Wednesday, March 28, 2012

Pitfalls and misdirection in strategic planning

A strategic plan is just a plan particularly related to strategy. Thus it expresses intentions and gives directives, optimized based on the best information available. To function well, it must understand all of its limitations as well as possible. The fundamental character of the future as uncertainty means that planners must consider contingencies. Any type of forecasting involves assumptions about the future. Planning should include considering as wide a range of alternative assumptions as possible. Each potential scenario flowing out of this sort of analysis should be evaluated for the appropriateness of the strategy, and of particular tactical moves in furtherance of the strategy, in the context of the scenario.
Such scenario analysis does two extremely important things. The first is that it forces thorough questioning of every assumption. Deliberately questioning assumptions and considering alternatives is necessary to have a good chance of identifying flaws in logic models from which conclusions will flow. Identifying logic flaws, or simply improvement opportunities, will enable better scenarios to win as the core of the plan. The other function of the scenario analysis is to increase organizational dynamism by preparing for change.
When the assumptions underlying a model are well understood, it is easy to test new information against them to learn whether it undermines or corroborates them. This informs whether reaction is necessary. Further, if the planning process included analysis of alternative scenarios, the organization may already have an appropriate response defined. Assumptions which have panned out in the past should be re-reviewed on a regular basis.
A planning process, then, should be designed to maximally solicit insights about the assumptions underlying predictions, and consider a wide array of alternatives to each. In the case of strategic planning, this means particularly looking at issues related to how an organization understands its strengths and capabilities and how it is positioned relative to the environment and competitors.
A strategic planning process should not spend time analyzing organizational execution or other short-term issues, except to the extent that there may be a deep organizational strength or weakness associated with execution. A strategic planning process should not be a review of past performance, except to the extent that that study reveals learnings relevant to understanding assumptions and making better predictions about the future. Assessing the performance of various portions of an organization separately is particularly misdirected, as it focuses each in different directions and leads the organization as a whole away from coherence. It is also critical to have the right data to understand the assumptions being made and the potential impact of those assumptions being wrong. According to a lack of true focus on strategy is the top reason for failure in strategic planning endeavors. How can an organization with a weak culture for strategy ensure that when undertaking a strategic plan it does not fall into one of these traps?

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