Wednesday, November 28, 2007

Strategic Planning Analogy #133: Don't Abandon the Maps

There’s a reason why Las Vegas is one of markets hardest hit by the recent housing crunch. For the longest time, it used to be one of the hottest housing markets. I guess what goes up, must come down.

I have a friend whose job was to find real estate for a retail company. He was looking for retail sites in Las Vegas at the height of its house construction boom. New sub-divisions were spouting up all over Las Vegas at a rapid rate.

When my friend would get to Las Vegas, he would buy the most up-to-date road map he could find. However, even the most recent maps could not keep up with the growth of the area. A large number of streets would be completely missing from the map.

Since he wanted to build stores in the areas of growth, he would always be driving around these new areas of Las Vegas that were not on his map. As a result, he would often get hopelessly lost. The maps were of no use to him.

Strategic plans are often like maps. They help companies find their way to the desired future. As we saw in the story above, when the environment is rapidly changing, maps can quickly become out-of-date. At that point, they have lost much of their usefulness.

In much of the business world, the environment appears to be changing at a rapid rate. Using the analogy of maps, many would say that the strategic planning maps can no longer keep up with the fast pace of change. They become out-of-date too quickly. New strategic alternatives, like the new sub-divisions of Las Vegas, aren’t even on the map. Therefore, these people suggest that the idea of strategic planning is no longer very useful and should be abandoned.

I heartily disagree with this conclusion. I believe that in rapidly changing, turbulent times, strategic planning becomes more valuable, not less. In this blog I will try to explain why.

There are several reasons why strategic planning is even more valuable in times of rapid change:

1) It reduces distractions
2) It helps speed decision-making
3) It helps strengthen one’s position
4) It provides a competitive advantage

These are briefly discussed below.

1) Strategic Planning Reduces Distractions
When things are changing rapidly, it is easy to get distracted by all of the activity going on. One can get so immersed in the details of the change that you can lose sight of the big picture.

Each little change can lure you in. You can fall victim to the latest fads, which provide no lasting value or competitive advantage. You can end up like a pinball, bouncing all over the place from fad to fad without making any forward progress.

In times of rapid change, one cannot afford to waste time bouncing around from distraction to distraction. To continue the analogy, sure there may be some new streets in Las Vegas, but don’t let them distract you. Your goal is to get from Salt Lake City to Los Angeles. All you need to do is get through Las Vegas on the way to Los Angeles. You need a “big picture” map of the entire trip. With the big picture strategic map, you can continue the quest to Los Angeles without getting bogged down in all of the change in Las Vegas.

2) Strategic Planning Speeds Decision-Making
Strategic planning helps you focus in on the ultimate destination for where you want to take your business. When you have a firm focus on the end point, it is easier to understand how to react when confronted with rapid change.

Using our example, if you know that your strategic destination is Los Angeles, it is easier to deal with the changes in Las Vegas. There may be many new roads, construction on old roads, and numerous detours confronting you when you get to Las Vegas. If you have no idea where you are going, all of that change can become very confusing and slow you down.

However, if you know that the end goal is to get to Los Angeles, the process is easier and faster. All you have to do is ask a local which it the best way to get through Las Vegas in the direction that leads to Los Vegas.

This is also true with strategy. If you know your goal of what strategic position you want to own or strengthen, then you can quickly deal with rapid change. As each change confronts you, all you need to do is ask yourself how that change impacts your goal and choose the answer which exploits the change in a way which gets you the closest to your goal.

There is no need to reinvent your strategy for every little change. Just stay the course. However, if you have abandoned strategic planning and thrown away your map, then you have no guide to help you navigate the change. Every little change can slow you down, because you have no reference point.

With no ultimate destination in mind, every little change can open up all kinds of possibilities and you can become paralyzed by not having any idea which possibility to pursue. When you don’t know where you are going, every road can become a temptation. Change creates more strategic roads to bog you down in decision-making, unless you can quickly assess them in reference to a larger strategic goal.

3) Strategic Planning Helps Strengthen Ones Position
When large organizations are confronted with change and there is no unified ultimate strategic goal, you can have factions of the company each choosing a different path. This would be like having everyone in your company choosing a different road in Las Vegas.

Your efforts are now diluted into many directions. Portions of your organization will be moving in opposite directions, canceling out the benefits of each other’s effort. Worse yet, your consumers will become confused. They will not understand what you stand for in the marketplace. Without a strong position and a unified effort to excel in that position, your firm will lose the battle.

Even if all of your people move in the same direction, if change causes the direction to appear random, it does not help strengthen your position either. Strong positions come from getting everyone to move in a direction which reinforces that position. If strategic planning is abandoned, there is no focus on where to win, so your efforts will be less fruitful. Instead of getting closer to the goal of Los Angeles, you will end up wandering aimlessly through the Nevada desert.

4) Strategic Planning Provides a Competitive Advantage
If your competition has abandoned strategic planning, then they will fall victim to the problems mentioned in points 1 through 3. They will become distracted, have their decision-making slowed down, and weaken their position. By contrast, if you continue to employ strategic planning, then you will avoid these pitfalls. Relatively speaking, you will become stronger in the marketplace while they become weaker.

Sure, it may be a little more difficult to do strategic planning in a world of constant change than in a static environment. However, if you take the extra effort to do so when your competition does not, then you are that much further ahead.

Many people have justified abandoning the process of strategic planning because they do not see its relevancy in times of rapid change. In my opinion, strategic planning is even more important in times of change, because it improves your focus, so that change does not distract you and throw you off course.

Certainly, over longer periods of time, if there is enough change in the marketplace one may need to reassess one’s strategic goals. Eventually all strategies become obsolete, and rapid change accelerates this phenomenon. But this is no reason to abandon strategic planning. Instead, one needs the process in order to periodically reassess one’s goals, to determine when it is the right time to make modifications.

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