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CEO Reading: strategy is useless

 In Business decisions, Decision-making, Financial decisions, Insights, Management, Realizer Blog

Strategy is useless

OK, maybe not useless – but it is vastly over rated. Here’s why and what you can do about it.

Last year I was fortunate to hear a short talk by digital investor Tony Faure. He had been on the board of Seek at launch in the early noughties, and related the following story. Every month the board of Seek would meet and each month they would discuss what they’d do if either of the giants of employment advertising (News, Fairfax) identified Seek as a threat and decided to launch their own online brand to squeeze Seek out of the market. They basically decided there was no way they could compete with the giants’s funds and strong brands. But each month they were surprised and relieved to note that neither of the giants had woken up, and Seek’s free ride continued. What was happening inside News and Fairfax?

They had legions of highly paid corporate strategists making strategic plans and assessing competitive threats, so why didn’t they react? Why didn’t they decide to deal with Seek? Perhaps it was something to do with the inertia in large organisations….
In 2006, a paper appeared in the Harvard Business Review, entitled Stop Making Plans; Start Making Decisions.The authors examined the strategic planning approach of a range of large companies and concluded that it very rarely led to action in the real world. Packs of slides were made, executives flew around to each business unit and sat in day-long meetings asking incisive questions. Much time and effort was expended. And yet the outcomes were often minimal. They identified 2 reasons for this.First, the annual strategic planning process is too infrequent, and will inevitably not happen at the same time as big changes and big decisions needs to be made. They showed that most businesses only have between 2 and 6 really big decisions to make each year, and the strategy process usually missed them.Second, strategy is done by business unit, which is completely at odds with how executives make the big decisions in their company, the ones which will affect multiple divisions or units.In summary, if strategic planning is not linked to the major decisions you need to make in your business it can be a huge waste of time and effort and tie your most expensive senior people up for weeks at a time, writing charts instead of building your business.

What to do? The authors recommend “Continuous Decision-Oriented Planning”, a process where leaders have a series of planning meetings over the year, each of which focuses on 2 decisions which affect multiple business units. Task forces to collate and present recommendations are drawn from across business units.

The result is that the leadership get to make more big decisions, and in a quicker time frame. Large corporations are often beset with inertia and indecisiveness. Improving the speed of decision-making improves flexibility and innovation.

Read the full HBR paper here – and why not change the way you run strategy in your organisation for 2015.