Strategy and Planning doesn’t make Strategic Planning

There is not such a thing as Strategic Planning! Strategy is one thing and Planning is another. Yet most schools and training organizations use the term Strategic Planning adding to the already existing confusion about Strategy and Strategic Thinking.

Planning follows a well designed winning strategy. They are two separate activities in a business. Or they should have been. Apparently because most business executives feel more comfortable with planning they attach the term next to strategy. I think they do so mainly because they are scared of strategy and feel more comfortable with planning like any manager/technocrat does.

Let me elaborate a bit more.

Strategy is a dynamic process (it is more dynamic today that it was 20 or 30 years ago because the conditions are dynamic. The markets and the business terrain are today unpredictable, volatile and often hazardous) that enables a business to win in a market.

It is supported by a compelling and inspiring purpose, mission and vision and answers the following questions:

• What is our winning aspiration or what is the market problem that we want to solve?
• Where are we going to play the game to win?
• What capabilities do we need to develop to play and win?
• What management systems will we need to drive execution?
• How do we know along the way that our strategy is winning?

A compelling purpose, mission and vision definition help shape the business strategy and answer convincingly the above questions.

Obviously the most difficult to answer from the above 5 questions is question 1. Often people ask me: “Do I need to know my competitors and the market well?”. Well, the simple answer is yes and no. You need to have a good understanding of your market and your direct competitors in this market BUT you don’t need to be obsessed with competition. It’s more important today to identify a real gap in a market, existing or new.

I found out that companies that formulate strategies based solely on beating competitors most of the time their strategy is price/cost driven rather tan value driven. And in today’s global environment trying to win by being the cheaper is not a good strategy.

Another thing about strategy is that there are various Startegic tools traditionally used by companies to find the answers to the above questions. But be cautious! Most strategic tools have been created 30 or more years ago. Therefore they are outdated and one needs to consider that. We need to adapt these tools taking into consideration current conditions.

Let me give an example to make my point. One of the traditional strategy tools is Porter’s Generic model which provides the basis for 2 main Startegic paths.

It says you can be a cost/price leader or a differentiation leader. Cost/price leaders are the large global companies which have created economies of scale and buy and sell huge quantities. However, looking at statistics the last 50 years we can see that a lot of these global companies are indeed winning on sales but they are suffering in profitability and profit margins which are declining year after year. Why is that? The markets are not the same as they were last year and the year before and so on and so forth.

Still, we use existing strategy tools but we are not blinded by them. After all. Today more than ever, winning strategies are the ones which are innovative and come out of the box. It’s the ones that do not accept the status quo. To win today a business often needs to avoid the textbook traps.

After defining your strategy, the planning process comes into the picture. It’s is a separate process and if based on the outcome of strategy most probably you will end up with a good plan. What do I mean? Well a plan normally defines what resources we are going to need to achieve certain objectives, the most common of which are revenue and costs to achieve a profit.

Well, eventhough you can control your costs very well, how do you control or forecast revenue? You can’t. You cannot predict how the consumer will behave today and tomorrow based on history. You can however do something to direct consumers to your business. This is called strategy. This is what strategy is all about. Without it, forecasting revenue in the future is like gambling.

A final note about strategy. Most people I talk to in business, think that strategy is the C Executive team job. This is not true in today’s environment because even the best strategy will need to be fine tuned and sometimes changed as you execute. Therefore, the more people in a business think strategically, the bigger the advantage for the company.

Successful businesses train their management and key people on strategy in order to become agile and create the capability to act faster to make the necessary decision, tweaks and fine tuning of the strategy and subsequently the plan as they execute. This cannot cannot be a one man or woman job no matter how smart he or she is. It’s too slow and risky in this unpredictable and fast paced terrain.

So does your company have a strategy and a plan meeting the above requirements? If not, you are not giving your business, your clients and your people the best they deserve.

If you want know more about strategy and planning read our ebook here.

Alternatively book a seat in our masterclass, Performance Based Strategy and Business Planning.

Check our website for the next course or let us train your management in-house by custom designing an effective training.

Yiannakis Mouzouris
Strategy and Performance Management
Expert / Business Consultant / Trainer
B.Sc. Mechanical Engineering
M.Sc.Engineering Management, US