Monday, March 4, 2013

Strategic Planning Analogy #491: Seeking Choices

When my children were little, they often weren't pleased by what was served at home for dinner. They would complain and ask if they could have something different to eat.

I would explain to them that we weren't running a restaurant. I did not have an extensive menu of options for them to choose from. Each dinner had only one meal on the menu. The only choice they had was to either eat it or go hungry.

It did not make my children happy when I eliminated their eating options.

It’s not much fun looking over a dinner menu if there is only one item on the menu. The lack of options and choices makes the task seem a bit futile. Since you’re going to get the one item on the menu anyway, you may as well skip looking at the menu.

A similar situation can occur with strategic planning. A lot of business people resist going through the planning process, saying they do not enjoy it. In many cases, I think the reason for resisting a strategic planning process is similar to the reason for resisting a menu with only one option on it—a perceived lack of choices.

If you think you are going to be basically doing the same things after the planning process as you were doing before the process (because of a perception of no other alternatives), then why do the process? You can skip it and go back to doing the one thing you knew you were going to do anyway. Under these assumptions, the strategic planning process can be seen as a waste of time, keeping you from getting your one task done (just as looking at a one-item menu wastes time and keeps you from getting to eat the one meal you know you are going to have).

This really hit home with me as I looked at the way business people from different countries treated the concept of strategic planning on social media sites like Linkedin. In fully developed mature economies, pure strategic planning jobs were disappearing and the discipline was not held in high esteem. By contrast, in emerging economies people actually seemed excited about strategic planning and there appeared to be a greater abundance of professional strategic planning positions being created.

Then I started to make the connection that much of the excitement around strategic planning in developing economies was due to a perception that businesses had many more options. As a result, it was important to spend time in these countries doing strategic planning in order to choose which options to focus on. It was as if they saw strategic planning as the way to choose the best items on a lengthy menu of tasty options.

By contrast, those in mature economies or industries seemed to see fewer options available to them.  It was as if the rules had already been written and hardened in concrete.  You couldn’t change anything—choices had already been made.  Your only option was to work harder at the same old thing.  Therefore strategic planning was a waste of time—a one-item menu that could be skipped.

Of course, a skilled strategic planner can see the value of strategic planning in virtually any environment—even mature ones.  But if their audience does not perceive the value, the planning process will be resisted (or even eliminated).  Therefore, strategic planners need to address this issue of perceived choices.

The principle here is that great strategic planning processes deal with determining which strategic choices to make.  Choice is the essence of what strategy should focus on.  In his famous Harvard Business Review article “What is Strategy?” (from November-December 1996), Michael Porter said “Competitive strategy is about being different.  It means deliberately choosing a different set of activities to deliver a unique mix of values.”

In the 2011 book Good Strategy/Bad Strategy, Richard Rumelt says that the main difference between good strategies and bad strategies is that good strategies are based on making tough choices and bad strategies refuse to make choices.  Or, in Rumelt’s words “Strategy involves focus and, therefore, choice. And choice means setting aside some goal in favor of others.  When this hard work is not done, weak amorphous strategy is the result.”

In a prior blog, I also talked about how the lack of making choices can lead to disaster.

The problem is that many modern strategic planning processes are missing this key point.  They are focusing on something other than making the hard choices and trade-offs necessary for creating a winning position with a complementary winning business model.

It’s gotten so bad that even many of those in the strategic planning field no longer see their primary task as one of helping companies make tough choices and coordinated trade-offs.  Without someone advocating the need to make tough choices in a strategic manner, the tough choices won’t be made.  Worse yet, business leaders are increasingly buying into the idea that there is no need to make tough strategic choices.  And once they start believing in that, it isn’t much of a leap for these executives to questioning why strategic planning should be done at all.  After all, what is the benefit of staring at a one-item menu?

Common Substitutes for Choice-Making
There are many processes out there which call themselves strategic planning, but really are not, because they do not focus on making choices.  Here is a brief description of some of them:

1. Elaborate Budgeting:  Here, the end outcome is not a set of coordinated choices and trade-offs, but a set of numerical spreadsheets.  In essence, it is just a budget with perhaps a couple more years of length to it and a few more words attached to it.  The tough choices needed to make the budget a reality tend to be missing.  It’s just a bunch of numbers one “hopes” to achieve. This often occurs when the planning process is housed in the finance department and run by the same people who create the budgets or do financial analyses.  In the past, I have used the basketball analogy and said this insufficient process is like focusing on yelling at the scoreboard rather than focusing on the hard choices of what play to draw up on the clipboard.  Yes, the highest score wins, but you don’t get the highest score by just staring at the scoreboard (the numbers).  I've spoken more about this here, here, here, and here.

2. Platitudes and Lofty Aspirations:  In this version, the focus is on lofty goals and aspirations which end up sounding like hollow platitudes. The end outcome is not a set of choices, but a nice phrase that can be put on a banner and hung in the lobby. They say things like “we aim to be a world class this or that” or “delight customers” or “create superior shareholder value” or something similar.  These are nice things to achieve, but unless you make hard choices about how to be different, or how your business model’s trade-offs achieve these things profitably, they are only wishes.  Wishes won’t come true just because you want them to.  They are the outcomes of tough choices. I’ve spoken more about this here and here.

3. More Better:  Here, the goal is to just do the same old thing as before, only more of it and better than before.  The end outcome is list of things to do which improve upon the status quo.  The problem is that this assumes the status quo is the right set of choices. It often isn't  because environments change, making the status quo obsolete. Second, when you try to improve everything, you often improve nothing, because you did not make any trade-offs needed to truly excel in any area.  Instead, the efforts cancel each other out.  The third problem is that this process tends to try to outrun the competition with a similar position, rather than trying to find a point of differentiation.  In other words, this version rushes directly to what to “do” without first stopping to decide (choose) what you need to “be.”  I've spoken more about this here, here and here.

How Do We Overcome This?
So how do we overcome all of these poor excuses for planning and get back to solid strategic planning which focuses on making the right choices?  There are two areas to work on. 

First, we need to offer strategic planning processes where choices are the focal point.  This needs to replace lesser processes which are often little more than budgets, platitudes or attempts to be more better.  We need processes focused on questions like:

  1. Where are we going to win? (Customers, Markets, Solutions, Points of Differentiation)
  2. Why are we going to win? (What bundle of trade-offs will give us the competitive edge in owning the winning position? What business model will beat out the alternatives?)
  3. What do we need to focus on to pull this off (capabilities, capacities, competencies)?
  4. What should we NOT focus on? (because it will keep us from winning)
  5. How do we tweak the business model so that we not only win, but make money?

Second, we need to get management excited about the importance of making these types of choices.  There are many reasons why management may not see the importance of making choices.  First, they may not believe they have many choices.  This is usually a false notion.  Restructurings, repositionings and new business models come about all the time.  Just look at how businesses and industries are continually being replaced by something new.  Why not become the next new thing which replaces the status quo?

Or perhaps management feels that the status quo is just fine, so there is no need to change it (no additional choices needed). But we all know that the environment changes and that all strategies eventually become obsolete. Isn't it better to be the agent of change and grab all the market share which comes with being the next big thing rather than to be the victim of someone else’s change and become obsolete?  Making better choices will create a stronger, more prosperous company and who wouldn't want that?

In other words, first we need to build processes which create robust lists of options and a way to choose the best option (like the Maitre D who helps restaurant patrons make a great choice from a great menu). Second, we need to get management to want to make the tough choices (desire to go to the restaurant and choose something new to eat off that menu).

The key function of strategy is to help companies make the tough choices and trade-offs which will place them in differentiated positions where they can win.  Unfortunately, lesser processes which focus only on budgets, platitudes or tactical improvements have crept in to replace the key function of choice. To get companies back on track, strategists need to do two things: 1) Bring back processes which focus on choice; and 2) get management interested in making those tough choices.

To get patrons to try new choices on the menu, some restaurants offer free samples. Perhaps you need to get your management interested in making choices by giving them samples of what particular choices could mean for the company. 

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