Strategy has a hard time. In this volatile, uncertain, complex and ambiguous (VUCA) world, it is increasingly questioned what strategy should look like and whether it is still useful in the first place. Looking at the core functions of strategy, the latter is most certainly the case. We need strategy more than ever. However, not the kind of strategy that we find perpetuated in our textbooks and everyday thinking about strategy.
In this series of articles I therefore challenge the ten most important myths about strategy. After breaking the first myth—that strategy is about war—this article zooms in on the next one: Myth #2: Strategy Equals Planning.
The idea is that strategy should be generated in this way: You conduct a thorough analysis of your organization and its environment, thereby paying particular attention to the trends that are going on. Based on this analysis you make projections about what you expect is going to happen or generate a couple of scenarios. And then you choose your course of action, plan it accordingly and write it down in a strategic plan.
While traditionally a five-year horizon was considered appropriate, this is now usually reduced to three years because that seems to be the period for which plans can still be made. Accordingly, organizations are supposed to fundamentally rethink their strategy about every three years. In the years in-between, they are supposed to make only incremental adjustments, should circumstances dictate so.
Why It Is Wrong
In a sense, strategy is of course about planning. As explained in my previous article, it even used to be called “business planning” or “long range planning” in the past. And in whatever you do, there is always some planning involved: you always think ahead—consciously or unconsciously—about what your next step is going to be. But beyond this very basic level of planning, the idea that strategy is all about planning is a myth for a variety of reasons.
- Definitions change. One of the most widespread definitions of strategy is the classical definition by Alfred Chandler: “The determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.” This definition is from 1962. This is more than half a century ago. Ever since, the world has evolved, and so have definitions. More recent definitions, even traditional ones like the one by Michael Porter from the early 1980s (“Deliberately choosing a different set of activities to deliver a unique mix of value,”) don’t have this built-in planning idea of strategy anymore.
- Strategy is an explicit response to planning. When we look at the history of the concept of strategy in the field of business, it is immediately obvious that strategy was introduced as an alternative for planning. The term strategy was introduced in business in the early 1970s because already at that time, people found out that the concept of planning didn’t really work. Just have a look at the titles of some early articles in Long Range Planning: “Strategic Management: A New Managerial Concept For An Era Of Rapid Change” (1971) and “Why Has Planning Failed?” (1972) and so on. So, it is exactly because planning had failed to deliver its promise, that strategy has been introduced as response.
- Planning is just half the story (1). Parallel to planning, an alternative view on strategy has emerged as well: strategy as adaptation or emergence. Headed by Henry Mintzberg, a whole school of strategy has developed that sees strategy not so much as a planning process, but as an evolutionary process of trial-and-error, learning and adaptation. As Mintzberg points out in various of his works since the 1970s, the heart of strategy is neither planning, nor adaptation, but finding the right balance between them. Accordingly, strategy is not about planning but about balancing between sticking to your plan and adapting to the changing circumstances and opportunities.
- Planning is just half the story (2). There is a second way in which planning is just half the story. The planning vs. adaptation discussion focuses on just one dimension of strategy: the extent to which we base strategy on predictions and expectations about the future. As Robert Wiltbank and colleagues have argued in a 2006 article in Strategic Management Journal, though, there is a second dimension: the extent to which we can control or influence the future. Along the idea that “to the extent we can control the future, we don’t need to predict it,” strategy is also about making things happen using your own resources, competencies and power.
- Planning only works when strategy is least needed. Planning works only in predictable situations. As long as the direction in which an industry develops is predictable and as long as we stick to what we have been doing in the past, planning can work. After all, in those cases we can extrapolate the trends of the past towards the future. However, next to being increasingly rare, such situations reflect exactly those cases where strategy is least needed. Strategy is most needed when things change or when you want to initiate something new. In such cases, though, planning doesn’t really help because there is no reliable basis for anticipating the future.
There is this famous quote by Dwight D. Eisenhower that “Plans are nothing; planning is everything.” It suggests that plans are useless because they will be outdated as soon as they are written down—or before. The very act of planning, though, is assumed to be useful because it creates a common frame of reference so that, once things change, everyone knows what to deviate from.
As argued before, creating this common frame of reference is one of the key functions of strategy. So it is important. But this doesn’t imply that it is planning that should provide this frame of reference. A shared understanding of an organization’s current, factual strategy can serve this same purpose—and in a more effective way because it doesn’t require speculation. Once we understand what an organization does today, we can point out quite specifically where and how things should change towards the future.
This doesn’t require meticulous, long-term planning. Wherever we look around us we see more agile, adaptive approaches emerge: in software development, in project management, in innovation, in entrepreneurship, and so on. These approaches distance themselves from the waterfall approach to planning that is still present in strategy. Adopting elements from such more agile approaches, strategy can effectively liberate itself from its planning-based history. The result is an approach to strategy which limits the role of planning to the short term and for the rest relies on a mix of adaptating to changing circumstances and effectuating the things you can influence.
This post was published earlier here on my forbes.com page.
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