The origens of strategy.

The origins of strategy............

six frequently-asked questions

What is the purpose of strategic planning?

Why does strategy have to be re-appraised on a regular basis?

How does an organization become aware of, and react to, changes?

What is the importance of SWOT analysis, and the determination of mission and vision?

The majority of organizations engage in strategic planning – on an almost random basis at one end of the spectrum, to a highly-organized ongoing system at the other end. This article looks at the process through which strategy arises, and provides some thoughts against which organizations can assess their own strategic processes.

What is the purpose of strategic planning?

Strategic planning is not a purpose on its own – it is simply a process for increasing the likelihood of an organization surviving and growing.

Why does strategy have to be re-appraised on a regular basis?

The whole world, including the environment in which an organization operates, is continually changing. Simply stated, there are two environmental systems which affect an organization: the external environment and the internal environment. The external environment includes:

the economy (e.g. worldwide and local economic changes)
the business environment (e.g. changes in business confidence; mergers and takeovers; changing markets)
the political environment (e.g. the trends arising from political thought and political processes, including legislation designed to give effect to political philosophy; trade union politics)
the technological environment (e.g. technological developments affecting either an organization’s products or the way in which it conducts it business)
the natural environment (e.g. long-term weather changes, environmental degradation)
the social environment (e.g. social trends, approaches, fashions, changes in the manner in which people live together)

The internal environment can include the following:

values (e.g. the values generally held by people working for the organization)
management styles
the physical environment (e.g. ageing plant and infrastructure)
human resource issues (such as increasing staff turnover trends, changes in the productivity profile)
trade union activities and developments

It is clear even on casual inspection that any or a number of the above factors can adversely affect the ongoing viability and profitability of an organization. And this is where strategic planning comes in. Where changes have already occurred and have had a negative impact, the planning is aimed at reversing any negative trend that may have developed. Where changes are expected or the likelihood of their occurrence has become high, the planning is aimed at minimizing the future impact of expected changes, or even capitalizing on the opportunities that such changes may offer.

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How does an organization become aware of, and react to, changes?

A process of environmental scanning takes place in all organizations. The difference between organizations lies in the extent to which this process is formalized. We have observed the four following types of strategic scanning:

Chance: Organizations become aware of significant changes only by chance, or when the impact of changes that have already occurred becomes visible. This is commonplace in many small to medium enterprises, but we have seen this in even larger organizations. Reaction to the changes is unplanned, reactive and often in emergency mode.

Informal: There is no formal system of environmental scanning, but management and employees take an active interest in a number of factors affecting the organization, such as impending legislation or changes in the marketing environment. Reaction to these changes is mainly reactive in nature, and the development of a long-term view is rare.

Semi-systematized: The normal pattern of this approach is similar to the previous one, but there is normally a system according to which changes or impending changes that have become visible, are raised formally at management level. It is then normal practice for individuals or units in the organization to be tasked with developing a suitable approach to a specific change, and the sum total of these approaches becomes the organization’s strategic plan. However, the semi-systematized approach does not concentrate on a long-term approach, and neither does it lean very heavily on follow-through and evaluation of strategies.

Systematized: The systematized approach usually contains the following elements:

A more formal approach to scanning the environment and to gathering and interpreting data on environmental changes – in some cases there may be a Strategic Planning Office undertaking the work in this regard.
A formal and regular planning approach (which could include six-monthly or annual strategic planning meetings).
An annual planning calendar which moves strategic plans into the area of formal business plans and budgets.
A system of ongoing follow-up and evaluation to ensure that plans remain on track, and are effective.

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What about strategic scenarios?

Scenarios can be written for a company, a country or for global changes. Simply stated, a scenario is a story of the future, which attempts to predict what changes are likely to take place, how these changes will interact with one another, and how this will affect the organization or country. A number of alternative scenarios are usually created: the worst-case scenario (which assumes a confluence of negative events), the realistic scenario (which assumes the most likely series of changes and events), and the best-case scenario (which assumes the confluence of a number of positive changes and events).

A set of scenarios can be a very useful instrument for determining well in advance how an organization should best react when certain events occur. This is particularly useful for contingency planning, where a set of plans for a particular set of circumstances can be created well in advance (thus creating what has been called “fitness for the future”). If the event does occur, time does not have to be wasted on starting from scratch in finding out the facts and considering various options and approaches.

In our experience, scenarios have been less useful for short to medium-term business planning in organizations: over the past ten to fifteen years, the environment has tended to change more rapidly and unexpectedly than was even predicted in scenarios – to the extent that many large organizations are reluctant to commit resources to strategies projecting more than two to three years into the future.

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What is the importance of SWOT analysis, and the determination of mission and vision?

Many strategic planning approaches (especially those which concentrate heavily on planning formulas and systems) tend to place a disproportionate emphasis on these elements.

SWOT analysis (an analysis of Strengths, Weaknesses, Opportunities and Threats) is a very useful instrument for creating an understanding within the organization of its interaction with its external environment, and for creating a preliminary insight into the ability of the organization to react strategically to changes. We have even found that an analysis of Opportunities and Threats tends to take the place of an environmental scan in a number of organizations (notably those with an informal or semi-systematized planning process). However, SWOT analysis is only one entry point into a strategic planning process and, used on its own, will certainly not produce a coherent strategy.

The mission of an organization is no more than a statement of the reason why the organization was created in the first place. There is nothing mystical about the mission: the word derives from the Latin verb mittere = to send. It is therefore a statement on what the organization was sent to do. It is important to obtain clarity on an organization’s mission, since a lack of clarity on its legitimate mission can lead to a number of strategies which are not in line with what an organization should really be doing. Many diversification exercises have fallen down for this very reason: the organization ventures into areas that it was not designed for. It is important to note, however, that the mission of an organization can legitimately change over time, provided that this is in line with the wishes of stakeholders and its governance structures. (An example of this is Nokia, which moved from a fairly diverse manufacturing concern to one which concentrates exclusively on mobile telephony).

The vision of an organization may be described as its dream. It is a statement of what the decision-makers would want it to be, and it is normally a more value-driven statement than the mission. We have found that, very often, the vision for an organization has a direct relationship with its culture and values. To strategy it is also an important statement, since it determines certain outcomes which the strategy has to support. Unfortunately, many organizations spend a disproportionate amount of time on defining their vision, especially when there is less of a common understanding about what it should strive towards, or (and this happens!) where the organization is casting about for something which will look good in the Annual Report.

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Who determines strategy?

It may be argued that all of the following have a hand in determining strategy:

The strategic planner who undertakes environmental scans and analyzes the importance of the information
The strategic planning committee or meeting which gives shape and substance to possible approaches
The Board or Governing Body which approves the annual strategic plans.

However, in our experience, the one individual who has more influence on strategy than any other person or body, is the Chief Executive Officer. Especially where this individual is a visionary, we find that he or she is often able to articulate a more comprehensive vision for the future, accommodating not only the changes which are necessary, but also the values and culture which epitomize the organization. Thus we find more often than not that the starting point for any cohesive thought and planning for a future strategy emanate from this one individual. But the most successful organizational strategies do not emanate from a one man show: they are a magical synthesis of vision and values (the CEO), of additional practical insights (the strategic planning committee), of meticulous planning (the strategic planner and various strategic task teams) and of governance wisdom (the Board or Governing Body).

Successful strategy has a visionary starting point, but in the end it is a team effort.

StratFac can offer a tailor-made solution for your strategic planning needs: from the facilitation of strategic planning events, through to the planning and implementation of a comprehensive strategic and business planning system.

Contact us.

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