Strategic Planning Introduction
Deliberate strategy formation provides sets guiding principles and actions to differentiate your business and accelerate success. Many tools and methodologies exist to help us put winning strategies together. But, the formula that should be used to put the best strategy together can be situational, subjective, and very dependent on the talents and dispositions of the strategists. So, having a great grasp on the different frameworks and tools at your disposal, as well as a solid context for them all, definitely puts you at an advantage. There have also been very important recent changes approaches to strategy formation and deployment that can provide you with an edge over competition that is still doing this the “old way”.
For years, the cornerstones of strategic thinking came from Porter, and the three generic strategies (Price Leader, Innovator and Operations Leader). Per Porter, companies should always remember “who they are”, and be deliberate in sticking to a plan that holds to one of these three core value propositions while paying the necessary homage to the others to be competitive. Porter’s 5 Forces, SWOT, and other strategy analytics support this kind of deliberate strategic thinking, and most of us have grown up accepting this as baseline strategic thinking. But, there has always been a foil to this kind of deliberate strategy formulation, and this is returning to the forefront. Hank Mitzberg’s less known and less popularized, thinking emphasized that many deliberate strategies fail in execution and a higher level of flexibility, reaction and adjustment is required in strategic execution. This feels a lot more like what we are hearing today from entrepreneurs and Lean Startup advocates. Mitzberg does not argue that deliberate strategies are bad, but rather we should expect changes in customer expectations or market, economic, or competitive realities to foil our strategies, and if our strategic framework does not embrace this and adjust, we will be without a meaningful plan as often as not. As a result, Mitzberg’s embraces Emergent Strategy Processes.
And, beyond questions of deliberate and emergent strategy formation, developing material capabilities to differentiate in operational execution becomes a cores strategic pillar in itself. This is less about marketing and more about engineering and operations, but absolutely essential from a competitiveness perspective. Strategies to effectively deliver learning organizations, six sigma quality, lean manufacturing, Agile development or best in class customer experiences are foundational to many successful businesses. Innovative companies are innovating in how to broaden the application of what works to other areas of their operations. For example, lean manufacturing, and the concept of removing all waste from operations processes are now being extended beyond the factory floor to shape business operations in product management, engineering, sales, marketing, and in strategic planning. It is interesting to note that the concepts of Lean support both deliberate strategic thinking as well as emergent. In Lean Manufacturing, there are cornerstone concepts that are analogous to deliberate strategy planning (Kaizan, minimization of the 10 wastes, work cells, man0in-motion studies, etc.), but Lean also emphasizes the need for operational flexibility, with the ability to quickly re-deploy resources, provide JIT services, the deferral inventory commitments and , obviously, to be ready to adjust as you learn!
And, learning from Lean Manufacturing, as well as lessons on what has not worked so well in engineering disciplines, has driven mass acceptance of the Agile development processes. As as can be clearly seen in the Agile Manifesto (URL), certain principals map to very deliberate identification of methods. But, this deliberate methodology is all about learning from the market, fast development, and the ability to respond to market and customer forces quickly. Thus, the name Agile.
With the ever accelerating change in technology, competitive landscapes, market segments, new market creation, and global consumer and enterprise expectations, it is easy to understand why emergent strategic thinking is gaining more and more prominence. With all of the products, computer technology, open source software, and technology services available to us today, we need to find ways to be even better at harnessing frameworks that help us move fast and be agile in adapting our deliberate capabilities and resources into implementations that actually hit the market with real value, customer appreciation and lasting differentiation. Here, the thinking of Eric Rheas, Alex Osterwald, Steve Blank and others, can help us further. In Rheas’ Lean Startup we are presented with concepts like the Leap of Faith Hypothesis, Customer Intimacy, fast prototyping and Minimal Viable Products, Validated Learning and the challenge to Persevere or Pivot based on this learning. In “The Lean Canvas” Alex Osterwald introduces a complementary method to map out our plans on a single page and to “keep score” on our business plan to further enable agility. One thing that cannot be over emphasized in this new emphasis on emergent strategy thinking is the need for iteration to constantly tune plans and strategies, because this is all about finding alignment with a dynamic system, namely your market and your customers.
While, the business world is clearly embracing the “Lean Startup Thinking”, deliberate strategy thinking remains foundational in figuring out who you are, where you are headed and grounding your “go-forward” plans. Deliberate Strategic thinking in vision formation, developing capabilities, technical frameworks, employee development, building brand value and more, are all essential to building business value and enabling success. But in our go-to-market planning, product development, customer engagements , and in our operational execution we need to be learning, agile, extremely sharp and lean or our competitors will eat our lunch.
This “two-headed” approach of embracing both deliberate and emergent strategy management can give us a very real competitive advantage over less dynamic and real time management practices. From the CEO to the GMs, and to all the Marketing, Product Management, Sales and Engineering Leaders, we need to harness both Deliberate and Emergent Strategic planning and deployment. We need to embrace the foundational tools of deliberate business planning but know that we need tools and processes that allow us to operationalize change, and re-alignment as we learn and as our markets and customers change. We have to adopt Agile engineering to not be out run by our competition, and really just to be smart and not wasteful. We need to include Lean operational and strategic approaches to be sure we are efficient. And finally we need to lean into the “Lean Startup” revolution and be closer to our customers, fast to market, fast to test and validate, and tune our way to success. But, at the same time we have to maintain the necessary discipline in creating operational differentiation as we deliver reliable, affordable, and high quality products and solutions to market.
With that introduction, what follows is intended as a guide to the different patterns and tools at our disposal. Deliberate, Emergent, Lean, and Agile concepts, methods, and tools. This is all focused on providing a pragmatic guide to help business leaders create balanced strategic frameworks that effectively support their paths to success.
Strategy Creation and Strategic Execution
One reason that strategy and strategic planning is such a complex topic is that the concept of strategy in business is so overloaded. You could be thinking of the creation of a foundational strategy for your business, a refinement of your strategy for the next several years, or perhaps you are working on a strategy for a new product. You could need a strategy to improve only a piece of your organization – perhaps on a finance and operations strategy to improve your free cash flow, or perhaps a very focused strategy to gain share from a competitor. Because of the many business needs that demand strategic analysis, development and planning, business strategy inevitably becomes a set of nested plans, or plans within plans, like the nested Russian Matryoshka dolls.
And to make matters worse, with all of the various tools and strategic frameworks that have been created to facilitate strategic thinking, planning and execution, it can feel like a strategic planning exercise just to justify which strategy framework you are using!
Still, in managing your business, you really cannot move forward without a strategic plan that addresses some pretty straightforward and important question, such as:
- What is the focus of your business? (market, segment, target customers, and positioning)
- Who are your target customers and who will you purposefully not target?
- How do you reach your customers? What do they truly value? (channels and positioning)
- What should your customers to think of when they think of your company? (brand)
- What products and services will you need to be a compelling supplier to your customers?
- What makes your company unique and differentiated? How will you protect this difference?
- What are the most important skills and resources to make your business strong?
- How will you generate value for stake holders and grow over time?
In a great HBR article on “Crafting Strategy” Henry Mintzberg argues that strategies are less formulated than they are crafted. I strongly agree for several reasons. First, strategic planning is iterative and collaborative. We put forward a strategy and test drive it with colleagues, stake holders and with the market itself. Our peers, our stakeholders and our customers react to our strategy, and so do we! We learn and we reshape our strategy; we anneal it, and move forward. Strategies are also emergent. Some things that find themselves as centerpieces in our go-forward business plans can be the result of an unexpected customer need, or the unexpected result of a competitors’ market blunder – things we never would have “formulated”. And finally, while quantification and analytical thinking are key to strategy formulation, in the end we will place our bets based on our “whole thinking”, which is more craft and insight than math.
This underscores that strategic planning must be iterative and that execution cannot be blind and ignore discovered opportunities. And importantly, all of these strategy creation tools are really frameworks to give us analytical insight into the various possible strategic choices and help us in our “craft”.
In the following sections I highlight the familiar and not so familiar strategic planning concepts, tools and frameworks and also offer some recommendations on how to best use them. While it can seem a little bit overwhelming to contemplate using so many tools, it is valuable to see the different tools summarized and cataloged together so that you can contemplate what will work best for your planning. I then follow up with recommendations and best practices for managing Strategic Execution to finally put the strategy to work to meet your objectives and have a real impact.
Strategic Management Alternatives – An Overview
Taking the generally accepted definition, a business strategy defines the long term goals of a business as and also defines the high level courses of action and application of resources to achieve those goals. So, your strategy should set clear direction and focus and also establish a framework for decision making within business constraints and in emerging market conditions. Inevitably, a strategy identifies a set of goals as well as the means by which those goals can be accomplished. And a good strategy identifies means that are differentiated and unique, that provide an “unfair advantage” to realize success in the face of competition.
These strategy creation and analysis tools can all be very valuable assets s you craft a truly great strategy and create an “unfair advantage” for your business.