Like the topic of leadership, “organizational strategy” is over-played, over-emphasized, and over-analyzed, and woefully undermines the actions necessary for making improvements or breakthroughs. Engaging in strategic planning appears to be intellectually stimulating and appealing to senior management, while implementing and executing seem pedestrian and mundane. And – you guessed it – the former is a luxury while the latter is a necessity. I am not claiming that strategy is a total waste of time, but given that research teaches us that the correlation between strategy and performance is at best mixed, I do claim that the amount of time and resources organizations invest in strategic planning is excessive.
In his 1962 seminal book, “Strategy and Structure,” Alfred Chandler wrote the conventional and classical definition of strategy: “The determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of the resources necessary for carrying out these goals.” It’s very elegant, very logical, very linear, and utterly sterile. Robert Burgelmann’s definition allows a more realistic messiness — “strategy is a theory about the reasons for past and current success of the firm.” But I find the strongest resonance with the notion that strategy is in reality a “retrospective sense making,” coined by Karl Weick, another eminent professor in the management field.
I love this story that often shows up in Professor Weick’s publications on strategy. The incident took place in the Alps. A reconnaissance unit encountered heavy snowfall shortly after they set out on their mission. After being missing for two days their superior office worried that the unit was lost. But lo and behold, they returned on the third day! Did they get lost? Yes, they thought so. But when one of the soldiers found a map in his pocket, the unit calmed down, pitched camp, waited out the storm, then headed back, aided by the precious map. Their lieutenant asked to see this map, and was astonished to find that the map was not of the Alps, but of the Pyrenees.
Weick summed up in this way: “…when you are lost, any old map will do. Extended to the issue of strategy, maybe when you are confused, any old strategic plan will do.” Pfeffer and Sutton (in their Hard Facts, Dangerous Half-Truths & Total Nonsense) implicitly concur. They point out in their book that by and large most strategies, especially within the same industry, are very similar from one organization to another: lower costs, focus on customer satisfaction, increase market share, etc. Some corporations even publish their strategies in their annual reports; strategy isn’t a secret weapon. What ultimately differentiates the successful organizations from the others lies in the — can you guess? — actions and execution of the plan. As Weick drives the point further, “Managers keep forgetting that it is what they do, not what they plan, that explains their success.” Many successful firms do not even engage in costly strategic planning; they learn as they do, and their CEOs would be the first to tell you that. Wells Fargo’s Richard Kovacevich put it, “I could leave our strategic plan on a plane, and it wouldn’t make any difference. No one could execute it. Our success has nothing to do with planning. It has to do with execution.”
Did I mention that strategic planning is costly? in tangible dollars, in time and effort, and attention (of both management and staff) being diverted? Pfeffer and Sutton cited Beyond Budgeting, by Jeremy Hope and Robin Fraser, that on average, firms spend four to five months and 20% to 30% of senior people’s time, and many staff to do this exercise. Ford reportedly spent $1.2 billion per annum on strategic planning! “A 1998 benchmarking study showed that the average company invested more than 25,000 person-days per billion dollars of revenue in the planning and performance management!” And how often do they actually follow the plan? And how is this not insane?
Not only is strategic planning costly, it can also create blinders for companies. “Strategic focus” sounds great, except in a uncertain or turbulent environment where that which was planned 6 months ago may no longer be relevant, and if a firm actually follows through with the by-now-obsolete plan, it can misstep and lose big-time. Southwest Airlines doesn’t do strategic planning, as explained by their CEO: You spend three months planning, then sell the plan to the board. By then, conditions on the ground are likely to have changed dramatically, and now you have to un-sell everything. “You miss opportunities while you are off thinking!”
What the successful firms have shown is that learning emerges from actions, and as you do, you figure out the next steps, and at the same time, (perhaps) correct some mistakes. Pfeffer and Sutton related this exchange with SAS Institute’s CEO, Johan Sall:
J.S. “Stanford (where Pfeffer and Sutton teach) is very selective and takes in only the best and the smartest students?
J.S. “The MBA program is a two-year program, correct?”
“Yes, that’s also true.”
J.S. “Why should it take two years to teach such smart people the secret to success: listen to your customers, listen to your employees, do what they tell you?”
SAS was at the time the largest privately owned software company in the world. It has low employee turnover, never above 5% even during the 90s frantic high tech period, and it has 98% customer loyalty. Try to imitate that!
The point is that most of the time, we find meaning in our actions and further actions bring about new meaning, goals, and more actions. What managers need to grasp is that a plan is only a point of orientation with which to create a self-fulfilling process. The story of Banana Republic is well known by now. The way they started their mail order business was rather unconventional: They bought surplus uniforms from overthrown armies; they advertised in their catalog; they used sketches rather than photos. As they got enthusiastic responses, they began to crystallize their strategy. But by now they have evolved into a conventional boutique clothier. Tuesday Morning, a retail store that sells household items at deep discount, only opened the store when they had enough merchandise, and in so doing, learned that customers loved the idea of anticipating “grand openings.” But they too are now going conventional, becoming a discount store year round. Uniqueness in business world is rather ephemeral.
Much about strategy is actually confidence and projected optimism on the part of management. As managers speak and behave with conviction, people are likely to act more forcefully. Hesitancy is the product of weak presumptions. Of course, it’s a fine line for managers to walk. If people suspect whitewash or delusion, and can point to fundamental illogic in certain operations, then continued management optimism would become demoralizing, even infuriating. So, strategy should be viewed as a vague plan that gets continual revision. And because successful strategic implementation is a continuing process of actions, learning, improvisation, and more actions, it is difficult to pinpoint causal links between the initial strategic plan and final outcomes.
Another interesting example (also provided by Weick) is about the Naskapi Indians in Labrador and their hunting ritual. Every day, they ask, “Where should we hunt today?” They find their “answer” in the first crack of a shoulder bone of a caribou, as they hold the bone over a fire. They go, they hunt, and they have a very high rate of success, unusual even among hunting tribes. What distinguishes their success from others is that they take immediate action and hunt most of each day. What they don’t do is sit around and debate where to hunt.
So, Happy Hunting! Till you find your game,
Staying Sane and Charging Ahead.
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