In many mid-sized B2B organisations there is no formal business strategy process. There may be a rough guide to the future direction and a financial plan, but that is all. If a strategic analysis process does exist, it is often little more than a box-ticking exercise.
If we believed the theory we learned in our college days we should recoil in horror at this situation. Surely a business that does not assess its market, identify threats and opportunities and plan a way forward will fail?
The reality is most businesses without a strategic process don’t die. Many thrive, at least in the short term.
So what is the point in allocating time and effort to developing a strategic direction for a business? Let’s start by looking at what strategy is, and is not.
What is strategy
In essence, it’s simple. Let’s take an example. Let’s suppose next year you want to publish your first book on Amazon. That is your goal.
To achieve your goal you calculate you will need to write 2,000 words per day, 6 days a week. That is your objective. It is quantifiable and time-limited.
Your strategy is how you are going to achieve that objective. Where are you going to work? What proportion of your time will you spend on research?
Crucially, a strategy is also about dealing with obstacles. How will you lockout distractions? If you know you are prone to procrastination how will you deal with that?
A strategy is the best guess (a hypothesis) on the best way forward given the information available to you.
So why bother with a strategic process?
Survival is one issue to consider (see above). It is also important to reflect on business performance. Could a business achieve better results and higher ROI if they had a strategic plan in place?
Taking survival first, the issue is survival over what timeframe. There are many examples of once very successful businesses that no longer exist. They made bad decisions or something changed around them that they did not expect.
A business founder is likely to care about the long term survival of his/her business. To be blunt, a CEO brought in to run a company is (in general) less concerned about the long-term. It follows, therefore, they are less concerned about strategic analysis and longer-term threats.
Moving on to consider if a business could do better if it completed regular strategic reviews. Here, I submit, yes it could.
Market analysis should identify both threats and opportunities. Strategies implemented to capitalise on those opportunities should deliver improved business performance.
Where the standard strategy process fails
The information available to you constantly changes and so must your direction. That is, I suggest, where the standard strategy process fails.
If you do believe a strategic planning process benefits your business you have probably encountered a major problem. The standard process fails to take into account market turbulence and imperfect information.
Many years ago, I attended a short talk given by Malcolm McDonald. Yes that Malcolm McDonald the author responsible for Marketing Plans (How to prepare them and how to use them) and many other leading texts on marketing practice.
I remember that talk, it was both entertaining and enlightening. I particularly remember his comments on SWOTs. That he shuddered as he walked down the halls of hotel conference rooms, peered inside and saw that cross on the whiteboard time and again.
His point was (from memory) the SWOT process was generally badly implemented. It was full of fluff, built on sand, with no focus. Too often the strategic analysis process fails to identify the key issues. Or if it does, they are often conveniently pushed aside.
If a SWOT is superficial (at best) any decisions on the strategic direction will fail to take account of the key roadblocks to progress. They will fail to address the real opportunities.
That said, I argue there is a greater problem with the standard strategy process even with a perfect SWOT analysis.
Business strategy, turbulence and chaos
The way markets, competitors or individuals operate is not linear. B does not naturally follow on from A. The situation businesses find themselves in is often turbulent, even chaotic. A quote from James Gleick excellent book – Chaos “the solvable systems are the ones shown in textbooks – they behave.” Unfortunately, people, markets and competitors do not.
The standard marketing texts tend to describe a strategy process as follows:
- Mission and goals
- Summarise the key issues facing the organisation (SWOT or similar tool)
- Define objectives
- Choose the objectives to attack
- Defining the strategies required to achieve objectives
- Define tactics
- Make plans (including financials)
- Measurement and review
But the strategy and tactics assume some level of stability and predictability that does not exist. Yes, there is a feedback loop from the measurement and review stage, but it is too slow to deal with real-time events. While it is true some markets are more stable than others, all can be knocked into a turbulent state by some unexpected event.
Worse still, the input (the analysis) is also constantly shifting. Too often businesses carry out a strategic planning exercise yearly. That is way too slow. The only part of the process that remains fixed for more than a few months is mission and goals.
Dealing with market turbulence
So what’s the alternative? You can’t sit around and wait for events to propel you forward (or sidewards, or backwards). You do need to analyse the situation, that is essential. You also need to decide what is important.
You know what you have to achieve. You know what tools you have in your armoury and you know what stands in your way. You can build a plan and take the first steps. From that point forward, your plan is useless.
You cannot assume C follows B, follows A as the environment will constantly shift around you. Perhaps this is what Eisenhower meant when he said, “plans are worthless but planning is everything”
A scenario planning exercise can help. This, at least, allows you to look further out at trends that may cause turbulence in your market.
So what is the solution? Part of it is organisational, part relates to communication and part relates to the speed of response. Trust and value chain and the skills of the workforce are key. These elements are discussed further in our guide Business Strategy – A Different Approach.
For businesses happy to focus only on the short term a formal business strategy process may have little value. But for businesses worried about both maximising opportunities and avoiding longer-term threats analysis, strategy and planning are vital.
I suggest the standard business strategy process fails to address market turbulence, but there is a different approach.