Wednesday, March 29, 2017

Does Strategic Planning matter?

The article that I found highly informational from the week 2 is “The Real value of Strategic Planning”. Though most companies invest a substantial amount of time in an annual strategic planning process, many managers see little benefit in this investment. The purpose of strategic planning is not to generate strategic plans, but to create prepared minds. The goal of these review meetings is for everyone to leave the room much better informed than when they went in. Achieving that outcome requires answers to several key questions - “Who should attend reviews”, “How long should the review process be”, “Where should a review be held”, “What should be discussed”, “How should the conversation be conducted” and “How much preparation is necessary”.

Kaplan and Beinhocker (2003) undertook an in-depth analysis of the strategic planning processes of thirty companies, some of whom had a long term history of success and others that had made serious strategic blunders. In this article, the authors ask firms to consider using scenario planning and to use it thoughtfully. They present “what if” conditions like - “What if there is a new government regulation? How might our firm be affected and react?” This condition may not happen, but it may and be of consequence.

Prepared minds can help companies judge the success or failure of the strategic planning process. For example, the strategic review revealed that though a division of a medical device company enjoys the largest market share and excellent profitability, was slowly becoming commoditized. Company executives realized that orthopedic applications would be increasingly important and they managed to pull through the perfect strategy to enter into the new market because it was clear on the possibility of the growth opportunity.

The author concluded that the true value of strategic planning was to make sure that key decision makers have a solid understanding of the key issues, agree on important assumptions, and share a common understanding of the facts surrounding the business. This serves as a solid foundation upon which good strategic decisions can be made despite a constantly changing environment.

Reference: The Real Value of Strategic Planning (Kaplan and Beinhocker, MIT Sloan Management Review, Winter 2003)

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