Companies Without Strategies Are Heading For Tragedies

Many businesses are still focusing on yesterday's problems at the expense of forgoing future opportunities. The best chess players always have a strategy in place. But in businesses, future planning seems to play second fiddle to analyzing of past performance. Architects would not build a house without the architectural plans because selecting the wrong layout or laying the wrong foundation or using the wrong building materials could result in disaster. The house can collapse on you after you move in. A strategic plan is the architectural blueprint for your business.

Executives always have the excuse for not doing strategic planning. They reckon that things are changing so rapidly. It does not make sense to do ten or even five year planning as events will change and it is not possible to preempt changes any more. It is true that nowadays environment changes are very rapid and that makes long-term planning even more difficult. Non-strategic planning companies give the excuse that planning results in paralysis through too much analysis. It is also true that some companies cover their backs with expensive market research and spreadsheet analyses.

However, one should not throw out the baby with the bath water. As a matter of fact, it is even more critical to have strategic planning during turbulent and rapidly changing environment. It is like the Titanic, which had the most modern technology in her times but did not plan for eventuality and disaster when it hit the iceberg. We are living in difficult times today and tomorrow things may be worse. With the possible threats such as terrorist attacks, infectious diseases like SARS, bird flu, mad-cow diseases etc, it will be naive for any CEOs to think that they are immune or protected.

One must not be fooled into thinking that a company is successful because it has a good strategic planning system in place. Your success may be coincidentally due to a buoyant market or weak competition. Also, one must not be mistaken that the use of processes such as the annual budget is tantamount to application of strategic planning. If the data is purely internal that is sales figures and product costs, it is not strategic planning. You need to factor in the external factors such as customer data, competition, economic trends, etc.

Also, studies of successful companies such as IBM, Procter and Gamble, 3M found that new innovations and great ideas do not originate from the centralized strategic planning department at the headquarters. Most of the good ideas and innovations were generated from outside the industry or the people who regularly interact with the customers. Strategic planning must not remain in its ivory tower but should incorporate the realities of the ground.

The former chairman of General Electric (US), Jack Welch drew on the strategies of the Prussian general and military writer Clausewitz, Karl von (1780 -1831). One of Clausewitz's theories included an explanation of why a military leader could not devise a complete battle plan and then stick blindly to it: "Man could not reduce strategy to a formula. Detailed planning necessarily failed, due to the inevitable frictions encountered. Strategy was not a lengthy action plan. It was the evolution of a central idea through continually changing circumstances."

His own strategic thinking matched that of the general. He constantly reinvented GE over the years as circumstances and the competitive environment shifted. There was an evolution to Welch's strategic thinking and each major initiative built on the one that preceded it. He would wage one 'battle' and then wait to see how the results panned out. In tracing the evolution of GE during his tenure, Welch has drawn a stair-step-like chart that depicts the stages of GE's culture change. Work-Out laid the foundation for Best Practices, which created a platform for Process Improvement such as Six Sigma, etc. Preparation of a strategic plan may not guarantee success but failure to do so is certainly a recipe for disaster.

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