Strategic Planning Analogy #576: How Strong is Your Foundation?

THE STORY

I think the scariest commercials on TV are sponsored by the companies that rebuild house foundations. They talk about how—if you neglect your house foundation—it will collapse and your house will be ruined. That sounds pretty scary to me.

THE ANALOGY
Businesses are like houses. They are built upon a foundation. The better that foundation, the stronger that business will be. Strategic planning is a tool to help build a strong foundation for your business.

But let’s take this deeper. Even the process of strategic planning is built upon a foundation. If the foundation behind your strategic planning is weak, it will become a weak tool in helping to build the foundation of your business. So if you want a strong business foundation, you first need a strong foundation in your strategy process.

THE PRINCIPLE
To me, the foundational assumption behind long range strategic planning is this:

“By planning, an organization can minimize its risk for failure by taking greater control over how its destiny will unfold.”

This is the foundation behind strong strategic processes. Focus your process on adhering to this foundation and the process will be strong. Focus on anything else and you may just end up wasting your time. And then, your organization’s foundation will also falter.

There are two key words in this foundation that I will focus on here: risk and control.

1) Risk

Nothing is certain in life except death and taxes. Everything else fluctuates in complex, interdependent ways. Strategies are built to be executed in such an uncertain, interconnected world. In fact, the mere exercising of your strategy will change the environment it is being executed in. 

Therefore, strategies cannot be structured in such a way as to guarantee success. There are too many variables. The best you can hope for is a reduction in the risk of failure.

As a result, a good strategic process will spend a disproportionate time focusing on those vulnerabilities where you are at greatest risk. These are chosen based on two criteria:

a) What situations will have the greatest impact on my chances for success?

b) What are the areas most uncertain in knowing how they will unfold?

If something has both high impact and high uncertainty, then it should be a key part of your strategic discussion. After all, a high impact, uncertain situation has the greatest potential for increasing your risk of failure.

Often times, these may be items that fall outside what is traditionally focused on in strategy. Yes, there is a place for mission statements, values, core competencies, goal-setting, metrics, and the like. But if you don’t spend enough time addressing the high risk issues, the other activities will not save you. You will be blindsided by a future that surprises you and you are unprepared for.

That is why scenario planning and contingency planning can be such valuable strategy tools. Scenario planning can help you discover the risky areas to focus on and contingency planning can help you prepare your responses to these risks so that you can minimize any negative impact.

This leads to a second aspect of risk. Because the environment is constantly changing, you cannot address all of your risks in a single, one-time strategy document. The world is dynamic, so the strategy process must be dynamic as well.

Notice that I keep using the word strategy PROCESS. Strategic planning should not be seen as a single annual event, but as an ongoing process which happens whenever there are decisions to be made. If you want to increase your likelihood for success, you need a strategic approach that adapts to the changes around you and helps you make the everyday choices that reduce the risk of failure.

This does not mean that your basic strategy will keep changing every day. A strategy with no lasting impact is worthless. But you may need to switch to different (well thought out in advance) contingencies as the future reveals itself.

As soon as you realize that strategic planning is about minimizing risk rather than about creating a perfect plan, you will see the folly in many strategic processes that spend way too much time trying to craft “perfection.” “Direction” is more important than “Precision” when it comes to planning. If I know my desired endpoint (i.e., direction), I will know what to do when all the changes occur: adapt so that my endpoint is still in front of me. However, if I only have a detailed roadmap as my plan with clear steps on what to do (i.e., precision), my organization can quickly become lost if the future blows up one of my steps.

Don’t waste time trying to create the perfect planning document. Instead, use that time to create the right general strategic framework (which minimizes my risk of failure).

2) Control

The second key word is “control.” Even though one cannot gain full control over the future, it is possible to increase one’s control over the future through planning. As Peter Drucker once said “The best way to predict the future is to create the future.” In other words, the more control you have over how the future is created, the less uncertainty and risk there is in the future. Therefore, one of the most important parts of good strategic planning is planning how to increase your control over how the future is created.

One thing I know for sure is that if your organization is not focused on increasing control, it will lose control to someone else who is  focused on increasing control (on creating a future that is detrimental to your organization).

This really gets down to the issue of power. The more power you have, the more control you have. And if you have both power and control, you can create strategies with less risk of failure.

Power is a relative term. To say one has power means that you have a greater ability to control the future than others who are also trying to influence how the future is created. Therefore, an analysis of power is very external in its orientation. It requires a deep understanding of all the players who can impact how the future unfolds. They may be current or future competitors, legislators, influential consumer groups, or whatever. Don’t limit your thinking here.

Your task is to figure out how to maintain your current power within this environment and increase it over time. This can include topics such as size/scale, public relations, lobbying, alliances/joint ventures, the setting of international standards, control of patents, branding, acquisitions, speed to market, and so on. You need to convince the world to march to your beat and heed to your rules (the ones which give you the advantage). Are these issues/topics part of your strategic agenda?

This idea of building strategies which increase control was a key point of focus in my previous blog, seen here.

This is one of the key advantages of the Blue Ocean strategy. If you focus on building a strategy in a place where there aren’t any rules yet, you have a better shot of gaining control over how those rules are written. There is often a better shot at creating the future if you go to a place where there is not an entrenched competitor who already has control (provided you enter the blue ocean with power).

How much of your strategic process is focused on internal issues versus trying to gain control of the eternal environment? My guess is that your process probably needs to increase the time spent on gaining external control.

SUMMARY
One’s foundational philosophy behind strategic planning will determine the type of planning process you adopt. I believe that the foundational philosophy that creates the best strategic planning process is this:

“By planning, an organization can minimize its risk for failure by taking greater control over how its destiny will unfold.”

This foundation will lead to a greater focus on the external issues of minimizing risk and controlling power. And that has the greatest return on your strategic efforts.

FINAL THOUGHTS
Some say that planning is no longer valuable because the world is changing too quickly. Well, if your strategic process is focused on the wrong foundation, that statement is true. However, if your strategic foundation is focused on minimizing risk, increasing control, and long-term destiny, then it is more important than ever.