Monday, February 22, 2010

Strategic Planning: Rigid or Flexible?

In a recent Wall Street Journal article, Walt Shill, head of the North American Management Consulting Practice for Accenture said that "Strategy as we knew it, is dead." (http://online.wsj.com/article/SB10001424052748703822404575019283591121478.html?mod=dist_smartbrief)

The kind of strategy that Shill is referring to is the kind of strategy that pretends that by dotting every i and crossing every t, and creating monolithic structures, that it will somehow be able to predict the future. Of course, if you could not predict the future, then it would be insane to establish a rigid five year strategic plan and stick to it, regardless of the environmental situation. In this way, one wonders what Shill is referring to, since we have never really been able to predict future events accurately. Was "strategy as we knew it" dead-on-arrival, well before the current economic crisis?

There have been periods of relatively consistent performance and environmental reactions to industry developments that have made long term static strategic planning successful. While the future was not predictable in absolute terms, it was in many ways, reliable. In a stable economic and social environment it is reasonable to lay out fairly static long range plans without need for regular short term updates. Now, with a rapidly changing economic landscape, new competitive pressures and high degrees of uncertainty in the short and long term, it appears that indeed strategic planning in that old sense is no longer relevant.

But, was it ever a good idea? Early strategic planning was typically employed in warfare. Helmuth von Moltke the Elder, the German military strategist (1800-1891)is well known for his saying "No plan of operations extends with certainty beyond the first encounter with the enemy's main strength." (no plan survives contact with the enemy). Some have taken this to mean that strategic planning is useless, since it will need to be revised as soon as it is engaged. A brief look at von Moltke's career belies this assumption. He was a brilliant field marshall and strategist who used military strategy to gain many military victories. His career is filled with strategies that did not turn out the way that he had initially planned and yet, he was extremely successful because of the way that he approached the variability of circumstances on the battlefield.

The key word in von Moltke's comment is "certainty." It is true that no strategy can be executed with certainty, and this realization is critical for successful strategic execution. Many people tend to believe that certainty is a binary choice - either we are certain or we have no certainty. In fact, certainty is almost always a matter of degree. Good strategic plans take this into account and work within a tolerable range of uncertainty in which the level of uncertainty itself may be quantified in some ways. (For an excellent discussion of uncertainty in measuring organizational performance, read "How to Measure Anything: Finding the Value of Intangibles in Business", by Douglas W. Hubbard, John Wiley & Sons, 2007.)

Successful strategic planning is a balance of risks, probabilities and potential impacts. By quantifying risks as much as possible and understanding degrees of uncertainty, a strategic planner can weigh how much risk is appropriate for any particular strategy. In the binary view of certainty, the only options are blindly moving ahead with the strategy or paralysis due to an inability to accurately predict outcomes.

In some ways, von Moltke was an early proponent of scenario planning. In understanding that there were several possible outcomes to the execution of his military strategies, he often developed detailed alternative scenarios. The development of scenarios allows a planner to take a sophisticated strategic planning approach at a high level that can be deployed under a variety of contingencies. When radically different situations present themselves, scenario planning allows organizations to rapidly redeploy resources and strategies to take advantage of the situation. In some ways scenario planning also allows for more robust development of scenarios even within the single "preferred" scenario because of the give-and-take between understanding similarities and differences between alternate scenarios. The storytelling that is part of scenario development helps teams to visualize and simulate strategic outcomes.

This differs from an alternative which says that uncertainty is dealt with by creating a rigid long term plan and then adjusting the plan with tactics as environmental variables change the battlefield. The difference between these two approaches is significant. Tactics are useful only when deployed within the context of a strategy. In large, complex organizations strategies are the overarching plans to which all tactics must align. If strategies are abandoned when they no longer serve the business environment, resorting to tactics is the worst possible reaction. Tactics without strategy is like trying to steer a boat without a rudder.

In the Wall Street Journal article, it is suggested that organizations need to retreat to a tactical approach during economic upheaval. Nothing could be farther from the truth. What is needed is a holistic strategic planning approach that utilizes a multi-scenario approach that can be rapidly deployed in light of changing conditions. Changing to a tactical approach only subjects organizations to being totally reactive and keeps them from being able to succeed in a downturn by taking strategic advantage over their competitors who may be failing by following a "business-as-usual" playbook.

Strategic Planning: Rigid or Flexible?
Strategic planning should neither be rigid with unbending five and ten year plans, nor should it be entirely flexible, swerving rudderless in the wind of reactive tactics. Furthermore, there is no "correct" amount of rigidity or flexibility that should be attributed to all strategic plans. The relative flexibility will depend on a variety of internal and external factors including stability of economic, environmental, political and social environmental factors as well as the size and complexity of the organization and the lifecycle of the products or services that the organization provides.

The caricature of strategic planning presented by Walt Shill's comments in the Wall Street Journal indicate that there is probably a need for a greater degree of flexibility and responsiveness in strategic planning. Scenario planning is a rarity in many organizations for example. And those organizations that have established Key Performance Indicators often fail to monitor them on a regular and frequent basis in order to be able to respond quickly to both internal performance and market trends.

Footnote:
Originally in Moltke, Helmuth, Graf Von, Militarische Werke. vol. 2, part 2., pp. 33-40. Found in Hughes, Daniel J. (ed.) Moltke on the Art of War: selected writings. (1993). Presidio Press: New York, NY. ISBN 0-89141-575-0. p. 45

Tuesday, February 9, 2010

What is a Strategic Marketing Plan?

When we talk about "strategic planning", there are actually many different types of plans that fall under this rubric. Typically we are speaking of an organizational plan, a "strategic business plan" that is an over-arching plan that supercedes all others. In reality, there may be many strategic plans within an organization and all of them must align with one another. An Information Technology strategic plan, for example, exists to provide detail and departmental responsibility to execution of initiatives that may or may not be listed in the organization's strategic plan.

Depending on the organization, marketing related issues may comprise 78-80% of the master strategic plan. So, why have a specific strategic marketing plan when most of it is covered under the strategic business plan already?

The first reason is that many organizations do not have a strategic business plan and that a strategic marketing plan is all they can muster to complete. Certainly this is better than nothing, but it may leave out critical elements of the organization's operations that are needed to support marketing in some way or another be it manufacturing, quality management, human resources, or information technology.

A second reason for a dedicated strategic marketing plan is that there is a need for greater detail than is appropriate in a strategic business plan. A business plan does not need, for example, to have a detailed media advertising plan as a part of its contents. Rather than high-level objectives, there is a need for specific product research, competitive analysis, research and development, etc. The strategic marketing plan can focus holistically on the Five P's of Marketing: Product, Placement, Price, Promotion and People.

All Strategic Plans have some things in common. All strategic plans need some kind of Mission/Vision/Values statements to define what the purpose of the effort is, what values guide it and what it wants to achieve. Your plan may not call it "mission, vision and values", but it should have these things documented. Often these fundamental elements are assumed, to the detriment of the organization.

Objectives and Strategies: After your MVV, you need to determine your prioritized objectives (what you want to accomplish) and strategies (how you are going to accomplish them.) But before you come up with your objectives and strategies, you need to do some homework. This homework is one of the major differences between a strategic marketing plan and a strategic business plan.

What are the steps to effective performance measurement?

Effective performance measurement is the cornerstone of successfully executing organizational change, and yet, many companies do not have effective performance measurement programs. There are many reasons for this ranging from a lack of buy-in to misperceptions about the use of metrics to the belief that all important factors cannot really be measured.

The first thing to keep in mind is that all measurement is for the purpose of executing change. You want something to happen so you develop a plan and as a part of that plan you decide what the Key Performance Metrics are that demonstrate successful execution of the plan. People struggle with metrics because it is hard work. It's one thing to come up with a set of objectives and strategies in a brainstorming meeting, but quite another to dig down deep and determine what it really means to successfully accomplish what you've set out to do. Typically goals are vague and metrics are specific. It's a lot easier to be vague!

The first step in a performance measurement program is to figure out your "critical questions." Start by asking questions about what you want to accomplish. Try using the Toyota method of "five whys". Keep asking "why" until you get to a root answer. This is what Socrates did in ancient Greece. The effect of his questioning was that he was not often very popular. People were shown to have little understanding of the fundamentals underlying their assumptions. Socratic dialogue is a great way to discover what you really need to measure.

The critical questions ultimately lead to which metrics you will choose for your effort. Remember to measure only the critical elements because each measurement takes time and costs your organization and the more metrics you collect, the more chance you run of diluting the importance of each measure.

The next step is to develop a process for measurement. Who will do the measuring? How often? In what medium will the data be stored? What quality measures will be put into place to ensure the data collection is good? Are there metrics already being captured by other processes or automated systems that can be used? How do your information systems talk to one another? Can the data be updated automatically and fed into a dashboard?

So now you've decided what to measure, how to measure it and where to store it. The next step is to develop a dashboard or other methodology for reporting your metrics. The objectives are to deliver clean information in a format that communicates trends, "normal" ranges and variations, benchmarks, targets and current values. The best dashboards are automatically updated and can present information in real time. For many organizations an Excel spreadsheet posted on an Intranet once a month is sufficient. Part of your reporting process will be to determine how to present your information, to whom the information will be presented and how often it should be updated.

Periodic Review: Strategic plans rarely go exactly as planned. There are infinite environmental variables that will change during the course of plan execution and it is necessary to review results and adjust the plan on a regular basis. This could be daily in some cases, weekly in others, monthly or quarterly. I would recommend at least monthly updates because if too much time elapses between meetings, the initiative can go way off course or worse, momentum can be lost. Regular reporting and review ensures that everyone is aware of accountability and their role in the success of the project.

Iteration: One of the functions of the periodic review is to ensure that targets are being met, but sometimes a mid-course trend analysis might show that the beginning of the year targets are no longer relevant. There may be game-changing events that require immediate strategic revision and iteration of the strategy. The iterative process is a continuous improvement based on execution, test, review, revision and execution of the new strategy. The iterative process acknowledges that information is imperfect during the planning process and that it is impossible to predict the future. Organizations that practice iteration are quick to respond to changes in the situation and adjust to maintain or gain competitive advantage.

Metrics work hand in hand with scenario planning when metrics are used as "triggers" to implement a scenario plan. The time to review scenario plans is during these regular metric review meetings.