Monday, November 2, 2015

Formulating Strategies

The Real Value of Strategic Planning discusses the benefits of having strategic planning meetings to formulate long-term goals and the proper approaches to conducting these meetings. However, the approach the article takes is primarily applicable to companies that are within certain environments. The environments, as described in Your Strategy Needs a Strategy, are defined by the malleability and predictability of the industry, which should apply different strategic styles. The four styles are classical, adaptive, shaping, and visionary.
A classical style is most applicable in an industry that is predictable, but companies have little impact on influencing the factors that determine the future. Adaptive style is primarily useful in industries that are unpredictable and companies have little influence. Another style is shaping, which is best when the industry is unpredictable, but companies can influence the future. Lastly, a visionary style is suitable when the future is predictable and is easily influenced.
Since there are four distinct styles, the approaches of conducting a strategic planning meeting should differ. The approach from The Real Value of Strategic Planning is more suitable for styles that emphasize long-term planning and have little flexibility, which are characteristics of classical and visionary styles. These two styles use data to formulate strategy blueprints, which translates into multi-year financials, and are carried out over a number of years. The styles also require the ability to assess the current and future status of the company. In the approach, there are questions focusing on the scope, which will help answer and define the position of the company. Additionally, the proposed technique spends time understanding the what, which includes the opportunities and threats, direction of the industry, and the position of the company. Understanding what is helpful for perfecting the position of the company in the predictable industry.
On the other hand, the two other styles, adaptive and shaping, predominantly use short-term planning, which requires a different approach. Because the industries are less predictable, the companies have to make use of hypotheses to make flexible projections. The company should also iteratively reassess the position of the company in the industry and update its projections, so the company is always ready to respond to the changes in the industry. The company should also spend more time on how to carrying out the plans. Short-term planning gives shorter period to perfect the plan; thus, it is important to execute the plan well. Lastly, there should be a long-term vision of what the company hopes to achieve and short-term goals that incrementally build up to the vision. A long-term vision gives a sense of direction, regardless of the predictability of the industry. The short-term goals are incremental and temporary, giving flexibility. The separation of a long-term vision and short-term planning will allow the company to act strategically in the short run, but still working towards a common purpose.

Because the needs are different, companies in predictable industries should plan their strategic planning meetings different from those that are in unpredictable industries.

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