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Strategy has never been more important than under today's conditions. Organisations that don't pass the strategy test are quite literally flying blind. Here's why....
If managers don't know what's important and what to look for, or if they are snowed by details, confusion continues and progress is slow. Strategy brings into focus those things that are most important so everyone can put their horsepower behind what really matters.
Strategy is about making big decisions about the organisation's focus, the investment of resources, and how to coordinate activities across the organisation. Big decisions are hard to reverse. They may be very costly, time-consuming or simply impossible to change.
The world is changing like never before. Changes in the economics of information are revolutionising many industries and sectors from retail to manufacturing to government.
But it's much more fundamental than this, not only are things speeding up but world views are being turned upside down. Science is showing us that the world is more like organics than mechanics, and so are organisations. To succeed today, managers need to rethink their fundamental beliefs about how things work and how organisations work.
Every year hundreds of thousands of dollars are spent by organisations on strategy. Much of it is wasted!! Here's Why.
The way we currently forecast the future is inherently wrong and potentially dangerous. I'm an ex bean counter so I know how most budgets and planning work. The numbers in the long term plan are dominated by sales forecasts that are produced by product and customer type or region, usually on a projection of about five years. The forecasts are often heavily influenced by straight line projections. The organisation then allocates investment to business units consistent with them achieving the long term sales forecast. The business unit plans are reworked and iterated until they produce an acceptable long-term plan. Sometimes these forecasts have SWOT analysis and other market and trend analysis but the decisions are nearly always made on the basis of the forecast sales, investments, and costs.
In 1984, the Economist asked 16 people: four finance ministers, four chairman of multinational companies, four Oxford University economics students, and four London dustman to generate 10 year forecasts. They were the kind of forecast that underpin many long term strategic plans, including the average growth rate for the OECD countries over the next 10 years, the average inflation rate in these countries, the exchange rate between the pound and the U.S. dollar, the price of oil and the year when the Singapore's gross national product per person would overtake Australia's (at the time Australia was twice Singapore's).
In 1994 the Economist checked the 16 forecasts with what actually happened. On average the forecast were more than 60 percent too high or too low. The average forecast price for oil for example was $40 compared with an actual price of just $17. All the respondents said that Singapore's gross national product per person would never overtake Australia's, but that actually happened in 1993. The most accurate forecasters were the London dustmen and the chairman of multinational companies (equal first place). The finance ministers came in last. But the performance of every group was quite abysmal.
They fail because they mistakenly belief that strategy is an intellectual activity when actually it's largely about emotions. As Wes Brown, a manager I respect greatly and MD of Datamail says: "It's the last 14 inches from the head to the heart that matters most."
I have seen plans presented where there are up to 20 strategies. There should only be 3 or 4 at the most. The fundamental concept of strategy is to be strongest at the decisive point. The biggest challenge in strategy is to select and focus. By definition decisive point(s) are few.
If managers try to do 20 things equally well they will almost certainly fail at all of them. However if they carefully think through the 2 or 3 things that will make the most difference and put their horsepower into these then they have a realistic chance of success.
Surveys show that 85% of management teams spend less than one hour a month discussing their strategies.
They fail because the process is too logical and rational. Dare I say boring!!! Strategy sessions can be exciting, even exhilarating. So why are so many uninteresting and boring?
Linear starts with the present and says; Where are we? Where do we want to go? How are we going to get there? It is driven by analysts. It assumes ideas must be imported and that extensive analysis determines strategies.
Non linear starts with the Vision and says; Where do we want to go? Where are we? How are we going to get there? It is driven by the Line. It assumes ideas exist within the firm and that extensive analysis to is required but only to test the strategies.
Over the last 20 years I have developed a fully integrated strategy process that ensures that only a few critical strategies are identified. But more importantly, that every single person in the organisation knows what the strategies are and how they can contribute to them in the most effective way. It means everybody pulls in the same direction on things that matter.
For details about this process, I strongly recommend you download the file called STRATEGY WORKSHOPS 1130Kb PDF. Even if you decide not to use my skills in facilitating your strategy process there is a great deal of useful information in here for you or whoever does decide to do the facilitation.
Helps large organisations be focussed, fast and flexible. Places where people have more meaning, depth and connection.
Expert in Strategy, Structure, Culture and Leadership Development.
One of NZ's most experienced change agents.
Key words: strategy, strategies, business strategy, business strategies, strategy management, strategic management, strategy development, implementation.