Strategic Planning Tools

There are many, many strategic planning and process tools which may be applied to the strategic planning process. I am a fan of the LinkedIn group "Corporate Planning & Global Industry Segmentation." Earlier this year there was a discussion about strategic planning tools and once everyone had weighed in, the following list was the result.

I have three observations about the list.

The first is "wow", this is a great resource. Strategic Scenarios has a toolbox of approximately 24 tools we apply to specific problem areas, but this is far more comprehensive.

The second is, "where is scenario planning?" If I were to prioritize strategic planning tools, there are a few that need to fall into the top five tools and these would be SWOT, Metrics, Scenario Planning, Alignment (Individual Action Planning) and resource planning. These are the tools that support the creation and execution of the organization's Mission, vision, values, objectives and strategies (the traditional elements of a strategic plan). Scenario planning adds to strategic planning in several ways:

1) It serves as a way to flesh out the objectives in such a way that the planning team can think more holistically about what strategies to apply.

2) It serves as an advanced risk management tool; by putting risks and opportunities into a story format and developing alternative scenarios in various risk situations.

3) The development of alternative scenarios keeps the organization from thinking that there is a single future reality. In fact, the future is unpredictable and scenario planning provides a way to plan for many alternative futures and be prepared for them.

4) Scenario planning serves as a "test" for the objectives and strategies set by the planning team. By playing out how the objectives and strategies will look in a story format, planners can perform "what-if" scenarios with business outcomes in narrative format, just like they can model financial results on an Excel spreadsheet.

5) Finally, scenarios help teams to break out of "the way we've been doing it in the past" and to challenge themselves with alternative futures that take advantage of opportunities. A good scenario development process will foster creative thinking and innovation within an organization and help them break out of the box of organizational inertia.

The third observation is that strategic planning tools are only as good as the people using them. Just like a carpenter knows which tools to use in which situations, and how to skillfully apply the tool to the construction process, strategic planners need to know which tools to apply and how to effectively apply them to achieve organizational performance. Applying too many or too few tools could result in less effective planning process.

◦ 23 Ps for strategy - see Rex Buckingham
◦ 5 Ps for strategy
◦ Ansoff matrix
◦ Art of Quantum Planning - see Gerald Harris
◦ Art of the Long View see Peter Schwartz (scenario planning)
◦ Art of War - see Sun Tzu
◦ B.C.G. matrix Analysis - see Boston Consulting Group
◦ Balanced Scorecard - see Robert S. Kaplan and David P. Norton
◦ Barriers and profitability
◦ Blue Ocean Strategy - see Prof W Chan Kim & Renée Mauborgne
◦ Chaos theory
◦ Competitive Advantage / Holistic Corporate Planning - see Porter
◦ Charting Your Company's Future by Kim & Mauborgne
◦ Company position / industry attractiveness screen
◦ Contrasting characteristics of upstream / downstream companies
◦ Crafting Strategy - see Henry Mintzberg
◦ Crossing the Chasm - see Geoffrey Moore
◦ Cultural web
◦ Discipline of Market Leaders - see Treacy/Wiersema
◦ Dynamics of paradigm change
◦ Enterprise Process Management
◦ EPISTEL - Environment, Political, Informatic, Social, Technological,
. . Economic and Legal
◦ Five Forces - see Michael Porter
◦ Force Field Analysis
◦ Four organizational cultures
◦ Four routes to strategic advantage
◦ GE-McKinsey matrix
◦ Geo-business model
◦ Integrated Business Planning using mathematical representations
◦ Integrated model of strategic management
◦ Leadership decision making model
◦ Management By Walking Around
◦ Mapping the Market, Segment by Segment
◦ McKinsey 7S Framework - see McKinsey & Company
◦ M-O-S-T
◦ Network analysis, PERT, CPA
◦ Nine Forces (Porter's Five Forces plus STEEP/PEST)
◦ Organic versus mechanistic management styles
◦ Patterns of strategic change
◦ PEST Analysis - Political, Economic, Social & Technolog'l analysis
◦ Porters Diamond
◦ Reengineering - see Michael Hammer and James Champy
◦ Related diversification grid
◦ Resource allocation at corporate level
◦ Spider Web Graphs
◦ STEER - Socio-cultural, Technological, Economic, Ecological &
. .Regulatory factors
◦ Strategic Game Board by McKinsey & Co
◦ Strategic triangle
◦ SWOT - Strengths, Weaknesses, Opportunities & Threats
◦ Third generation balanced scorecard
◦ Three Growth Horizons by Mehrdad Baghai
◦ Total Customer Service profit chain
◦ Total Quality Management (TQM)
◦ Toyota Management System / Production System (Hoshin Kanri)
◦ Value Chain models - see Michael Porter
◦ Winning in Fast Time - see Jack Warden

My strategy = your tactics

For all the use of the terms "strategy" and "tactics", there is a predictable debate about which are the strategies and which are the tactics. Using the dictionary to understand the meanings of these words will not likely help in this debate, because the dictionary will simply reinforce what we already believed these terms to mean, while leaving the specifics of our situation unaddressed.

How could two people, working in the same company, be unclear about which are the strategies and which are the tactics?

The answer is that the difference between strategy and tactics is a matter of perspective.

For example: Let's imagine a strategic planning session in which the CEO establishes an Objective for the organization that Knowledge Sharing should be formalized within the organization. The strategy, he says, will be to build a Knowledge Portal. From the CEO's point of view, AND from the point of view of the organization's strategic plan, the strategy is to build a Knowledge Portal. The Objective to formalize knowledge sharing is the "what" and the Strategy to build a Knowledge Portal is the "how". The CEO does not concern him/herself with the tactics of how the Knowledge Portal gets built and, appropriately, the tactics are assigned to the CIO.

The next day, the CIO meets with his/her team and says, "We have a new objective. We need to build a Knowledge Portal." What will our strategy be?" The team researches the options and decides that their strategy will be to build a Microsoft SharePoint Portal server. They develop a project plan with their tactics including acquisition of server hardware, training, software, installation, configuration, establishment of standards, etc. The CIO does not concern him/herself with the tactics of installing the software and, appropriately, the tactics are assigned to the Project Manager.

The Project Manager meets with his/her team and says our objective is to build a Microsoft SharePoint Portal site. He/she assigns a team member with the objective of acquiring a server. This team member's strategy will be to research the requirements for Microsoft SharePoint, anticipated storage needs, company standards, project budget guidelines, etc. , and submit a purchase order for the best machine that fits those criteria.

This food chain of objective, strategy and tactic is passed down the organization. The strategy at each level is the tactic of the level above. The same words are used and yet, they are applied to different actions. In a well run organization, each of these objective, strategy, tactic sets will be aligned with one another, so that the person with the screwdriver installing a box into a server rack understands how this task aligns with the CEO's objective to formalize knowledge sharing within the organization.

A comprehensive, performance based, strategic planning process understands this relativity of strategy and tactics. When we talk about an organization's strategies, we are always talking about the strategies at the organizational level. When we follow-up with the alignment and individual action planning phase of executing the strategic plan, each person's actions will fill out the chain from strategy to execution. The combination of strategy and tactics, with clearly measurable outcomes and well defined responsibilities is how an organization ensures that organizational objectives are successfully executed.

Gut vs. Analysis

I keep hearing that strategic planning is not necessary because you can just run things "from the gut". There may be something to that, in some circumstances, depending on what you mean by "from the gut."

If "from the gut" means that someone is planning in a non-formal process using many, many years of experience, using the same methods that they have used in the past, then this may be a satisfactory planning method, providing that nothing changes and the organization can continue with business as usual.

Malcolm Gladwell's "Outliers" describes how, after 10,000 hours of experience, someone gains sufficient expertise at something that they can begin to manage intuitively, without need for recourse to stodgy planning tools. Once someone has logged their 10,000 hours, then you might argue that they're not really planning "from the gut" at all, but rather through a synthesis of thousands or even millions of data points that they have experienced over that time. 10,000 hours of experience provides sufficient variation in situations that someone can recognize a wide variety of patterns and know what has resulted from a wide variety of actions.

There are (at least) three major problems with leading "from the gut".

The first is that those who lead from the gut rarely communicate their plans effectively throughout an organization. One of the benefits of a formal strategic planning process is that the strategies, tactics, measures and responsibilities are written down for all to see. When the plan is documented and clearly communicated throughout the organization, we're much more likely to see alignment in which everyone is working together towards common goals. The alternative is a relatively anarchistic environment with everyone pursuing their own version of "how we've done it in the past." This kind of haphazard leadership style may work in a smaller organization where "leadership by osmosis" can occur, but it will likely fail in a larger, more complex organization where everyone does not get direct access to the top leadership.

The second big problem with leading from the gut is that "stuff happens." There are impacts on the organization both from inside and outside that can wreak havoc with the casual plan. When planning from the gut, there is rarely a scenario planning exercise, risk analysis, alternative scenarios or research to understand leading indicators that would provide the organization with a warning when trends impact their industry either positively or negatively. This means that the casually run organization is both at a greater risk from outside forces, and also is less able to take advantage of new opportunities.

The third challenge with leading from the gut is that managing from the gut works well in situations where there is little complexity, but when organizations get bigger and where social, technological, environmental, economic or political changes are dynamic, the gut is no longer effective. There is simply too much complexity for even a genius with 10,000+ hours of experience to synthesize informally. Unfortunately some managers get away with managing from the gut for a long time and therefore believe that it will continue to serve them well in the future. As situations become increasingly complex, the gut approach ultimately fails, collapsing under the weight of unanticipated outcomes.

Those who manage from the gut may have been successful using this methodology in the past, but ultimately it is a lazy and ineffective way of managing and leading an organization. Utilizing a formalized system that both takes advantage of the leaders' experience and also follows a process that includes communication, alignment, consideration of risks and alternative scenarios, and clearly documents responsibilities and measures of success will win out over the gut system. Surveys show that companies that use a formalized strategic planning process are 70% more successful than those who do not.

Things Change

One common complaint about strategic planning is that as soon as you start to execute the plan, things change and your plan is no longer valid. The argument goes that since things change and you cannot predict the future, that there is no sense in planning at all.

This could not be farther from the truth. In fact, it is because of the fact that things change, and change quickly, that planning is more necessary than ever.

If things never changed, then it would be satisfactory to continue ahead without a need for strategic planning. Simply staying the course of previous success would virtually guarantee future success.

The key to successful execution of a strategic plan is that the plan is continuously reviewed and updated on a regular schedule. While this schedule will vary for every organization, it might consist of monthly metric reporting, quarterly review and update, annual action plan update, annual strategic plan update and complete strategic plan re-write every 3-5 years.

Another success factor in executing strategic plans is to include scenario development as a part of the strategic planning process. In scenario planning the team selects the key challenges that lie ahead for the organization. For each of these challenges, the team develops three or four "scenarios" or vignettes that describe what the world would look like under different circumstances, depending on how things changed in the future.

Drivers of change are identified for each scenario in order to help identify what forces (social, technological, economic, environmental or political/regulatory) will impact the organization. The team identifies current trends and makes projections for the various scenarios. A "story" is developed for each scenario and the team outlines which strategies they would use to react to the circumstances for each story. When all of the stories, drivers of change and strategies have been developed, then the team may look through them to determine whether there are factors common to all or most of the stories. They may choose to implement those strategies in their strategic plan. The team may elect to choose a "most likely scenario to occur" and plan for that scenario. If and when that situation does not come about, then the team is prepared for the alternatives with their backup plans. In this way, the organization has considered many of the risks and trends before the scenarios occur, thus making them more nimble in reacting to change and more comprehensive in understanding and protecting themselves from risks.

Scenario planning puts planning teams into a strategic thinking mode before they actually dig into strategic planning. By working in this way, the team thinks outside of the box of collective organizational assumptions and considers the real and potential threats and opportunities for the organization. This process serves to break teams out of continuing business as usual and encourages innovative, future based thinking.

The final issue regarding change and strategic planning is that organizations that do not actively engage in strategic planning are in a reactive mode, responding to changes that occur as they happen. Organizations that actively plan for the future CREATE their own futures and make them happen, rather than waiting for the future to happen to them. It is far better to respond to change that you have created that brings about your organizations' vision than responding to the actions of others.

Two Factors for a Successful Strategic Planning Office

The very idea of a Strategic Planning Office is antithetical to the successful practice of strategic planning in historical application. In the 1970's GE had hundreds of strategic planners on staff who worked tirelessly, but achieved virtually nothing.

The very idea of a "separate" office is a dangerous one. SPO's typically should perform two major functions. 1) Conducting critical research on trends. Surveys, collecting data, investigating changes in the industry and broader world environment. 2) Facilitation of organization-wide and departmental strategic plannign processes. So, why is this dangerous? 1) The separation of strategic planning from the people who need to execute it means that the very people who need to own the plan are merely recipients of the plan from someone else. Without ownership, they are not likely to succeed. A separate planning department is unable to monitor and adjust as well as the "doers" who are carrying out the plan. Plans that are static and don't follow leading indicators or make mid-course corrections in view of changing environments are bound to fail. 2) Data collection by a third party, unrelated to the key performance of a plan will likely be data that reinforces the status quo. What is needed, is a wider worldview that stimulates innovative and disruptive thinking. Third party research rarely accomplishes this goal.

This not to say that external SPOs cannot succeed, but rather, that they must be structured to 1) guide and support the planning process from within the teams who are carrying out the plan 2) their process encourages innovative and disruptive thinking and guides teams through tough decisions that may challenge current power structures and fiefdoms within the organization, 3) the planning process must be viewed as continuous, not as something the SPO performs once a year, 4) project teams must be responsible for continuous monitoring, measurement and adjustment of the plan as situations change, 5) teams must think of strategic planning as their means to "create" a future rather than simply carrying on business as usual or responding reactively to internal and external environmental impacts.

Malcolm Gladwell speaks in both Blink and Outliers about the need for extraordinary experience nad expertise to spot subtle changes and trends. Strategic planning specialists must understand that their expertise is in facilitating information sharing and process for people who have spent years in gaining specialized expertise. A good SPO will leverage that expertise for the organization when the proper relationship exists.

Ten Challenges and Ten Solutions (abbreviated)

Here are the short lists of the top ten reasons for strategic planning failure and the top ten steps to bridge the execution gap.

Ten Challenges to Traditional Strategic Planning

1. Failure to "plan for planning"
2. Informal vs. formal strategic planning
3. Failure to research trends
4. Assume one vision for the future
5. Failure to communicate the plan
6. Failure to align individual's action plans to the organization's objectives
7. Failure to assess competency gaps and address with hiring and training
8. Organizational structure and processes do not support the plan
9. Failure to reinforce the plan with all stakeholders on a regular basis
10. Failure to develop and track detailed performance metrics

Ten Steps to bridge the execution gap

1. Plan the process
2. Trends and Future Scenarios
3. Mission, Vision, Values
4. Objectives, Strategies
5. Metrics/Dashboards
6. Communication Plan
7. Organization/Process Analysis
8. Competency gap analysis
9. Alignment, Prioritization,individual Action Plan
10. Execute, measure, reinforce

For more detail, see http://strategicscenarios.com

Top Ten Reasons Strategic Planning Initiatives Fail

During the past few decades numerous surveys have shown that between sixty and eighty percent of organizations fail to achieve the targets set in their strategic plans.¹ Those are not good odds and it begs the question, where does the strategic planning process fail?

Part of the answer may be found by asking ourselves "what is the strategic planning process" and what does "failure" mean?

Traditional strategic planning involves a facilitated session that results in some kind of documentation of the organization's Mission, Vision and Values, then the Objectives and strategies needed to achieve the objectives. These five elements are the key components to any strategic plan. Any organization who has developed these five things is far ahead of those who have not. They have clearly defined who they are, what they do, where they want to go and how they want to get there.

The problem is that even the most well developed strategy is not worth much if it is not linked to execution. I have heard of many strategic plans that, when complete, go immediately on the bookshelf only to gather dust until next year.

A successful strategic plan is one that not only lays out strategy for the firm, but that also includes an execution plan that is built into and linked to the strategic plan.

"If 90% of organizations fail to execute strategy, that's a problem" David Norton

So, if we look at the top ten reasons strategic plans fail, all of them have to do with the unmet needs of tying strategy to execution. Here is the list:

1) Organizations fail to "plan for planning". That is, they make assumptions about what a strategic plan should look like (e.g. the five elements), who should be involved, what the steps are, how long it should take, how much it should cost, and what the organization needs to know before it can embark on planning.

2) Organizations that use informal strategic planning. Informal strategic planning is typically a "business as usual" approach that may accompany development of the firm's annual budget. Formal strategic plans are not written down, but may be discussed at high levels in an ad hoc fashion.

3) Don't do the homework. In order to break out of the status quo, organizations need to do a significant amount of homework before strategic planning in order to understand where they truly stand in relation to trends worldwide, in their industry and internally to the organization.

4) Assume one vision for the future. A strategic plan that is a "forecast" for the future is bound to fail when that future fails to materialize. Nobody can predict the future consistently and with accuracy.

5) Don't communicate the plan. Some organizations are either lazy or feel their staff don't need to know the strategic plan. Others feel that the secrecy of the strategic plan is needed to protect proprietary ideas. Others don't realize the benefits of sharing the strategic plan not only with management and staff but suppliers, clients and others who do business with the organization.

6) Failure to align. If the strategic plan is written and lives in a bubble in the executive suite without being integrated into each and every employee's action plan, then the objectives in the plan are not likely to be carried out. Alignment harnesses the power of everyone working together towards the same goals. Alignment answers the WIIFM (What's In It For Me) question when employees understand their compensation will be based on measurable results of their actions towards achieving the organizations' objectives.

7) A culture of metrics. Metrics are the key to execution of any strategic plan. When properly based on benchmarks and baselines, metrics make the vague strategies in the strategic plan very explicit. Until specific measurements are identified and regularly carried out, most staff will not have any idea what the strategic plan is all about.

8) Continuous reinforcement of the plan. Change is difficult and people tend towards their comfort zones. The changes that a strategic plan demand are not likely to occur during a single meeting to discuss the contents of the new strategic plan. The plan must be continuously reinforced during ongoing decision making processes, monthly metrics reporting, employee reviews, company newsletters and other media throughout the year.

9) Organizational Structure. What if your strategy is to streamline operations by eliminating silos around product lines? If you don't make part of your strategic planning process include organizational restructuring to match the strategy then the strategy will fail.

10) Competencies. Organizations have competencies and the individuals within them have competencies. During times of change you will need to perform a gap analysis to understand the gaps where existing skillsets do not meet the skills needed to execute the new strategies. Without employee development and/or strategic hiring, your strategy will fail.



¹ The Execution Premium: Linking Strategy to Operations for Competitive Advantage, Robert S. Kaplan, David P. Norton. Harvard Business Press, Boston, MA 2008

Notes from Your Strategic Planning Office

Google the term "Strategic Planning Office" and see what you find on the first few pages. Military, state and local government agencies, cities, universities, and more. Each of these organizations has a Strategic Planning Office (SPO) whose sole purpose is to facilitate, create and manage the strategic planning and implementation process.

The SPO is an interesting concept when you think about it. Its existence is based on a vision of strategic planning as an ongoing function that has its own raison d'etre, like any other department in an organization. The SPO serves the organization and all of its departments in the same way that, for example, an Information Technology department does. IT has no reason to be, save for serving the information management needs of the core business functions. The SPO acts as a specialized support organization within the organization to care and feed the strategic planning process.

Take a look at some of the links you see on the google search. The sophistication of the SPOs vary significantly where, in some cases, the SPO is not really an "O" (office) at all, but rather an ad hoc committee. (University of Iowa) In others, there may be two people who work in the office of the president or provost of a university. (UNM) At Stanford Medical School, there are six full time team members and at University of Sydney, there are sixteen. What do these people do?

The SPO fills in the gaps most commonly left unaddressed by organizations that do create formal strategic plans. The major areas they address include: research, facilitation, advice and consultancy to leadership, metrics data collection and statistical analysis. These are many of the areas which, when they are either assumed, or are dealt with on an ad hoc basis, lead to failure of strategic planning efforts in less sophisticated organizations.

This blog shares ideas about strategic planning from the point of view of an outside Strategic Planning Office, specifically Strategic Scenarios, LLC. which operates as an external SPO for organizations who do not have the internal capacity to conduct these functions in house on a full time basis, yet which see a need for strategic planning that actually gets executed, resulting in the ongoing strategic advantage of the firm.