JLBC HOW STRATEGIC THINKING CAN SURVIVE

JLBC: Leadership

Are the organizational resources – setting the direction of your Company?

• Would different members of your management team paint different pictures of what the Company should be in the near and distant future?

• Is your statement of future strategy more helpful for public relations purposes than a clear guide for future products and markets?

The more of these questions you answered "yes," the more your Company's strategy is in trouble. If you answered all "yes," you can probably hold last rites for design in your organization. It is officially dead.

JLBC HOW STRATEGIC THINKING CAN SURVIVE

Strategic thinking has long been considered an intellectual nicety; it has provided a patina of respectability to corporate statements built solely on operations considerations. Management attention, however, has been given mainly to operational planning and decisions, for it is here that the "big payoff" could be pursued. In addition, managers have tended to avoid the high risks inherent in strategic thinking without a process. They preferred instead to dwell in the lower risk, more secure area of long-range planning. But, even the best operations planning and decisions are not enough in today's world. We can no longer afford the "security" of avoiding high-risk strategic discussions. What, then, can be done?

Strategic thinking must be separated from long-range planning and must precede it. Preaching separation of strategy and long-range planning may appear obvious, but most organizations tend to confuse the two. One major corporation, for example, has this patchwork quilt of overall objectives:

to market and produce legitimate products and services at quality levels in their respective markets to utilize resources fully to maximize return on stockholders' investment to structure the Company and assign responsibility in ways that promote efficiency and incentive, and reward achievement to provide satisfying, healthful, long-term employment at all levels to maintain through fluctuating business cycles the confidence of customers, employees, and stockholders to preserve the integrity of the Company in its accounting and reporting procedures, and thereby, the spirit of the investing public.

The first two objectives above say something, however vague, about what the Company wants to be in terms of products, markets, and return. But the remaining objectives are operations; they are how-to-oriented guidelines for the operation of the business. By masking strategic considerations with operational ones, the above Company is headed for an identity crisis as it is pushed and pulled into the future with no clearly defined picture of itself.

Besides making strategic considerations usable, another advantage of separating strategic thinking from operations is that it simplifies the long-range planning process. In most instances, strategic thinking and long-range planning should not cover the same time perspective. A clear, specific statement of strategy covering the next five years generally diminishes the need to project long-range plans over the same time frame. We have found that organizations with transparent systems can put their planning focus on shorter-range plans. Once a strategy is formulated and key areas identified, detailed long-range planning can be limited to these areas.

There is a tendency to feel that it is strategic because long-range planning covers a more extended period than short-range planning. Conversely, there is a tendency to think that the short-range is not strategic but operational. The operational and strategic, however, can have immediate or long-range time significance. Strategy is a function of direction, not time. Operations are a function of how this direction is achieved, not time.

Separating strategic from operational thinking diminishes any controversy over the merits of "top-down" versus "bottom-up" planning. Both approaches are needed; it is just a matter of where and when. The strategy must be set at the top.

If top management has a special responsibility, it is to determine the future nature and direction of the organization. Given this strategic framework, the long and short-range operational planning must be done at all organizational levels where the needed information exists.

If middle and lower levels of management have one special responsibility, it should be to plan their operations to support the organization's overall direction.

Once separated from the operational, strategically thinking can survive if it is clear, specific, and straightforward. Only then can it provide a framework in which long-range planning and day-to-day decision-making can proceed. And only in this way can the executive intelligently assess which products and markets should be emphasized, which should be de-emphasized or abandoned, and what the scope of new products and needs should be. But not many companies have such a framework.

When companies have a simple corporate strategy statement, their statements tend to be so general that they are relatively useless as guidelines for specific future product/market choices. Consider this summary statement of corporate strategy:

Our business is the creation of machines or methods to help solve the increasingly complex problems of businesses, government, science, space exploration, education, medicine, and nearly every area of human endeavor.