De-Stranding the Strategic Planning Process

8/12/2019 De-Stranding the Strategic Planning Process

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Executive Agenda

De-Strandingthe StrategicPlanning Process

The case for a continual strategic planning capabilityis unassailable as business leaders today must decipher

an external environment marked by volatility, complex-

ity, and abbreviated decision cycles.


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Executive Agenda

As most people are painfully aware, few leadersbusiness or otherwere able to foresee

the chain of events in that plunged the world into recession. Of those who did foresee

the meltdown, still fewer were able to prosecute a strategy to mitigate relevant risks. It is not

surprising, therefore, that in a survey of global business leaders conducted last year by our

Global Business Policy Council, more than half of all leaders were focused on improving their

strategic planning processes and tools in the aftermath of the recession.It makes

sense that leaders are striving to correct what was such a glaringand, in most cases, costly

blind spot in their planning.

With two of every three CEOs saying that the post-Great Recession world is dramatically

different, it is small wonder that corporate leaders are seeking ways to improve their ability

to understand this changed environment. The only future constant one can reliably expect

in trying to navigate successfully the global business landscape is the prospect of continued

instability and volatility. We can hope that the recession is increasingly behind us, but few argue

that the strategic outlook is any more sound or certain. Early hopes for a robust recovery last

year were dashed by sharply higher energy prices, the tragic events associated with the earth-

quake, tsunami, and nuclear emergency in Japan, and lingering economic and financial uncer-

tainties in Europe. As we look forward, much of the turmoil in Europe not only persists but also

seems poised to intensify. Similarly, the economic outlook in the United States is fraught with

significant vulnerabilities. Although we have seen some very welcome positive signs over the

past few months, a range of structural weaknesses, including growth, housing, unemployment,

consumer and business confidence, and national debt, continue to raise questions.

The idea of negotiating unarmedthe oncoming period of disruptive andpotentially discontinuous political, social,economic, and commercial change issimply unthinkable.

This year is also precarious for the major political systems around the globe. In one country after

anotherSpain, Russia, France, India, Mexico, the United States, and South Korea, among others

national elections are testing the legitimacy of the current leadership framework. Others, partic-

ularly China, which is moving into its fifth leadership generation, will also experience significant

political transformation. The Arab Spring continues to cast the spotlight on uncertain political,

economic, and social reform trajectories across North Africa and the Middle East, with obvious

implications for geopolitical stability, resource flow, and migration.

For these and other reasons, an ironclad case can be made for robust, systematic planning

that is genuinely strategic in scope, global in nature, and innovative in design. A range of tools

is available to help leaders prepare for the futurefrom scenario analysis, war gaming, risk

mitigation, and foresight analysis to identifying trends and the unknown unknowns.

Paul A. Laudicina and Erik R. Peterson, Cautious Investors Feed a Tentative Recovery, A.T. Kearney Foreign Direct Investment

Confidence Index. The Index describes the perceptions of business leaders and investors in countries and industries.



Executive Agenda

Stranded Strategies Are No Longer EnoughDespite increased investment in strategic planning and the strong rationale for a permanent

and ongoing strategic planning capability, the reality is that strategic planning for many firms

continues to be an elective proposition. While the reasons for this subordination vary, as one

would expect, every leader is grappling with several overarching pressures that constrain

strategic planning:

Culture.In todays x culture, leaders are pressured to focus on the moment.

Priorities.Immediate and urgent priorities frequently crowd out longer-range considerations.

Strategy as conjecture.Strategic planning is seen as less empirical and some of its method-

ologies less concrete.

Short-term perspective.Incentive structures are focused on the here and now, and leadersare not rewarded for results that happen in the remote future. This eat-what-you-kill

perspective is reinforced by various stakeholders.

In the face of these pressures, strategic planning all too often becomes an occasional function

rather than an integral exercise. Over the years, we have seen it time and again: At some quiet

part of the planning cycle, a firm elects to hold an offsite meeting of its senior leaders so they

can agree on a common vision for the future, along with policies to achieve that vision. The

result, more often than not, is what we characterize as a stranded strategythe development of

a number of shorter-term business ideas (often more tactical than strategic) that by their very

nature are highly perishable and that soon become subordinated to the relentless day-to-dayrigors of business operations.

Compare this to stranded investmentthe notion of large-enterprise investment that quickly

becomes uneconomical and no longer reflects the circumstances in which it was created.

When it comes to strategic planning, this translates into snapshot, limited-shelflife strategies

that soon become decoupled from priorities. What ensues is a failure-to-launch conclusion.

Seven Ways to Strategic

Firms escaped robust strategic planning in earlier economic and business cycles. However, the

idea of negotiating unarmed the oncoming period of disruptive and potentially discontinuous

political, social, economic, and commercial changewithout a strong and continual process for

anticipating and preparing for changeis simply unthinkable. Clearly, snapshot strategies are

no longer enough.

But how to move to the next stage? Obviously, whatever process is used must account for the

unique circumstances and culture of the firm in question. A great deal depends on the style

of the leaders and the extent to which this group is committed to empowering the planning

process. Still, a number of steps are useful in building a vigorous planning capacity that

transcends corporate cultures and the nature of business. Seven stand out for their abilityto deliver an immediate impact and a longer-term growth advantage:

. Open the aperture.It is incumbent on business leaders to establish a default understand-

ing of global trends, aggressively mapping the dominant forces changing the external



Executive Agenda

environment and identifying the big-ticket forces at work. Rather than boiling the ocean,

this represents taking a systematic look at the various drivers of change, how those drivers

interrelate, and what they imply for business operations.

. Stress-test the structure.Within the constraints of these driving forces are potentialoutcomes that might surprise. Through scenario planning, foresight analysis, and exposure

to non-traditional perspectives, planners can identify outcomesstoriesthat bring fresh

insight and ideas to the process.

. Reassess prevailing assumptions, continually.In this age of massive information and

knowledge flow, keeping up with relevant information is nearly impossible. With new dis-

coveries and new levels of understanding emerging each day, it is necessary to recalibrate

underlying conventions. A case in point is demographic shifts. While in the past we worried

about population explosion, many countries are now facing dramatic population implosion

and all the significant benefits and dislocations this may produce.

Global Radar can pinpoint the black-

swan contingenciesthat do not fall withinthe traditional parameters that businessleaders carve out for themselves.

.Graft on unknown unknowns.It is surprising when planners stay in the well-worn rut by

focusing on the known-knowns that drive everyday business. By definition, the value-add

of such an approach is extremely limited. Instead, planners need to scan the universe of

contingencies that go well beyond the next planning cycle. For example, what would it mean

if an embattled Tunisian street merchant set himself on fire and, in the process, ignited an

enduring social movement across North Africa and the Middle East? Our Global Business

Policy Council has developed a strategic service that we call Global Radar with precisely this

goal in mindto pinpoint those black-swan contingencies that do not fall within the tradi-

tional parameters that business leaders may have carved out for themselves.

.Develop a set of early warning signals.Rather than taking a reactive posture, strategic

planning functions need to develop a list of signals of change that set off reassessments in

the assessment process. These could take the form of headline-level events, what we could

call neon-light developments, or even small, faint signals that might otherwise easily be

discounted or overlooked altogether.

. Institutionalize, enliven, and integrate the planning process.The complex world in which

we live suggests by its very nature that bumblebee planningflying from one offsite flower to

the nextfalls woefully short of what is needed. To monitor developments in real time and

develop contingency policies to respond to predictable and less than predictable events,

companies need to create an ongoing, living process. A smart strategy depends on smart,

continual, and consistent inputs to the process. Beyond that, the planning process must be

thoroughly integrated throughout all dimensions of the firmfrom leadership to opera-

tionaland critical to the highest levels of leadership.



Executive Agenda

. Invest in the process. You get what you pay for. The rate of return on solid internal analysts,

informed feedback from external subject matter experts, and innovation in the planning

process can be substantial.

What It Takes When the Stakes are HighTogether, these actions would go a long way toward de-stranding the strategic planning pro-

cess in firms struggling to address what undoubtedly will be turbulent circumstances. As Peter

Drucker once observed, Strategy is a sense of direction around which you improvise. A vigorous

strategic planning capacity makes such improvisation possible at a time when the stakes are

extraordinarily high. Companies equipped with a strong planning strategy are more likely to

survive in the short term and are more apt to flourish in the long term.

Authors

Paul A. Laudicina,managing partner

and chairman of the board, Chicago

[email protected]

Erik R. Peterson,managing director

of the Global Business Policy Council,

Washington, D.C.

[email protected]


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Executive Agenda

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De-Stranding the Strategic Planning Process