Estimates show that the strategic plan failure rate is a whopping 50%-97%. Yet business gurus keep cranking out strategic planning books, and companies keep spending millions of dollars each year on internal strategy teams and management consultants. Why do we bang our heads against the wall? Why do we go down this rabbit hole with so little to show for it? Why do we keep doing the same thing over and over again, expecting different results?
One possible explanation is that we’re comfortable with the process. We find strategic planning reassuring, especially after a regime change. A new leader or leadership team begets a new plan. It’s only natural that these people think it’s necessary to make far-reaching changes if they want to make a name for themselves. No one has ever become famous by following the strategy of their predecessors. It’s the bold and exciting new ideas that get attention.
The problem, however, is with the planning. The reason is simple: Business leaders are problem-solvers; they’re always looking for solutions. Plus, they don’t like uncertainty. So, they see strategic planning as just another problem requiring a solution. When referring to strategy, the word “plan” is implied. Therefore, these leaders end up constantly developing strategic plans rather than concentrating on developing winning strategies.
According to Michael D. Watkins, a professor of leadership and organizational change, a strategy is a set of guiding principles that, when communicated and adopted by the organization, generates a desired pattern of decision-making. A strategy is therefore about how people throughout the organization should make decisions and allocate resources to accomplish key objectives.
Additionally, the strategy should connect with and complement the organization’s mission, purpose and vision. It is, in effect, how to accomplish its goals. Strategies also should be somewhat nebulous and open-ended. They must consider numerous possibilities, known and unknown.
The APICS Dictionary defines strategy as how a company will function in its environment. Strategy specifies how to satisfy customers, grow the business, compete, manage, develop capabilities and achieve financial objectives. But it’s also essential to keep in mind that business strategy must connect to the organization’s purpose. This is what author and leadership expert Simon Sinek calls “the why.” Some like to think of a business’s why as its raison d’etre, French for reason for living. However, I believe the why should be a combination of purpose and passion. When there’s passion in one’s purpose and purpose in one’s passion, business objectives reach employees, customers, partners and all stakeholders on an emotional level. This creates loyalty, which has value beyond price.
Moreover, we need to stop thinking of a strategy as a goal. A goal is finite, like the goal posts on a football field, the hoop on a basketball court, or the home plate on a baseball field. Each time a touchdown, basket, or run is scored, it signifies the end of something. Goals signify an end. But there is no end in business.
As Simon Sinek writes in The Infinite Game: “Finite games are played with known players. They have fixed rules. And there is an agreed-upon objective that, when reached, ends the game. Infinite games, in contrast, are played by known and unknown players. There are no exact or agreed-upon rules. Though there may be conventions or laws that govern how the players conduct themselves, within those broad boundaries, the players can operate however they want. And if they choose to break with convention, they can. The manner in which each player chooses to play is entirely up to them. And they can change how they play the game at any time, for any reason. Infinite games have infinite time horizons. … Business is the ultimate infinite game. Companies aren’t created with an end date in mind. No one starts a company with the intention of closing it down in five or 10 years. Whether it is started by one person or a dozen, a company is a legacy, a kind of immortality.”
Strategies are developed for the long term. Most organizational strategies are designed to last five years. Although plans can be highly effective, they’re meant for the short or medium term, at best. Long-term plans are merely guesses, plain and simple. Too many things can change in the long term for plans to have any real meaning. And therein lies the fallacy of strategic planning: It is impossible to successfully implement something for the long term (a strategy) using a tool that is only viable in the short term (a plan).
Still, organizations need to develop strategies to remain viable. They must to plan for the future, make strategic investments and improve. Riaz Husein, CEO of Profit Chain, is fond of saying, “Hope is not a strategy.” He’s right. We cannot hope things will sort themselves out. We must develop a new mindset and mechanism for developing strategy, then create a methodology to realize it. And often this involves stepping outside our comfort zone. Here’s how:
1. Develop a strategy. This is the first step, and it may be harder than it looks. According to Roger L. Martin, professor and author, in his article in the Harvard Business Review, “The Big Lie of Strategic Planning,” there are three rules to follow in developing a strategy:
- Keep the strategy simple.
- Recognize that strategy is not about perfection.
- Make the logic explicit.
If a strategy is a guiding principle, then a principle can be both an idea and an ideal. While an idea may be fully formed, an ideal is not. There is a bit of vagueness in an ideal, and that means taking some risk. All good strategies come with some risk. Be creative. By identifying and quantifying risks, they can be effectively added to the organization’s supply chain risk management plan. And they can be addressed through mitigation, avoidance, acceptance or transference, minimizing the time that we have to work without a net.
2. Create a road map. After developing a new strategy, we need to create a road map to provide direction. Why a direction and not a plan? Directions are flexible. Organizations develop strategies based on their view of what will happen. Because no one can accurately predict the future, strategies often change over time. It is rare for conditions to remain the same for years; therefore, strategies must have the ability to adjust. If an organization believes that the market for their product is expanding, they may choose to invest in a new factory or in the expansion of an existing one. Academic and author Henry Mintzberg called this intentional investment a deliberate strategy. And if, three years down the road, the market experiences a downturn, the organization may choose to revise its strategy. Depending on the severity and anticipated length of the downturn, they may want to slow the construction schedule, postpone the purchase of equipment or halt the project entirely. Mintzberg called this revision emergent strategy, which is the organization’s response to unanticipated events. An emergent strategy requires a new road map or, at a minimum, a revised one. The road map, and any emergent strategy that is developed from it, confirm or adjust the logic of the original strategy.
Road maps are developed at a high level, and they are often organized as a Gantt chart. The chart includes the high-level steps, major milestones, events and assigned durations for each step. Steps are sorted in chronological order. At this point, you may want to add budgetary costs to each road map, and assign responsibility to an individual or group.
3. Develop detailed plans for the 6-18-month timeframe. Develop detailed plans, including financial and labor budgets, for a 6-18-month period. Because this is a short period of time, there is a relatively low risk of uncertainty. Schedules and budgets are probably going to be accurate, and there is a high probability that work can be completed and the environment will not appreciably change. People can be held accountable for ensuring that schedules and budgets are executed promptly and within cost projections. At this stage, successful plans have distinct goals to meet.
4. Revise the road map and update detailed plans as required. About once a quarter the road map should be reviewed, adjusted and updated as required. Detailed plans should be updated weekly and new plans created as needed. This step enables you to provide detail and structure to the planning process, setting and achieving goals for the detailed plans and funding the process, making implementation possible.
Developing a strategy, then working to see it realized is not a linear process, but an iterative one. It’s not like shooting an arrow, but creating a piece of pottery. Strategy is like clay: From its original state, it can be formed into anything. It begins to take shape on the potter’s wheel, and the vision and skill of the potter determine its final form. The strategy begins to solidify by following the road map or series of road maps that provide it with direction and substance. Finally, the detailed workplan, financial plan and labor allowance give the strategy the material required to take solid form. At this point, your strategy is realized — but only temporarily. It must be further refined and shaped through continuous improvement. As the strategy improves, it gives everyone in the organization a sense of accomplishment and pride in its continuing success.
This article was prepared by the author, acting in his personal capacity. The views and opinions expressed in this here are the author's own and do not constitute, nor necessarily reflect, a statement of official policy or position of the author’s employer.
The ASCM body of knowledge and, specifically, APICS CPIM and CSCP designation programs provide in-depth education about supply chain design, strategy and planning methodologies. If you’re looking to master key planning skills and build upon your real-world experience, consider pursing an APICS certification.