Crafting company strategy may be judged one of the most important tasks executives perform – but all too often this performance proves miserable flop.
A recent survey carried out by US-based McKinsey consultants Eric Beinhocker and Sarah Kaplan amongst American companies reveals that although much time is consumed in the strategy-making process, it frequently serves little good purpose. CEOs complain that it turns up few new ideas and is “often fraught with politics”.
One even described it in terms of superstitious ritual in that it involves much beating of drums, nobody knows quite why they’re doing it – but there is “an almost mystical hope” some good will emerge.
After researching the issue with 80 companies, Beinhocker and Kaplan somewhat sadly conclude that: “The annual strategy review frequently amounts to little more than stage on which business unit leaders present warmed-over updates of last year’s presentations, take few risks in broaching new ideas and strive above all to avoid embarrassment.”
Not good enough, they say. Effective company strategy is vital and there are ways to give its crafting process more clout.
First thing is to take critical look at how it is being done – and why management professor Henry Mintzberg thinks “strategic planning” is an oxymoron. That is because real strategies are unlikely to be contrived in boardroom, they’re much more likely to be hatched from informal conversation or thoughtful moments on plane.
What the formal meetings can do, though, is “prepare minds” by ensuring everyone knows the strategic context in which they are working. An effective approach, according to Kaplan and Beinhocker, includes the following:
* limit strategy discussion to small number of primary decisionmakers to encourage “real conversation”;
* include those involved in carrying out the particular strategy;
* allow heaps of time -18-25 days for business units plus another two-five days spent on sector and corporate strategy;
* don’t combine strategy planning with financial planning or figures will dominate discussion;
* don’t straitjacket the meeting with excessive corporate direction;
* distribute all relevant information well before the initial meeting;
* encourage culture of “commonality” among participants;
* be disciplined with follow-up in terms of communication and alignment (eg link in with long-term financial goals or HR issues).
OK, so the process is now more functional but still may not produce mind-bending ideas. So, next task is to inject innovation and vitality, say Kaplan and Beinhocker.
Creative thinking can’t be forced but you can create environments that foster thinking. Their suggestions include:
1. “Bottom-up, strategy by experiment” – try whole lot of different things out, get in behind what works, abandon what doesn’t;
2. “Top-down, drive crosscutting themes” – engage the whole organisation in thinking around bigger issues affecting its future, and pull together “elite” taskforces to work when needed on specific issues.
The researchers also suggest formation of small pool of strategy talent to help drive the planning process.
Most companies can raise their game in strategic planning, say Kaplan and Beinhocker – if they take fresh approach and encourage strategic creativity.
