Finance


Is strategic planning dead?




FINEX Folio
By Reynaldo C. Lugtu Jr.


Posted on January 13, 2017


LATE LAST YEAR, I chanced upon an online article in Forbes titled “Strategic planning is dead.” How ironic, as many companies were in tail end of their strategic planning exercises -- spending a few days offsite with expensive consultants, culminating with a set of strategic moves and a three-year plan.


This topic dates back to Henry Mintzberg’s 1993 publication of The Rise and Fall of Strategic Planning. Now, a cursory search in the Internet shows a marked rise in the use of “death of strategic planning” in the content and title of articles starting 2013.

Having been exposed to the practice of strategic planning in various organizations, at the same time teaching strategic management in an MBA program, I asked the same question: Is strategic planning still relevant in this day and age? To answer this question, we go back to the origins of strategic planning.

Coming from its military roots, strategic planning has always aimed at looking at the “big picture” and a set of actions to achieve certain outcomes. One of the first strategic planning methodologies for businesses was developed by Harvard Business School in the early 20’s which defines strategy as a pattern of purposes and policies defining the company and its business.

In the early 1920s, Harvard Business School developed the Harvard Policy Model, one of the first strategic planning methodologies for private businesses.

In the 1950’s through the 60’s, with the increase in industrialization, strategic planning’s focus shifted to industry growth, capturing market share, and managing risks, which gave rise to the emergence of industrial conglomerates. It further evolved to making strategic decisions from the analyses of environmental forces and competitive situation guided by the CEO’s vision.

Strategic planning became a standard management tool in virtually every Fortune 500 company and many smaller companies as well. Apart from the macroenvironmental analysis, it involved the relative power of customers and suppliers, and threats posed by substitute products and services, new industry entrants and market rivals dictate competitive strategies. The classic SWOT (strengths, weakness, opportunities, and threats) is central to the analysis.

Because the microenvironment during these is relatively stable, strategic planning involved long range plans ranging from 5 to 10 years. Political and regulatory climates are relatively stable and predictable. Technological advances involved mechanical and electronics innovations such as the commercialization of the telephone in the 50’s and the first solid state calculator in the 60’s.

But times have changed. Technological advances have obliterated the predictability of the future, with digitization and social media spawning the rise of new companies such as Facebook, Uber, and Twitter. Consumer preferences have changed drastically over the years with the emergence of the millennial consumer. Political and regulatory environments have become unpredictably turbulent with the rise of populist movements in several nations. Uncertainty has become the new normal.

Therefore, strategic planning must evolve instead of passing away. It has to be adaptive to the fast-pace environment rather than static. The key changes in the planning process are:

Responsive strategy -- There is still value in looking at the horizon of three years, but the strategic plan should focus on the immediate year ahead. It is necessary to chart the direction of the organization, but the plan should be flexible enough to build scenarios and contingencies to account for changes in the destination due to threats and opportunities that emerge.

Flexible execution -- The organization should be flexible enough to change its course for execution if there are changes in the destination during the execution on the current year. Resources such as people and capital should be allocated fast enough to capitalize on emerging new opportunities.

Adaptive culture -- This is the most important component for the success of the strategic plan. The organization should build a culture that executes fast, not fearful of failing, and learning from the pitfalls. It should reward people who experiment, fail, and reconfigure rather than penalize them. With these is the accountability with each organization members’ action, rather than a practice of finger-pointing.

The tools and frameworks of strategic planning are still applicable, such as macroenvironmental analysis, competitive industry analysis, SWOT, and so forth. But the organization should be deliberate and conscious in its application for an adaptive and responsive strategic plan.

The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of FINEX. The author may be emailed at reylugtu@reylugtu.com.

Reynaldo C. Lugtu Jr. is a senior executive in the information and communications technology sector. He is the Chairman of the ICT Committee of the Financial Executives Institute of the Philippines. He teaches strategic management in the MBA Program of De La Salle University. He is also Adjunct Faculty of the Asian Institute of Management.