Commentary: Sense and Strategy in Corporate Planning
It is that time of the year when executives start developing their corporate strategic blueprints and action plans. Executives often need to choose between "thinking out-of- the-box" for new, disruptive ideas and pulling out previous years' templates to play it safe with the "tried-and- tested" solutions.
Whatever they do, our experience interacting with senior leadership teams across various sectors suggests that in reality most corporate planning processes are ineffective in achieving results.
Before we understand how to make makes strategy more effective, let us gain a perspective on its application. There are two critical aspects of any corporate planning process.
First, strategy that makes "sense." All the stakeholders of business need to recognize their roles and what they can contribute to achieve it. It is therefore critical to engage with stakeholders to understand the value they can bring by way of fulfilling organizational objectives.
Second, making sense of the "strategy." Strategy needs to help mitigate risks and introduce innovations or ideas that will change the course of the business for the better. In this case, appreciation of the past issues and future expectations of the management or shareholders is as important as the understanding of the competitive landscape.
Now the question is how do we arrive at a strategy? At a fundamental level, practitioners follow three typical steps in the process to devise a strategy – situation analysis, planning, and execution.
Most Indonesian executives follow this diligently. However, when reviewed, more often than not, their strategies either do not make sense to stakeholders, or they themselves are unable to make sense of their strategies in the context of what they want to achieve from deploying them. Why? We believe many Indonesian executives are not matching their strategy to their operating environment. The more conventional approach of analyze, plan, execute is best suited for companies where the industry context does not change rapidly.
Long-term strategic plans may work well in industries such as oil and gas and consumer goods, but less so in dynamic industries such as telecommunications or internet software. Thus a one-size- fits-all approach to strategy does not work. What is the solution?
The Boston Consulting Group has developed a simple framework that categorizes strategy planning into four styles, depending on "predictability" of your operating environment and the "power" you hold to influence or change it.
The classical strategy approach applies when the industry is highly predictable and where individual players have little ability to actively shape their environment. In this situation, the best approach would be for companies to set a goal based on the most favorable market position it can attain by capitalizing on its current capabilities and resources.
However, the strategy would also define ways to further strengthen the position through continuous planning in view of future trends or market movements. Once such plans are set, they tend to stay in place for several years.
The adaptive approach applies when the industry is highly unpredictable and it may not be practical to be guided by a standard strategic plan. In a volatile environment, companies need a strategy where they can constantly and promptly realign or redefine goals and tactics.
This would mean, planning cycles may shrink to less than a year or even become fluid. Instead of blueprints that are cast in stone, the action plans are based on rough hypotheses and the best available data. However, in doing so, it is important to ensure that strategy is tightly linked with or embedded in operations, so that any "change" or "critical information" that may have potential impact on the business can be captured real-time and the strategies can be revisited.
The shaping approach applies when the industry is highly unpredictable, but companies are able to actively shape their environment. The way to win in this environment is by collaborating with the market and industry players to develop strategies.
As with the adaptive approach, the shaping approach eventually emerges from continuous review of three elements: repeated engagement with the stakeholders to take note of the market forces, trends and challenges; orchestration or synergizing of efforts to positively influence the market forces in the favor of the business; and most importantly, interventions from time to time to help the ecosystem evolve with the market.
The strategy using this approach is more responsive to growth opportunities.
The visionary approach applies when there is an opportunity to create or re-create an industry or when a firm sees the outcome as predictable and the environment as malleable, even if others don't share that vision. Such times call for bold strategies, which entrepreneurs use to create new markets. Like a shaping strategist, the visionary considers the environment not as a "given," but as something that can be molded to advantage.
The visionary style has more in common with a classical than with an adaptive approach. Because the goal is clear, strategists can take deliberate steps to reach it without having to keep many options open. It is more important for them to take the time they need to marshal resources, plan thoroughly, and implement correctly so that the vision does not fall victim to poor execution.
Visionary strategists must have the courage to stay on the course and the will to commit the necessary resources.
How can these approaches rescue Indonesian companies? Choosing the approach to devising strategy can make all the difference between winning and losing in the market place, the difference between generating superior results versus remaining mediocre in both planning and delivery.
Edwin Utama is partner and managing director at the Boston Consulting Group
Tags: Keywords: