Intuitive and Analytical Approaches

Strategic Planning ideally is comprised of a combination of intuitive and analytical thinking. Taken individually, these two approaches are useful, but incomplete in addressing the challenges of planning.

At its core, planning is ultimately a creative activity. Planners start with a clean slate, or even from within a context of past performance and established infrastructure, but with a potentially infinite number of possibilities available for future growth. "Analysis" comes from the Greek analyein, meaning to loosen or break up. Analysis often involves taking a difficult problem and breaking it up into its parts in order to better understand how things work and how they fit together. In mathematics an analytical proof is often created by assuming an outcome and then deducing a series of irrefutable steps that lead up to that conclusion. In this way, analysis is tremendously useful in strategic thinking because, once you know what you want to achieve, analysis is a good way to break up that vision into "strategies" that describe how you will achieve that vision.

But how do we achieve that vision in the first place? Vision is something that cannot be deduced or analyzed. The vision is something that forms the fundamental foundation upon which strategic planning is based. The vision is typically arrived at through intuitive thinking. "Intuition" comes from the Latin intuiri, (in + tueri) meaning "to look at" or contemplate. It seems appropriate that our "vision" comes from the kind of thinking that means "to look at." Intuitive and analytical thinking are opposites in that intuitive thinking is non-deductive, non-rational and is more holistic. Intuitive thought is where creativity comes from. Analytical thought can be creative in its approach, but ultimately it is not creating anything, but rather understanding complex things in terms of their parts.

Holistic strategic planning incorporates both intuitive and analytical thinking in its approach. Intuitive thinking is necessary to create the vision and to drive innovation, perhaps by perceiving competitive opportunities that may not fall under an industry's normal way of doing business. Analytical thinking picks up from there and helps us to articulate the objectives and strategies that we will employ to achieve the vision. Analytical thinking is used further in organizational alignment and individual action planning which breaks up the strategies further into action plans for each individual within the organization. Finally, analytical thinking is used in performance measurement to help us measure how well we are achieving our vision and to correct our strategies as they are tested against the realities of the real world.

Intuitive thinking does not just occur at the beginning of the process, when developing the vision statement. It is apparent throughout. The design of the environment scan toolkit is based on exercises that break participants outside of their boxes of preconception and analytical approaches. The toolkit represents different ways of looking at a problem in order to stimulate intuitive thinking and innovation. The toolkit does this by taking the strategic planning challenge and turning it on its head. We approach the problem from close in with an internal analysis of the organization, internal trends, resources, strengths and weaknesses. Our perspective widens when we take on an inspection of Porters' Five Forces of competition. Who, in our immediate sphere of competition, has competitive advantage? What are the threats of substitution, or imbalances of power between suppliers and customers? We then zoom out further to take a 30,000 foot level view of the environment with the STEEPL future trends exercise. This approach has us looking at Social, Technological, Environmental, Economic, Political and Legal trends that affect not only our business, but represent global trends in all areas of human endeavor. Finally, we employ scenario developments which use story telling approaches to break us out of analytical thinking modes. By telling stories about our possible future states, we visualize (intuit) what the world will look like and use free association exercises to ask questions about those future scenarios from a number of different perspectives.

These exercises all push us to use our intuitive thinking to address the challenges we are trying to solve. The exercise then shifts to analytical approaches in which trends are prioritized and put into context. We may apply a "strategy canvas" or "four action framework" to pull the stories apart and understand which components are the most important. Many of our results will be organized into the prioritized SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis which, along with our intuitive exercises will inform our process of developing objectives and strategies.

By looking at things from close-up, far away, sideways and upside down; by tasting, smelling and feeling them; by stretching and bending them; we encourage new ways of thinking and innovative approaches. Analytical thinking cannot do this. We then dive into the process of planning for execution to create those future states by breaking the vision into parts that can be measured, assigned and executed. This process cannot be done through intuitive thinking. By blending intuitive and analytical thinking throughout the process we can achieve the combination of innovation and execution that leads to successful organizations.

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

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.

Six More Barriers to Strategic Plan Execution

The next list from HBR is the six mistakes that can derail your attempts to change. Thanks to Reynolds Consulting for this (and their comments embedded.)

1. Cautious management culture. In my work I have found that the vast majority of things that hold companies back from change is their current business model and belief systems–internal factors within their control. You can change if you want to.
2. Business as ususal process management. If business is at full capacity where do you find the resource to change? Start a stop doing list and keep track of all the things you do that don’t add value–keep it posted and add to it regularly and watch it grow! That alone is a great source of opportunity to re-allocate old to the new!
3. Initiative Gridlock. It is important to identify how many initiatives you can reasonably do with your resources and do a few really well then a whole bunch marginally.
4. Recalcitrant Executives. Nooo! Nobody we know has that problem, right? I have often said if you aren’t part of the solution you are part of the problem. Executives have to manage that aggressively. It is their job to run interference for the people in the organization that have to get the job done so all can be held accountable.
5. Disengaged Employees: Ditto above except…it is really important to ensure they understand what is expected of them, get the chance to have early wins and feel they are doing valuable work. When that happens disengaged employees are rare.
6. Loss of focus during execution. Communication is a tool that can never be underestimated. It is often stated that it takes at least 7 times before someone really hears a message. Executives often think they have communicated until they are blue in the face–but you cannot overcommunicate—keep the end game visible, make the steps clear, help people focus on the current one, make successes important, and keep the conversation lively!

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