Saturday, July 7, 2007

Same Title, Different Jobs

Back when strategic planning was considered to be more of a full-time profession, there were several strategic planning societies to belong to and numerous strategic conferences to attend. When I would attend some of these conferences, I would typically see the same phenomenon played out.

Even though all the people attending all had relatively similar job titles (something involving leadership in strategic planning), the participants at these conferences tended to congregate into two separate groups. One group would be people from either relatively mature industries or industries with high barriers to entry and exit. This would include a lot of heavy industrial manufacturing companies and people involved with the oil industry or mining.

The other group tended to consist of people who were in relatively new industries or industries with low barriers to entry or exit. This tended to include people who worked in high tech, the dotcom space, or retailing.

What was interesting was that when each of these two groups began to talk to the other about their roles in strategic planning, it was as if the groups had two distinctively different jobs. There was almost nothing in common between the two groups. They defined their roles differently, they did different tasks, and they even had different expectations for what strategic planning is supposed to be.

Even though the people in both groups had similar job titles, they had totally different jobs. As a result, each group would soon start to have little to do with the other group, and would just converse with the group which most matched their own perception of strategic planning. In the end, it would almost be as if two separate meetings were going on at the same conference. Maybe that’s one reason why people stopped scheduling all of those conferences.

Beware of people offering up a one-size-fits-all approach to strategic planning. As the story above pointed out, all firms are not in the same situation. Based on barriers to entry/exit or location on an industry life cycle, one’s strategic needs can be quite different. To treat them all the same would be unproductive. That would be like having a doctor treat an emergency room trauma case in the same manner as a routine office checkup.

One must tailor the approach to strategic planning based on particular situation a company finds itself in. Therefore, the first step in strategic planning is to determine which type of planning is appropriate for the current situation.

The principle here is the principle of appropriateness and balance. First, the strategic planning process used should be appropriate to the situation a company is in. Not every situation requires the same strategic process. Second, although different situations may require a different emphasis, businesses can get in trouble if they ONLY look at the area emphasis. Although the primary focus should be on the point of emphasis, a balance is needed to ensure that a company is not surprised by any “blind spots” which come along. The other aspects need to be considered as well.

In this blog, we will outline these two principles. Then, in subsequent blogs, we will apply these principles in more depth to the two main types of strategic situations as alluded to in the story above.

In a complete strategic planning process there are three major steps:

Goal: Determining what you will stand for (own) in the marketplace—the place where you can win.

a. Discovering: Learning about the near and long term environment and coming to some conclusions about key trends. This would include external discovery—learning about the world in which you will compete, as well as internal discovery—learning about one’s own strengths and weaknesses relative to that external environment.

b. Visioning: Creating visions of possible future states and the types of positions one could own in them. This would answer questions like: What problems am I solving for what type of customers? Why is my solution to the problem superior to the alternatives for that customer?

c. Evaluating: Combining what is learned in discovery with what is proposed in visioning to determine which alternative is most desirable and achievable for your company/brand.

Goal: Determining the path that will ensure you are able to obtain (or re-enforce your hold on) your desired position. This involves making it easier to get what you need and harder for your competitors to do the same

a. Pursuit of Capabilities
b. Pursuit of Supply Chain Connections
c. Pursuit of Market Share

Goal: Discovering ways to leverage your position so that you can optimize the return on your investment.

a. Doing well at general business efficiency principles
b. Finding unique nuances in your business which can improve productivity
c. Use power and influence to extract a disproportionate share of profits from your industry ecosystem.

Focus on Appropriate Areas
If you are in an industry which has some of the following characteristics, then your strategic focus tends to be mostly on #3 Productivity and least on #1 Positioning:

i. Mature Industry (consolidation has already taken place and rules of success already written).
ii. Stable Industry (the future is going to be a lot like the present).
iii. High Barriers to Entry and Exit (The players in the game remain the same. The risk of getting kicked out low).

The reasoning for the emphasis on productivity is obvious. If you believe the industry is relatively set in its ways and your current position within the industry is set, then there is less need to worry about positioning or pursuit. Your position is already fairly firmly set and most of the pursuit activities have already occurred. Hence, the key focus is on how to squeeze a little bit more profitability out of your current situation through productivity.

Conversely, you will have an opposite focus if your industry is in the following situation:

i. Embrionic or Early Growth Stage of lifecycle.
ii. Instability in the rules of the industry, the players in the industry, or the technology in the industry.
iii. Low Barriers to Entry or Exit

In these types of situations, there can be ambiguity about who holds what position in the marketplace and there may be opportunities to stake out new and better claims to a position. At this point, profitability is of lesser importance as investments are made to stake claim to a position which can reap great rewards later once you survive the consolidation.

Yet Still Keep Balance
In mature industries, although productivity may be the key focus, you cannot ignore the rest. Stable industries can be made unstable by new technologies or new ways of solving problems. If you are not watching the environment for these industry changers, you may find your position become obsolete.

Similarly, in the young and evolving industries, productivity is not the primary concern. However, if your cost structure is way out of line with the rest of the industry, you will probably not survive to the next level of the life cycle. Even in the heyday of the dotcom bubble, when profits seemed irrelevant, there eventually came a day of reckoning when the inefficient were erased from the marketplace.

Thus one also needs balance.

The ideal design of your strategic planning process depends in part on where your industry is in its lifecycle and your current position within that industry. Once you determine this, you can put the proper emphasis on positioning, pursuit and productivity, where one or more of these get greater emphasis, but none are ignored.

This is a lot of content to cover in one blog. That is why we will be continuing the discussion in subsequent blogs.

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