Why Strategy Is Still Worth A Business Owner’s Time

1. Is strategic planning still worth doing?

A couple of months ago I asked our LinkedIn Group the question “Is the strategic planning process as we know it still relevant?” That was because I’d seen articles and blogs arguing that strategic planning;
• Uses tools which are no longer relevant or
• Is no longer worthwhile because everything changes so quickly now.

2. What do the big names think – and is that important?

So a question in the recent McKinsey Quarterly caught my eye. Asked “What’s the new thing in strategy?” the answer was “there’s always new stuff out there, and most of it’s not very good…… it’s probably better to be thorough about what we know is true.”

McKinsey is a thought leader on the topic of strategy. So the answer kicks the point about the tools no longer being relevant into touch doesn’t it?

Then last week I found an article containing 5 video clips from a presentation given by Jonathon Goodman of the Monitor Group – another authority on strategy. The title is “Why Strategy Matters, And Now More Than Ever”. And that, by itself, disposes of the question of whether strategic planning is no longer worthwhile.

You can argue that McKinsey and Monitor work with large corporations so what they say offers no benefit to smaller, privately owned companies.

But I disagree; after all we founded ProfitPATH to adapt the tools used by corporations for owner managed businesses. If what McKinsey and Monitor say about strategy makes sense, then it makes sense for everyone.

The difference between corporations and owner managed businesses lies in how to apply what they’re saying.

3. Three things for business owners to think about.

I’ve picked 3 quotes from Goodman’s presentation. Each one makes an important point that’s easy to overlook or ignore.

“Strategy is the filter to distinguish distractions from opportunities.” Monitor views strategy as the outcome of making an integrated set of choices about, for example the company’s goals; its target markets; how it will win (its value proposition, sources of competitive advantage etc.);and its capabilities.

For a strategy to be successful each choice must reinforce the others so that all of the pieces of the strategy are aligned. The strategy drives resource allocation and is the thing that connects all parts of the organization.

It makes sense to compare any new initiative which arises to the strategy. If the initiative supports the strategy, it really is an opportunity. If it doesn’t, it is simply a resource wasting distraction.

But how often do we miss applying this critical test as our eyes glaze over with excitement about the profits the new initiative can generate?

(ProfitPATH will shortly introduce a new service to help clients focus on opportunities and avoid distractions.)

“It is useful to produce different versions of the future and ask – what would it take to win?” Business owners can use trends which might emerge or events that could shock any aspect of the environment to create 2 or 3 different versions of the future.

Goodman suggests asking 3 questions about each version. Will our current strategy be effective? If not, what will it take to win? What is the difference between what it will take to win then and what it takes to win today?

“Being flexible is not a strategy.” Monitor argues that the changes in the business environment make developing a coherent strategy more important than ever.

Companies that have one can determine the areas in which they can be flexible e.g. by knowing where to seed opportunities for new products and markets and by building flexibility into capabilities so that they can be deployed in different ways.

But despite the emphasis being heaped on the need for flexibility it cannot, by itself, form the basis of a strategy.

4. Wrapping it up.

Strategy and strategic planning will always be critical to long term success and increasing the value of a company. The big guys can’t be right all of the time – after all who is? But their experience and resources have to be worth something.

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Tags: corporations, flexibility, goals, Jim Stewart, McKinsey, Monitor Group, opportunities, owner managed business, privately owned companies, ProfitPATH, strategic planning, strategy, strategy consultants, target markets, value proposition

Comments

  1. I enjoyed the post. I will look at the videos when I have time. I work with many small businesses around strategy issues and I find that without a addressing a strategy small business fail to meet their potential. After this economic storm that we have experienced many surviving small businesses need revised strategies because their markets and resources have changed forever.

  2. John Irvine says:

    Jim,
    Challenging stuff.
    As a risk management specialist, I often find that the strategy becomes the focus in a ready, fire, aim paradigm. Whether to strategise or not is contingent on what issues confront the organisation and how to capture the necessary data to make the right choice of strategy.
    I have had success in applying systemic analysis to the corporate strategy development and the lesson is that informed decision making can only benefit strategies. Those informed decisions however, need to include input from the “headshed” of the organisation and the strategy is a culmination of the analysis of the data presented, active engagement and sysnthesis of the data that defines the issue, risk, problem that requires a strategy.
    Based on this principle, the strategy is absolutely necessary but is only one small part of the strategic process. Humans, by their very nature look for a logical, organised way to analyse situations. The strategic process provides that methodology. It is in the efficacy within that methodology that gives the organisation its power to increase its potential.
    Dr Richard Barber, a systemic risk specialist, uses the following analogy; We would expect a medical doctor to gather ‘raw data’ about the symptoms of a sickness, then to apply proven diagnostic tests or analysis to the data, before finally drawing insights and conclusions leading to methods of treatment. The same overall process is expected when engineers are dealing with a problem. A major advantage an appropriate diagnostic or analytical process (which in itself is a strategy) is that it can take us beyond our own limited knowledge to see causes or impacts that we were previously blind to. For example, by following effective diagnostic processes a doctor may identify an illness they had never even heard of previously.

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