[Part Two of my ‘Strategy That Works’ series. This is an updated version of a post I wrote some years ago. Read Strategy That Works – Part One here.]
Is strategy actually relevant and practicable in the contemporary, 2-years used-by date, technological environment? I have worked with numerous organisations and executive leaders to develop their strategic thinking. There are many fallacies I in their thinking and inhibitions developed through their traditional MBA and business school approaches to strategy. Effectively, their strategy is either neutered or non-existent.
There are two extremes of business strategy thinking:
- One must plan strategy in 1, 5, 10, 20 or even 40 year plans and build on those with certainty.
- Strategy is impossible in our fast-moving economies. One must simply be nimble and highly responsive to market forces.
Either of these positions is a ridiculous extreme.
The Value of Strategic Thinking
Trying to operate any venture without strategic thinking is akin to running a ship without a destination, a compass, or a crew trained to deal with the open seas. You don’t even know that you’re lost, because you didn’t choose a destination, don’t have any way of charting your course and your people are clueless.
Strategic thinking is about setting a clear destination and determining how you will arrive there. Too much business thinking is muddy about this – e.g. “Our Vision is to be a place of excellence for our clients.” What does that even mean? Does it mean that clients think your offices are pretty? Does it mean that you jump about from project to completely unrelated project, providing totally unrelated services? Does it mean that you have the capacity to deliver meaningful products and services to your clientele?
Then comes the so-called strategy: “Our strategy is to be number one in our market”. That’s not a strategy, that’s a goal (and quite possibly a nonsense one at that). “Our strategy is to follow our 100-point plan that dictates our budget, resourcing and daily actions for the next 24 months.” Again, it’s not a strategy, but a business plan – and one that will drive your business into the ground.
The Fallacy of the 5-Year Plan
Government departments and other major bureaucracies (one global mining company comes to mind) are often the ones mired in the kind of all-encompassing, communist era, 5-year plan thinking that says that one can plan with certainty for the next 5, 10 or 20 years.
We worked with a global company that a number of years ago had a 40 year plan for development of resources and its industry along the Asia Pacific Rim. They were very proud of their plans (and the millions of dollars spent developing them). That plan was blown out of the water about 18-24 months in, as the GFC, poor acquisitions and mergers, and other global issues impacted them – not to mention that the Asian economies like to be self-directed, thank you very much, not dictated to by mining companies.
The Problem with the No-Strategy IPO/Buy-Out Tech Strategy
Tech companies often fall foul of the other extreme. “Well, technology is changing so rapidly, there’s no way we can plan for the next 8 months, let alone set a course for the next 2 years.” This approach is naïve at best. If you do not determine a path for your company during turbulent, changing times, then you are so reactive that you will lurch from initiative to initiative without sustainable growth.
Ongoing, annual permutations in technology and inroads made by companies such as Samsung and Huawei demonstrate that tech companies can have thoughtful, intentional strategic growth over an extended period. Apple’s moves to repatriate small segments of its manufacturing in the US (including establishing multi-year manufacturing deals for creating sapphire materials), demonstrate strategic choices that addressed multiple concerns in the US about its off-shoring practices. These are substantial investments that demonstrate forward thinking, not simply reactive hype.
Are these companies 100% certain that they will achieve their overall objectives? I doubt it. What these strategic choices indicate is that they are making commitments now that will guide them in the future, despite uncertainty.
What Strategy Really Does For You
Here’s the key to great strategy:Strategy is pragmatic forward thinking, helping to guide choices during periods of uncertainty and growth. - Peter J McLean Click To Tweet
That strategic thinking is absolutely necessary in any industry or endeavour. If you knew absolutely that you were going to win, you wouldn’t need a strategy, you would just need a crystal ball and dot points of action points. Strategy guides the choices that you will make now and into the future.
Stay tuned for Part Three.