Having spent most of my life consulting to privately held businesses, strategy development and planning has always been important to me in trying to help and engage a business. When I later became a CEO myself, it was also a process that I applied to my own organization and tried to extract as much value from as possible. After a virtual lifetime of experience with just about every sort of business planning possible, and somewhat of a fascination with the idea of strategy, it still seems confusing to me whether a company's planning process actually results in a viable business strategy. But shouldn't a plan produce a strategy for the business? And if the business has a good strategy, shouldn't that business produce superior performance?
The answer to both of these questions should be yes, yet the results of many company planning exercises would imply otherwise. Over time, the concept of "planning" somehow became disconnected from "strategy." In turn, this has hurt the efforts of many organizations in applying the concepts successfully. Here, we will briefly review how this has come to pass and identify a few things that managements might consider in applying strategic thinking to their business. First, a (very) condensed history of the evolution of strategic planning as we see it in business today. On the one hand, the business world moves fast and it also tends to thrive on fads, many of which re‑brand and re‑create management concepts. The words "strategic planning" are old news and for many management teams, may evoke images of a pretty mundane process. But sometimes it is interesting to step back and realize that most modern management concepts, including strategic planning, have a very short history. Most of them developed after the Industrial Revolution of the 19th Century. No one ever used the (now ubiquitous) word "strategy" in a business context until the 1950's, when Peter Drucker introduced the idea that military concepts could be applied to business thinking. Strategy in business caught on in both academia and the real world; it evolved in the 1980's, with contributions from heavyweight thinkers like Michael Porter. But few of these concepts had anything to do with "planning." They had more to do with competitive thinking and how top managements drive thinking and behavior, along with the allocation of their resources, to win.
Meanwhile, a parallel path in "planning" was developing in corporate America, which reached its zenith in the 1970's with the rise of the conglomerate; these were giant public corporations containing numerous disparate businesses. Here, centralized planning with a long-range view grew increasingly popular in large companies. Over time, the technique trickled down to small companies. The efficacy of long-range planning is debatable, but since one of management's classic roles is "to plan," some amount of this might be healthy.
As the 1970’s bled into the 1980’s, "pop management" was born and at some point, the label "strategic" was slapped on central planning. We have lived with "strategic planning" ever since. The results appear to be decidedly mixed. But, some planning approach is considered good hygiene in most companies and lives on as a standard item in the management tool kit. Hopefully, this brief history reinforces the central premise here: a plan is not a strategy and vice versa. They are different things and they may or may not converge in a business, depending on management.
Entrepreneurial companies lead by founders or their successors have always been my favorite companies to work with. Many, if not most, company founders never had a "strategic plan," but they always had a strategy. They probably did not write it down, and they may never have articulated it – even to themselves. But they had it.
Which begs the question, what is a strategy? Simply put, a strategy is a way of arranging the actions of a business in such a way as to set it apart in the marketplace. It could be simple (fastest pizza to your door) or complex (Google search algorithms). It could be designed to compete on cost, price or value. But one way or another, a strategy makes the business more competitive and ultimately higher earning.
A plan, by contrast, is just a plan. A plan can be a great thing for a business. It can help with company direction, internal communication, serve as a performance baseline, etc. Good things can come from having a plan. You can even put the label "strategic" on it. After all, it is your plan. But that will not mean you actually have a strategy. If you had to choose between having a plan or a strategy, a strategy is always your best choice. A business with a good strategy will outperform and it will win. That is the proof of strategy. Even losing companies will likely have a plan.
Can you steer your company through a conventional strategic planning exercise and derive good business strategy from it? Possibly, but not probably. There are a number of challenges to surmount, including the process itself which is likely oriented to plan protection, not strategic thinking. Insufficient market input and outside thinking are other obstacles to crafting good strategy internally.
In an ideal world, a business would be able to produce a strategic direction that simultaneously creates a competitive advantage. That way, the company's plan would actually articulate the strategy itself. Rather than a disjointed list of goals, tasks, and initiatives, the plan would "hang together" in such a way that its execution creates an advantage in the marketplace. But getting that result means taking a different approach to this whole subject. Next time you look at your strategic plan or consider going through a planning cycle, ask yourself a simple question: with all of this grand production of process and paper, is any strategy coming out of it?
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