October 23, 2017


















Article 2.13

"STRATEGIC PLANNING" USUALLY ISNíT

STRATEGY? or, "BEAT THE PAST!"

Does your company have a 1996 "strategic plan?" Even if the plan is an informal effort, should we more honestly call it - "performance control" or "beat the past for bonus bucks." Here are some telltale signs that managerial incrementalism might be masquerading for the "strategy" that we really need:

1. The plan is a try-harder, refinement of last yearís numbers airbrushed with an optimism that exceeds average industry and economic expectations.

2. There is no written statement that defines: a number one niche of customers being pursued; an important, unique offering that we measurably excel at for those customers; or the operational capabilities that we heavily invest in to sustain our competitive edge. And, there certainly isnít a forward-looking description of what we will be doing to take care of the "next customer" in the "next era" of electronic commerce that will arrive in 2 to 4 years.

3. The implicit strategy, instead, seems to be - "sell more product volume at higher margins with leaner operational costs to more customers over a greater geography." Call it - "financial management in pursuit of mythical economies of scale."

4. There are no budgeted funds or extra talent for doing strategic experiments that could grow up to become company changing factors, because we are lean-n-mean. There might be some tactical programs that we will do in our imaginary spare time, but they must generate a positive return within 12 months or incentive pay suffers. Most strategic investments, unfortunately, take longer than a year to bear fruit and must be guided by monomaniacs on a mission who have been freed sufficiently from normal, operational crank-turning duties.

5. The plan has lots of detailed numbers even though past forecasts for the bottom line have been substantially wrong. Donít feel bad; it is a by-product of ever faster, unpredictable change in the business environment and often bad economic input advice. For example, 50 well known economists made an averaged forecast for interest rates on 30 year US bonds in December Ď94 for Ď95 year-end. The forecast was 7.86%, but the outcome was 5.98%! Why do they bother with decimal point precision?

6. Our detailed plan and controls give us a confidence that we "wonít go broke"- at least this year. But, will playing "beat the past" actually increase the odds of going broke slowly over the next few years? Static firms can fade fast when radical change arrives.

7. We could go on, but hopefully questions have been raised. Will financial incrementalism fund significant new solutions for coping with the accelerating change in the environment? What is our vision for the business ecosystem that we must try to fit into in 1999? What experiments should we start to do to nibble our way towards that view? Is it time to do some "strategic thinking" to build a guiding vision?

WHAT IS "STRATEGIC THINKING?"

It is an art, not a science, which can not be covered in a short essay. But a few important aspects follow:

1. It is a sporadic activity that doesnít come to instant closure during formal planning retreats, especially if they are heavy with numbers, goals, and timetables - incrementalism kills innovation.

2. Lots of strategic thinking and discussion is vital at the beginning and at the end of the life cycles for either products or industry processes.

In the middle of long-running life cycles, managerial incrementalism works well and strategic thinking often distracts us from grabbing more profitable volume.

3. Such thinking is actually done best by merging in-house thinking with different, visionary views from outside resources. We have to better define past success rules to: A) excel at our past in a more focused way. This will generate extra resources to: B) invest in a new future. To see the future first, we must see - the forest, the trees, and the diamonds in the rough by using both hard data and soft inferential clues. A generally right, collective view of the future, will beat any genius CEOís solo vision by at least 200 IQ points.

4. Because it takes more than a year to transform a business, we must think broadly and deeply about how our business ecosystem might look three years from now. If all of our key people wrote down independently their corporate and industry views for 1999, how much depth, breadth and commitment would they express? How much consensus would there be amongst the views? If most responses were - "bigger and better than the present - I guess", would we be in strategic control of our future?

5. Any future views for process reinvention within our traditional channel must be shared and meshed with the views of our best suppliers and customers. Radical process change must be either experimentally co-created with them or executed around them to a new set of partners. Even big hub companies or the IRS should think twice before forcing a new electronic order upon many of their "partners."

Some related questions to consider are: why would the best companies on our buy and sell sides want to include us in their future thinking and experiments? If we only want to partner with the best, so will they - what can we do to further earn their respect, trust, and first initiatives?

6. Strategic thinking is a crafting, emergent process. Because most forecasts deteriorate badly after a year, we must try multiple, efficient experiments. We should not be surprised if after 6 to 12 months we have learned many unforeseen things. Then, we should cheerfully admit our "good mistakes" and begin another round of - thinking, hypothesizing, and experimenting. If we place enough smart bets, we will get "lucky" just like the best wildcatters and venture capitalists do. Maybe we will only be half-right at first; but, that wins over the lean-and-mean, rear-view mirror driven competition.

CONCLUSION

If we donít have a good three-year-out consensus view of our industry and our role within it and if we arenít changing as fast as the environment in general - then trying harder by the numbers with bigger sticks and carrots wonít secure our future. Plans and budgets have their place, but they should also be funding strategic thinking experiments.

Merrifield Consulting Group, Inc. DO #13, Article 2.13