How Relevant is Long-Range Strategic Planning?
Summing Up: Jim Heskett's readers argue that long-range planning, while necessary for organizational success, must be adaptable to the competitive environment. What do YOU think?
How Can Strategic Planning be Adapted to Changing Needs?
Strategic planning concepts and the notion of long-range planning will continue to be integral parts of responsible management. But they may require a substantial rethinking if they are to remain relevant. For example, they will have to be applied more selectively, depending on such things as the industry, the nature of competition, and the speed with which a particular organization's environment is changing. And there is a question about whether a sufficient cadre of managers is being prepared to do this. These are conclusions resulting from a reading of responses to this month's column.
In defense of strategic planning, Greg Martin said, "Same story, different day: in times of change it is practically irresistible to not throw the baby out with the bathwater. While technology has and will continue to accelerate the pace of change…it can also be cleverly leveraged to facilitate an iterative, evergreen process of strategy formulation and implementation."
David Wittenberg added, "Strategic planning, especially long-term strategic planning, is no less necessary in a fast-changing world. Clayton Christensen reminded us that the root cause of every business disaster is mistakenly pursuing short-term goals ahead of long-term ones." Daniel T. C. Lee commented, "Traditional or not, strategic planning has never restricted new innovation…. The issue is the extent and depth of the analysis."
Several argued along with Munyaradzi Mushato, who said, ''the need for a sustainable strategy is actually higher in a volatile market space … why deliberately go out to plan to build a short-lived competitive strategy?" Paul Tiffany commented that the question we should be debating revolves around the tools that are most appropriate to the task today, such as David Teece's ''Dynamic Capabilities'' model.
Huw Morris was among those suggesting adaptation. He regards current strategic planning concepts as relevant, but warned that they need to be used to promote agility. For example, he said, ''by strategy task forces that 'hack' rather than as part of a long annual strategic planning process." Gary Johnson put it this way: "Competitive advantage and a business without strategy-one that is in constant reactiveness, seem to be an oxymoron; a 'living' strategic plan will always help a business be more competitive." Shadreck Saili said that while long-range strategic planning may still be relevant to some degree, ''the frequency of monitoring and evaluating of strategic plans becomes therefore a relevant factor to consider." Edward Hare suggested that, "What organizations need to do is break old habits of practicing planning as ceremonial processes that are conducted periodically. That'll probably happen … Those that don't just won't survive."
This led to the question of why managers have been reluctant to adopt new methods of planning. Janice Maffei framed the case by saying that "We need to influence leaders to envision longer term possibilities while creating short term experiments." Shann Turnbull warned this may not be easy, commenting: "The establishment of 'smaller, faster, more agile organizations' is inherently a governance problem…. The problem is that network governance is not taught in business schools or any other faculties." How can strategic planning be adapted to changing needs? What will it take? What do you think?
From time to time thinking converges around a set of ideas. For us this month, the topic is strategy planning and organization. Conventional thinking and organization that has encouraged us to seek sustainable competitive advantage in the past is being questioned in today's business environment. Some are even suggesting that the mind set that has given us strategic planning concepts such as SWOT (strengths, weaknesses, opportunities, threats) analysis, the "five forces," growth share matrices, five-year plans, and an emphasis on core competencies of the firm may lead to competitive disadvantage in a technology-transformed world in which markets, employee and customer mind sets, and innovations, evolve at a rapid rate.
The conversation was stimulated (can it be 16 years ago?) by Clayton Christensen's work leading to his book, The Innovator's Dilemma. In one sense, the book was mistitled. Some of its most salient material concerned issues confronting large corporations facing innovative upstarts with disruptive ventures, the non-innovator's dilemma. But it also dealt with the challenges of achieving innovation in a world of entrenched ideas about how products are developed and used. Implicitly, the book questioned traditional concepts of strategic planning in an environment populated by increasingly innovative and agile competitors.
Now comes a new book, The End of Competitive Advantage, by Rita Gunther McGrath. Hers is a frontal attack on accepted strategic planning methods designed, in her opinion, for another time. These are methods based on the presumption that competitive advantage is sustainable. It's a presumption that she claims "creates all the wrong reflexes" in a world in which the best one can hope for is "transient competitive advantage."
McGrath's prescription for achieving transient competitive advantage includes such things as smaller, faster, more agile organizations--and where management-by-consensus is a thing of the past. The emphasis is on marshalling rather than owning assets, including talent. In order to ensure the appropriate deployment of these assets from one opportunity to another, it will be necessary to recentralize control over the resource allocation process, moving it out of strategic business units (SBUs). It raises questions about the relevancy of SBUs as opposed to transient teams as a form of organization.
These organizations engage in "shape shifting" based on systematic innovation and the constant testing of assumptions, all required to maintain transient advantage. They are organizations designed to create and test options, practicing "continuous deployment," doing things "fast and roughly right" rather than relying on strategic planning as we have known it.
McGrath makes her points forcefully, but laments the slow rate at which these changes are being adopted in large organizations. If these ideas are so powerful, she asks, "why hasn't basic strategy practice changed?" Is her thinking on target but just a bit ahead of the curve? How relevant is long-range strategic planning and its assumptions of sustainable competitive advantage? What do you think?
To read more:
Clayton M. Christensen, The Innovator's Dilemma (Boston: Harvard Business School Press, 1997)
Rita Gunther McGrath, The End of Competitive Advantage: How To Keep Your Strategy Moving As Fast As Your Business (Boston: Harvard Business Review Press, 2013)