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HOW DO WE CONDUCT STRATEGIC PLANNING?
1. STRATEGIC PLANNING
In most organizations, executives complain that their Strategic Planning is overly bureaucratic, insufficiently insightful, and doesn’t accommodate today's rapidly changing, digital markets. To combat these issues, there are a few best practices we should follow:
Let’s dive a little deeper into each of these best practices.
The 3 time horizons we want to explore can be defined as short term (1-year timeframe), medium term (3-5 years timeframe), and long term (5+ years). Each horizon is uniquely considered and has different objectives.
Most organizations repeat the same Strategic Planning process year after year. This leads to a situation where year after year, the usefulness of the Strategic Planning process deteriorates, as most analyses become adjustments of last year’s analyses. There is a stagnation of effectiveness. The same inputs lead to similar conclusions and creativity is sapped from the sessions.
So, how do we break this type of cycle and behavior? The answer is to encourage productive and stimulating Strategic Dialogue by asking different questions. Great strategists need to learn the “art of questioning.” Here are a few guiding principles around this regard:
Once the right questions are selected, we can have teams address these questions. These teams will design novel, relevant analyses, amass new knowledge, and develop strategic recommendations. Remember, as well, question-driven strategic dialogue is an iterative process.
Organizations that engage a broad, decentralized group (of both internal and external) stakeholders in their strategic development efforts yield stronger results than organizations that leave strategy in the hands of a small, centralized team.
Involving a broad group prevents groupthink. We should involve folks from different backgrounds, generations, and geographies. This is more likely to surface alternative ideas and perspectives. It is common to also engage participants external to the organization—e.g., customers, suppliers, consultants.
This approach improves our strategic “peripheral vision.” In other words, it makes us more adept in spotting both opportunities and risks early.
It is also important to engage stakeholders early on, as this increases buy-in, which helps with the Strategy Execution process later on.
For more information on Strategic Planning, take a look at these frameworks available on Flevy:
2. STRATEGY DEVELOPMENT
The good news is there’s a plethora of research and consultative frameworks on Strategy Development and Strategic Thinking, perhaps more so than any other management topic. There are literally 100s of Strategy Development frameworks developed by strategists, academics, and consulting firms.
This is also the bad news. As there are so many tools available, it can be difficult to determine what the right approach is for our organization.
To help navigate through the available tools, let’s take a look at the Strategy Framework Canvas (SFC). The SFC is a unifying choice framework that guides us in selecting the appropriate strategy for the circumstances at hand and execute it effectively. This model is particularly useful for large organizations that are now stretched across a more diverse and faster-changing range of business situations.
SFC identifies 5 distinct archetypal approaches to strategy:
The Classic approach is the most common approach. In this situation, the market is predictable, basis of competition is stable, and strategy is sustainable.
Classic strategy is achieved through sustainable Competitive Advantage by positioning our organization optimally in an attractive market. Since the basis of Competitive Advantage within these environments is known and non-malleable, advantage can be based on superior scale, differentiation (or, equivalently, scale within a narrower market segment), or superior capabilities.
The most well-known Strategy frameworks are the Classics, such as:
We use the Adaptive approach when the environment is neither predictable nor malleable. There is continuous disruption in the market.
Unlike the Classic approach of sustainable Competitive Advantage, the foundation to the Adaptive approach to strategy is the notion of serial temporary advantage. Within unpredictable and non-malleable environments, the emphasis is on continuous experimentation and real-time adjustment—as opposed to long-term analysis and planning. Because advantage is temporary, we focus on means and not ends.
Examples of Adaptive frameworks include:
We take the Visionary approach when we can reliably create or re-create an environment by some degree of predictability by seeing an opportunity and pursuing it single-mindedly.
Visionary approaches are most frequently associated with entrepreneurial start-ups. However, large organizations increasingly need to adopt this approach for themselves, as well.
Examples here include:
The Leader Approach is used when the environment is unpredictable, but malleable. We can shape or re-shape the whole industry.
A Leader approach both permits and requires an organization to collaborate with others in a diverse ecosystem that distributes risk, supplies complementary capabilities and resources, and builds the market quickly through strength in numbers.
Examples of Leader frameworks include:
Lastly, the Renewal strategy approach is used when the environment is harsh. This type of strategy aims to restore the vitality and competitiveness of the organization.
In such a harsh environment, the existing circumstances prevent the current way of doing business from being sustainable. The first step is to change course to preserve and free up resources.
Examples here include any type of the following:
Once we determine the type of Strategy approach to take, the next step is to adopt a Strategy Development framework most befitting our organization. Key considerations include our Corporate Culture, Organizational Structure, Leadership Style, Competitive Positioning, and Core Competencies, to name a few.
For more information on Strategy Development, take a look at these frameworks available on Flevy:
The Strategy Chessboard (listed above) is another holistic Strategy framework, similar to the SFC. For even more materials on specific Strategy frameworks, take a look at our Strategy Development Stream (here) and the Flevy Marketplace (here).
3. STRATEGY EXECUTION
Numerous studies from top consulting firms (including McKinsey, Bain, BCG) and Harvard Business Review have shown approximately 70% of strategies fail due to poor execution. Furthermore, organizations only realize about 60% of their strategies’ value.
This gap between the Strategic Plan and actual performance results is called the Strategy-Execution Gap.
For most organizations, their projected performance based on strategic planning forecasts follow a “venetian blinds” pattern. In other words, when each year’s performance projections are viewed side by side, the resulting diagram resembles a series of diagonal venetian blinds. This pattern signifies a deeper issue of an institutional practice of setting unrealistic goals, which has damaging impacts to the organization’s culture.
Here are 3 guiding principles to follow to close the Strategy-Execution Gap.
Principle 1: Keep it simple.
In most organizations, Strategy is a highly abstract concept, often misused to be synonymous with vision or aspiration. It is likewise something that’s not easily communicated or translated into action. Resultantly, without a link between strategy and performance cannot be drawn, because the strategy itself is not sufficiently coherent and concrete.
On the other hand, high-performing organizations avoid long, drawn-out descriptions of lofty goals. Instead, they utilize clear, succinct language describing their course of action. By being very clear on what the strategy is and isn’t, we can keep all employees headed in a unified direction.
Principle 2: Use a rigorous Strategy Execution/Deployment framework.
To be productive, the dialogue between corporate and the business unit about market assumptions must be conducted within a rigorous framework. Here are some frameworks available on Flevy:
The specific framework used to ground our strategic planning isn’t the most important. What is critical is that the framework establishes a common language for dialogue between corporate and the business units—one that also unifies and the strategy, marketing, and finance teams.
Without such a framework, it is difficult for management to determine whether the financial projections are reasonable and realistic. Thus, management can’t know with confidence whether performance shortfall stems from poor execution or a poor plan
Principle 3: Continuously monitor performance.
High performing organizations utilize real-time performance tracking. They continuously monitor resource deployment patterns and their results against plans, leveraging continuous feedback to reset planning assumptions and reallocate resources accordingly. This real-time approach allows management to identify and find flaws in the plan, as well as shortfalls in execution—and to avoid confusing one with the other.
Continual performance monitoring is particularly important in highly volatile industries. In such environments, events outside the organization’s control can render a plan useless.
The 3 documents below highlight the core concepts of Strategic Planning, Strategy Development, and Strategy Execution discussed in this article. To develop Expertise and achieve Excellence in Strategy, we recommend taking a look at our Strategy Development Stream offering.
Source: Best Practices in Strategy Planning, Strategy Framework Canvas (SFC), Closing the Strategy-to-Performance Gap
Best Practices in Strategic Planning
This framework presents an overview approach to Strategic Planning, along with 4 best practices to ensure effective Strategic Planning that leads to successful Strategy Execution.
Specific topics covered include the 3 Strategy Time Horizons, Strategic Dialogue, Art of Questioning, Strategic Initiatives, Strategy Dashboard, among others.
Strategy Framework Canvas (SFC)
The SFC is a tool to help navigate through the sea of existing strategy frameworks. Since the 1950s, corporate strategy thinking has been evolving--new strategy frameworks are introduced each year. Today, there are literally 100s of strategy frameworks that have been developed by strategists, academics, and consulting firms.
The SFC is a unifying choice framework that guides us in selecting the appropriate strategy for the circumstances at hand and execute it effectively.
Closing the Strategy-to-Performance Gap
This framework explains the Strategy-to-Performance Gap (also called the Strategy-Execution Gap), its root causes, as well as identifies 7 rules to follow to close this gap. These rules allow an organization to objectively assess any performance shortfall and determine whether it originates from the strategy, the plan, the execution, or its employees’ capabilities.
By closing the Strategy-to-Performance Gap, organizations also eventually develop a culture of overperformance.
Below, we have listed all the useful frameworks referenced in the above article, as well as some additional ones.
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Our free PowerPoint Toolkit contains over 50+ slides worth of diagrams, shapes, charts, tables, and icons for you to use in your business presentations. A real time saver for cranking business decks.
Strategy Development Discussion Deck
This is a discussion deck template for a corporate strategy development session. In this discussion, we go through a 2-prong approach to growth and evaluate the merits of various growth drivers.
PowerPoint Plugin (Flevy Tools)
Flevy Tools provides a set of automated tools for creating 10 common business diagrams, including Waterfall Charts, Gantt Charts, Chevron Diagrams, Pyramids, Harvey Balls, and more.
Strategy Development & Execution Primer
Strategy without execution is merely theory. This 54-slide presentation introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution.