Thursday, March 12, 2009

Strategic PlanningaAnalogy #246: The Dreaded Science

Decades ago, I knew someone who worked in the automotive industry. The company he worked for was having a serious problem: The paint was flaking off the cars not long after purchase. His job was to fix the problem, so that the paint would no longer flake off.

The first thing he did was go to the lab where the paint’s adhesiveness was being tested. He talked to the engineers. They were puzzled, because in the lab, the paint adhered very well. It never flaked off the metal.

So my friend asked them where they got their metal samples to try the paint on. He was told they special-ordered it from an independent metal shop. He examined this special-ordered metal and could see that it was a more refined grade than what was used to build their automobiles.

So the next thing my friend did was get the engineers metal samples which came right off the assembly line. Now, they were testing the paints on the same metal that the paints would go on in real life. As a result of this change, they were able to resolve the problem.

Tests in artificial environments are not always useful in predicting outcomes in the real world. The conditions are often not similar enough to the real world. As we saw in the story, the metal bought from a specialty shop was different enough from the metal on the assembly line to make all of their testing with it useless.

Speaking of useless, there are a lot of people in the business world who characterize strategic planning as useless. I’ve been reading a number of blogs lately from others who talk about strategic planning. The impression I get is that the reputation for strategic planning being a useless waste of time comes from their personal experiences. They’ve seen strategic planning as something that:

a) Takes them away from their important work via off-site meetings; and

b) Has them work on planning exercises that either make no sense to them or seem irrelevant to what they do for a living (too abstract, impractical).

I’ll have to admit. I’ve seen things like that and there is some truth in what they say. The problem, however, is not the idea of strategic planning. The problem is how the strategic planning is practiced.

These people experienced strategic planning like that automotive paint laboratory. The laboratory was isolated from the real world and worked on metal that had no relevancy to the metal on the assembly line. The result was failure. Similarly, many off-site strategy meetings are too isolated from the real world and work on concepts having little to no relevancy concerning how things really get done. Again, the result is failure.

As strategists, we need to put real “assembly line metal” into the hands of the people designing the strategy. Then the strategy will “stick” to the business after the meeting is over, like quality paint.

The principle here has to do with relevancy. The more relevant you can make the strategic planning exercises, the more committed the people will be during the exercise, and the more buy-in there will be to the strategy once the exercise is over.

To make sure you are relevant, we will look at two ideas:

1) Use Real Metal in the Lab
Off-site or dedicated strategy meetings are often like laboratories, where you can play around with potential strategic options. Strategic planning work at these meetings tends to come in three forms:

a) Abstract/Conceptual: Mission Statements, Vision Statements, Position Papers, 2x2 Grids, Scenario Development, and so on.

b) Numeric: Mathematical Simulations, Financial Reports and Projections, Regression Analyses, Graphs, Big Fat Books of Numbers, and so on.

c) Problem Solving: Dealing with specific problems facing the company, looking for specific solutions.

All three are important. The abstract provides the context for everything you do, giving general direction as to what is right and wrong for your company. The numeric lets you see how the abstract impacts your output. The problem solving is what actually takes place to make the strategy real in the marketplace.

The problem comes in balancing the mix. The types of strategic planning complained about in what I read tend to be too focused on the first two types of work and not enough on the third.

Let’s face it. If we do our jobs right, the abstract work shouldn’t change that often. Wal-Mart has had essentially the same conceptual strategy for over thirty years—win with a low cost, low price strategy. Sure, the flavor of that strategy changes every once in awhile, but even that doesn’t change all that often. At Wal-Mart, the early flavor of that strategy revolved around distribution excellence. Then it moved to data management excellence. Now it is moving to lowering costs through sustainable environmental practices. As important as it is to get these big decisions right, once you are finished you really don’t need to spend a lot of time on reinventing them at every meeting.

The purpose of the numerical work is to make us more intelligent about what future outcomes might look like. We all know that this is imprecise work. There are too many variables outside our control. Events will continually change. Therefore, why waste time sweating out all the numeric details to deep precision at a strategy meeting? As I’ve said in a prior blogs (here, here, and here), the idea is to only get precise enough to ensure that you are generally going in the right direction. Too much precision can actually cause problems. Just look for three things: Direction (is the trend going up or down), Magnitude (is it moving a little or a lot) and Speed (is it happening quickly or slowly). That is often all the numerical analysis you need to know to make the right strategic decisions.

This leaves problem solving, for real, live problems impacting the company. These are like the real assembly line metal—a practical place to test the stickiness of your strategy. This is where most of the time should be centered. Now you may fear that if too much time at strategy meetings is on practical problems, the meetings will get too tactical and long-term issues will not get proper attention.

My response is that businesses are going to spend most of their time trying to solve problems anyway. It is the sum of all of these little practical action plans (not your words) that ends up being your real strategy in the marketplace. Therefore, if you want all of these actions to represent your strategy, what better place is there for discussing them than at a strategy meeting? This is your best shot at getting actions to match up with strategy.

Not only that, it makes the meetings more relevant to your executives and lets them see how to apply strategy to their everyday problems when the meeting is over. Hence, it’s a win-win for both of you.

Businesses can only focus on so many big projects at a time. As we saw in a prior blog, if all you can accomplish in your meeting is an agreement on which projects deserve the highest priority, you have done a lot, since you have gotten work priory linked to strategic priority.

2) Get out of the Lab
I’ve written close to 250 of these blogs on strategy. Looking back, I have only rarely ever mentioned dedicated strategic planning meetings. Why? The real work is out in the field. If you want to be seen as relevant, go out to where the work is being done and show people how strategy can help them solve their problems.

My automotive friend had another problem to solve. To test the quality of the manufactured metal, the company had to take samples from the assembly line back to the lab. This forced them to stop the assembly line for sample-taking. It was also a timely process back in the lab, causing feedback and corrections to be very slow.

My friend changed the process so that the metal could be tested right on the assembly line in nearly real time. This saved the company millions and millions of dollars.

The more real-time you can be out there in the field, the more valuable you will be, and the better the reputation will be for strategic planning. Don’t just sit in the “ivory tower” dreaming big dreams. Get your hands dirty out in the field.

Strategic planning has a bad reputation with many in the business world. It is seen as abstract and irrelevant. To ensure that strategic planning gets its proper emphasis and respect in the business, spend most of your time on proving its relevance by using current problems as the basis for strategic discussions.

Economics is called “the Dismal Science” because economists are never in agreement and are usually wrong in their forecasts. It’s just a lot of work by a lot of smart people which gets us nowhere near the truth. If strategists fail to become more relevant, they will go down the same path, becoming “the Dreaded Science.”

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