Taking strategy a step beyond ‘planning’ stage

Open the dusty file drawers at any business, and you’ll find yellowing folders stuffed with strategic planning reports. In the age of the desktop computer, they’re tucked away in electronic folders.

By Robert Weisman, Globe Staff

http://www.boston.com/business/articles/2004/07/25/taking_strategy_a_step_beyond_planning_stage/

At too many companies, strategic planning has become a meaningless ritual, unconnected to daily operations. Managers go through the motions, filling out their templates as quickly as possible and returning to their jobs of selling products and meeting quarterly numbers. Some try to game the system, aligning their personal agendas with the latest corporate initiatives in a bid to grab bigger slices of the budget.

Either way it’s clear that strategic planning can be a sterile exercise.

"When someone says ‘planning,’ it’s often something that’s divorced from the day-to-day business," said Phyllis Rothschild, a director at Mercer Management Consulting in Boston. "The word ‘planning’ itself tends to create some eye-rolling when people hear it."

Companies that truly master strategy engage in a practice that Rothschild and her colleague, Mercer Management principal Jag Duggal, call "strategic managing." In essence, they erase the distinction between strategy and execution. Their executives and managers continually update their strategy in light of unfolding events — doing "deep dives" to assess and react to mergers or product rollouts — and they link strategy to funding and everyday actions.

In a recent Mercer Management Journal article stemming from client work and a benchmarking study, Rothschild and Duggal outline three foundations of strategic managing by successful companies:

Debate assumptions, not targets. Squabbling over targets can undermine strategy. Business leaders should shift the conversation to assumptions, nurturing debate on risks and tradeoffs and the issues of customers, costs, and competition that play out in the marketplace.

Stress money over message. A company’s strategy must be incorporated in all its capital allocation decisions. That will enable its executives to translate their high-level vision into operating results.

Break the templates. Organizations should avoid tedious annual goals and forecasting reports in favor of a broad strategic rethinking that can progress on staggered schedules for different operating divisions. Such an approach often can be furthered by narrower budgeting and more flexible short-term planning.

Even planning-averse companies that rode the technology wave to prosperity in the 1990s need a strategic approach to continue growing in today’s market. "Effective strategic managing, where strategy is linked to how the business is run, can create a critical competitive advantage," Rothschild and Duggal said in their article, cowritten by another Mercer director, Richard Balaban.

Evidence of strategic managing often can be seen in how the structure of a company evolves. IBM Corp., cited by Mercer as a "best practices" company, integrated its hardware, software, and services businesses in response to a change in market behavior: enterprise customers becoming more reluctant to buy technology products a la carte and more open to buying them in the context of a larger plan. IBM’s new structure enables it to market business solutions (that include servers and software) rather than merely peddling products.

"One of the things we do is we take our clients to the IBM labs," said Saul J. Berman, strategy and change leader at IBM Business Consulting Services in Los Angeles. "We can brainstorm with them about what is the right technology to solve a business problem."

By contrast, strategy breaks down at many companies because of flaws in the process. One example from the Mercer article is Ford Motor Co. under former chief Jacques Nasser. "Despite a rallying cry of ‘getting closer to customers,’ Ford funded investments on remaking the brand and diversifying channels," investing in the Internet and scrap metal, the Mercer consultants wrote. "Had the Ford culture encouraged open, honest debate, managers might have challenged these initiatives and regained their focus on quality and productivity."

Above all, strategy that works must be grounded in reality.

"Very successful companies tend to do strategic managing," said Hassell H. McClennan, associate professor of operations and strategy at Boston College’s Carroll School of Management. "They’re consistently testing their strategy out against the realities of the marketplace and against their own competencies and capabilities."

How can you tell if a company is managing strategically? A good litmus test is whether its strategy is understood deep into the ranks of management.

"Before I’d invest in a company," Duggal said, "I would ask a middle manager, ‘What’s the strategy?’ "

Robert Weisman can be reached at [email protected]
© Copyright 2004 Globe Newspaper Company.