoming a thing of the past.

We are experiencing an environment where the future is increasingly complex and there are no experts on future development.

The heart of an organization’s strategic planning environment must be game-changing innovation. Not just the innovation of products and services, but the ability to systematically convert ideas and insights from all quarters into new offerings that can alter the very context of the enterprise itself.

Strategic planning requires getting out of the ‘lighted places’ into investigating and entering the unknown. Planning has to abandon postulating targets and KPIs, as these are irrelevant as future performance- or success measures. Planning- as well as measurement environments will have to become dynamic.

Traditional organizations are neither equipped for such investigations nor are ready for approaches or processes to be able to harness and translate the results. They are too cumbersome and inflexible.

Allow us therefore to postulate a new organization.

An organization will have to understand itself as possessing a unique competency architecture which demands a responsibility to create requisite concepts for its performance stakeholder groups (Customer/Clients, People/ Employees, Society at large). (Side remark: owners as a stakeholder group have no direct impact on performance)

In order to fulfill this responsibility, any operational plan and strategic planning will have to look at the following:

  1. To increase the organization’s understanding of the values of the situational value map of the performance stakeholder.
  2. To increase the organization’s understanding of the dynamics of these values
  3. To increase the organization’s ability to translate these insights into changes of the competency architecture at speed
  4. To improve the competency architecture’s ability to build required strategic resources in order to create requisite concepts to place successfully into the relevant performance stakeholder groups at value chain clock speed.

If the organization is able to plan and execute above successfully it will become unassailable by any competitor and build a truly sustainable high-performance environment or, as we term it, become a ‘superior enterprise’

This requires organizational changes on a great many levels, shedding conventional thinking and challenging current wisdom about culture, performance, people (management & subject matter experts,) and operations. E.G. organizational culture will need a strong, relevant and shared vision that is ringfenced by shared values. Management will have to become efficient and effective as leaders, facilitators, and strategic thinkers, being able to maintain system integrity, re-introduce complexity and guard organizational learning. Just to name a few.

With this new self-understanding of an organization, the modern requirement of strategic planning as facilitating game-changing innovation that can alter the very context of the enterprise itself will become reality. And in consequence, the returns for a further stakeholder group, the owners, will become legendary.

And this, we postulate, is true strategic planning – dynamic, innovative, and effective at its core, leading an organization into the ‘dark places’ and to future greatness.

We do invite comments and discussion on- and off-line

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