Strategic planning notes
From PLN
Strategic planning notes
- by Leslie Dillon, from Leader's Digest
How managers' everyday decisions create--or destroy--your company's strategy
Organizations' formal strategies determine how their business is carried out-right? Wrong! say the authors of this article. It’s managers' actual day-to-day behaviors, including their decisions about resource allocation, that really drive strategy. Sometimes these choices don't support high-level plans. Every resource allocation decision moves an organization "either into or out of alignment with its announced strategy."
The authors have found that the way strategic commitments are made falls into two categories:
- Organizational structure: The fact that responsibility is divided among various individuals and units has vital consequences for how strategy is made.
- Decision-making processes: Equally important, the way decisions are made in an organization has vital consequences for strategy.
Senior managers are urged to focus less on formal strategy and more on the processes of resource allocation. Here's how to make that happen:
- Know who's driving key resource allocation decisions
- Actively manage resource allocation
- Understand the people making the proposals.
- What's the track record of the person making the proposal? A near-perfect record means "there’s probably little downside to approving the request."
- Recognize the strategic issue and make sure managers address it.
- Requests for resources require making two decisions: Should we support this idea? and Is this the right way to go about it? Most budgeting processes are aimed at the second question, not the first.
- So, when evaluating requests for resources, spend more time with your managers discussing Should we support this idea?
- Connect the dots for managers.
- Frame the questions you ask about resource allocation to reflect your organization's perspective.
- Meet with your division managers together and ask them, “What’s best for the organization?”
Joseph L. Bower and Clark G. Gilbert. "How managers' everyday decisions create--or destroy--your company's strategy", Harvard Business Review, February 2007.)
FAST strategy
Well-known independent management consultant John Hagel advocates implementing the FAST approach to strategy. FAST is an acronym for Focus, Accelerate, Strengthen and Tie it all together. This approach urges operating on two different time horizons: one takes a five- to ten-year view; the second is a more tactical six- to 12-month approach.
Focus is the key activity on the 5- to 10-year horizon. Senior managers must "develop a common view" on these two key questions:
- Five to ten years from now what will the markets we participate in look like?
- What kind of business will we need to have to continue to create value in these markets?"\
On the six- to 12-month horizon, the key requirements are: Accelerate (identify a few key operating initiatives) and Strengthen (identify major obstacles to moving faster; "de-bottleneck" and strenghten the organization so it can move faster). "Tieing it all together integrates these three streams of activities." The FAST approach favors incrementalism but recognizes that, without direction, it can lead to suboptimization. (John Hagel, Fast Strategy, Strategyworld.org., Apr. 28, 2007.)
Scenarios to help plan the future of your library
SOLINET convened a series of meetings throughout the Southeast inviting members to discuss the future of libraries. These discussions used scenarios developed by the Planning Committee of the Board of Directors to explore ideas about the evolution and direction of library services, collections, buildings, staff and technology. The results of these meetings were compiled into a report available online (9-page PDF). The scenarios are also available online to lead discussions in your own library.
The report states that the library environment for the next three to five years will focus on:
- New service models for libraries (outward focus on users; engagement in planning; importance of collaboration).
- Changing role of collections (including library as creator of resources, especially through digitization of special collections).
- Staff transformation (including creating and adding staff who are forward-thinking, technologically-savvy, and service oriented).
- Re-purposing buildings (Social space, quiet space, collaborative space).
- More assessment (of user needs, of performance and return on investment).
- Keeping up with and in control of technology (possibly with Google as the primary catalog and access point to library collections).
(SOLINET Member Scenario Planning Discussions, Summary Report from the Planning Committee of the SOLINET Board of Directors, Apr. 23, 2007.)
Strategy’s strategist: An interview with Richard Rumelt
Richard Rumelt, professor of strategy at UCLA’s Anderson School of Management and a giant in the field of strategy, gives some advice on strategic planning and the role of the CEO in this interview in The McKinsey Quarterly. Here's a brief summary of what I thought were his major points:
- Most strategic plans have little to do with strategy. They’re three-year or five-year rolling resource budgets, and they coordinate deployment of resources--but that’s not strategy.
- Strategic planning is “a pathway to substantially higher performance.” The best path to that “is to exploit some change in your environment--in technology, consumer tastes, [etc.]--and ride that change with quickness and skill.”
- The annual resource budget should be separate from the strategy. Call “those budgets ‘long-term resource plans’--and start a separate, nonannual, opportunity-driven process for strategy work.”
- Strategy starts with identifying changes. “Strategic thinking helps us take positions in a world that is confusing and uncertain.”
- What’s needed is a “predatory approach. Leap through the window of opportunity and stay focused on big wins—not on maintenance activities. (Think Steve Jobs and the iPod.)
- Most “innovation flows from the unexpected combination of two or more things.” (The iPod “came from knowledge and resources being adroitly combined.”)
- “Most of the strategy concepts in use today are static.” If the terrain never changed, that would work, but in today’s world, change is constant.
- “’Value denials’...are products or services that are both desired and feasible but are not being supplied.”" Value denials are business (or service) opportunities. One way to think about change is to ask yourself “what value denials it will uncover.”
- Strategic analysis is really about solving a puzzle. Small groups of smart people are needed to solve these puzzles.
- A manager’s most important job “is to break down a situation into challenges that subordinates can handle.” The manager “absorbs a good chunk of the ambiguity in the situation and gives much less ambiguous problems to others.”
(Dan P. Lovallo and Lenny T. Mendonca, ”Strategy’s strategist: An interview with Richard Rumelt,” The McKinsey Quarterly, Aug. 15, 2007.)
Demystifying strategy
What, exactly, is business strategy? There’s lots of confusion, but professor and leadership consultant Michael Watkins defines it this way: "A business strategy is a set of guiding principles that, when communicated and adopted in the organization, generates a desired pattern of decision making. A strategy is therefore about how people throughout the organization should make decisions and allocate resources in order [to] accomplish key objectives. A good strategy provides a clear roadmap, consisting of a set of guiding principles or rules. The strategy is just one element of the overall strategic direction that leaders must define for their organizations. It’s not the vision, which is actually just an inspiring portrait designed to motivate employees to work harder! And it’s not the mission, which is about what will be achieved. Nor is it the value network, which is about with whom value will be created and captured. The strategy is about how resources will be allocated to accomplish the mission.
“Together, the mission, network, strategy and vision define” strategic direction. “They provide the what, who, how, and why necessary to powerfully align action” in an organization.
(Michael Watkins, "Demystifying strategy: The what, who, how and why," The Leading Edge, Harvard Business Online, Sept. 10, 2007.)
How to improve strategic planning
Formal strategic-planning processes are an important ingredient in improving strategy development. So what can managers do to improve the process? This article lists five ideas that executives can use to make planning processes run better.
- Start with the issues. Identifying the key issues is the first step. Ask each of your direct reports how a given set of social, economic, and technology trends will affect their units. Or list three to six strategies for the coming year and then meet with your managers to debate the implications each of the trends has on their units. If you prefer a bottom-up approach, meet with your direct reports and other key staff to develop a list of the most important strategic issues facing your organization.
- Bring together the right people. Include your most knowledgeable and influential staff, stimulate and challenge their thinking, and hold honest, open discussions about the issues you’ve identified. And remember: those “who carry out strategy should also develop it.”
- Adapt planning cycles to the needs of your organization. Annual strategic planning cycles for the entire organization are not necessary. But when important changes in the external environment occur, senior managers may need to make major strategic decisions on an ad hoc basis.
- Implement a strategic-performance-management system. Establishing milestones and assigning metrics to them helps alert managers to problems as they emerge.
- Integrate human-resources systems into the strategic plan. “One way to create a more valuable strategic-planning process would be to tie the evaluation and compensation of managers to the progress of new initiatives.”
(Renée Dye and Olivier Sibony, "How to improve strategic planning," The McKinsey Quarterly, 2007 No. 3.)
Related articles
- Strategic planning series--Introduction - Introduction to a series of articles on strategic planning.
- Strategic planning--process and practice - The LLN Peer Panel offers real-world perspectives on strategic planning in the library field.
