Tuesday, August 20, 2013

Three Signs of a Bad Strategic Plan

We’ve spent a lot of time in prior blogs focusing on what good planning is all about. Today we will look at the key characteristics of bad strategic planning. In general, bad strategic plans have one or more of the three following characteristics.

#1) Bad Plans Are Full of Platitudes
One dictionary defines platitude as “a flat, dull, or trite remark, especially one uttered as if it were fresh or profound. Synonyms: Cliché, Truism.” In strategic plans, platitudes can be quite common. At first, the words sound profound, but after you think about it, you realize that it is merely a trite truism—a cliché.

Examples of platitudes would be phrases similar to the following: Our goal is to be a…
a)     …market leader.
b)     …highly profitable company.
c)     …consumer-centric organization.
d)     …good corporate citizen.
e)     …successful leader in our industry.
f)      …company with above average returns on investment.

A good way to tell if you have a platitude is to say the opposite of the statement. If the opposite does not make any sense as a strategy, then the original statement does not make sense as a strategy, either.  For example, does it ever really make sense if you turn to the opposite of the above phrases and say your goal is to be a…

a)     …market loser or also ran.
b)     …highly unprofitable company.
c)     …organization that ignores its customers and treats them poorly.
d)     …bad corporate citizen.
e)     …unsuccessful follower in our industry.
f)      …company with above poor returns on investment.

If the opposite is not a viable option, then your original statement is little more than a fancy way of saying “We want to be good.” And that is no strategy—it is just a wish.

Great strategies are about making tough choices. It is about choosing where to focus and where not to focus. It is about making trade-offs so that you give up in some areas in order to win in others. It is about finding your differential advantage versus competition. You don’t find these in platitudes. Platitudes tell you what is common to all; strategies tell you how you are creating a meaningful difference in the marketplace.

In contrast to the above statements, a great strategy could say something like: Our goal is to win on the basis of superior quality. This works as a strategic statement, because you don’t have to have superior quality to win. You could also win on price, service, speed, originality, etc. So the opposite of “not winning on quality” makes sense. You’ve made a real choice.

This choice provides direction (towards quality). It lets you know the trade-offs (I will invest in extra quality even if it means I cannot have the lowest prices). It lets you know how you will create demand for your offering versus the competition (better quality than them).

Those platitudes cannot do this. Just finding a fancy way to say “I want to be a success” provides no direction on what you will do to achieve that success. Putting the platitude on the wall may warm your heart a little, but it does not help you determine:

a)     Why does my company deserve to win?
b)     What actions are needed to create the win?
c)     Why should customers prefer me over the competition?
d)     What should I focus on?

And if your strategic plan cannot help you answer these questions, then it really doesn’t help you at all.

#2) Bad Plans Focus on the Scoreboard
To solve the problem above, some companies attach a specific number to define their success. The statement may go something like this: In five years, we will have achieved success by attaining:

a)     Sales of “X”
b)     Profits of “Y” percent of sales
c)     An annual growth rate of “Z” percent.

The problem is that putting a specific value on a wish does not change the wish into a strategy. It merely makes the wish more specific. Yes, now there is a quantifiable and measurable goal associated with the statement. But there still is no direction as to how that number is to be achieved. The numeric specifics let us measure how badly we did at the end, but they do not tell us what to do at the beginning.

In the past, I’ve referred to this as focusing on the scoreboard instead of the clipboard. It refers back to a statement Flip Saunders made when he was the coach of the Minnesota Timberwolves basketball team. When a reporter once asked him what it would take to win, his answer was “Unless they’ve changed the rules, we have to score more points than the opposition.” Although that answer is true, it is not a strategy.

The point is that a scoreboard lets you know who is winning the game, but it provides no strategy as to how to win. If Flip Saunders’ only advice to his team was “Go get me more points than the opposition!”, he has not given them a strategy for winning. Yelling at the scoreboard to put up more points doesn’t get you more points, either.

The way you win in basketball is by drawing up good plays on the clipboard and then executing them well. The clipboard is where the strategy is developed, not the scoreboard. If all you do is attach numbers to a platitude, then all you have done is merely told me what you want the scoreboard to look like when the game is over. But that doesn’t mean anything.

True strategies will look more like that clipboard. They will specifically say what everyone’s role is and how they are supposed to work together to increase the odds of scoring more points than the opposition.

And remember, a budget is not a strategy, either. It is just a more elaborate scoreboard.

#3) Bad Plans Focus On Improving the Parts
To avoid the problem of focusing too much on the scoreboard, some companies will work with the individual departments to talk about ways to specifically make improvement. It usually focuses around tactics to either reduce inputs or increase outputs for that area.

Although this is nice, it also falls short of great strategy. The problem is that it focuses on improving each part separately, rather than looking at how all the pieces fit together. It would be like having a separate clipboard for each player on the team telling them their best move in isolation. When all the players go onto the basketball floor together, they will probably fail, because they were not given a plan on how to work together for the good of the whole.

Perfecting the parts individually in isolation assumes that:

a)     You are already doing the right things (you just need to do them better);
b)     You are not missing anything (you have all the parts you need); and
c)     Making each individual part the best is optimal for the whole.

In most cases, these are bad assumptions. Today’s status quo can become obsolete in a short time. This can make what you are doing no longer appropriate, no matter how well you do it. Perfecting the obsolete is a waste of time. Perhaps you need to rethink the entire approach.

Perhaps the best approach is to move into brand new Blue Ocean areas, which require capabilities nowhere found in your organization. Or maybe the great opportunities lie in the white spaces between your departments, and you need to focus on better interaction between departments.

And, depending on what trade-offs you have chosen, it may be wrong to improve every area. For example, if you have chosen to win on quality, perhaps you need to double your efforts on quality initiatives by taking away improvement efforts in areas which will not increase quality.

Great strategies do not just look at improving the individual status-quo parts. Instead, they build integrated business models showing the best way to get all the parts working on behalf of the trade-offs needed to win in the environment of the future.

Bad business plans tend to have a combination of these attributes:

a)     A Focus on Platitudes;
b)     A Focus on the Scoreboard; and
c)     A Focus on Improving the Parts.

By contrast, great business plans tend to:

a)     Focus on Differentiating Direction;
b)     Focus on the Clipboard; and
c)     Focus on the Integrated Business Model.

A little bit of fluffy platitudes in a plan can make it prettier and easier to sell (like adding dessert to a meal). But if that is all you provide, then you have not given them the most important part of the meal.

1 comment:

  1. Good article. Very relevant and I see most of strategic presentations focussing on the above, and management feels that they have a clear and well articulated strategy.