Strategy Development

Strategic planning in most organizations doesn’t really matter anymore. Sure, the process often consumes an enormous amount of time and produces reams of data, but rarely does it drive top leadership's decisions or the organization's overall strategy.

Why? For starters, the model most organizations use for strategy development is not well aligned with the way top leaders make decisions. Indeed, strategy development in most large organizations is a “batch” process where market and competitor information is first analyzed, threats and opportunities identified, and a multiyear plan defined.

The process usually takes place annually in strict accordance with a predetermined planning calendar. Strategic decision making, by contrast, happens continuously - often driven by an immediate need for action - and does not conform easily to a preset schedule.

Ultimately, strategic planning can’t have an impact if it doesn’t drive decision making. And it can’t drive decision making as long as it remains periodic and calendar-based. Thus the key to making strategy development matter is to focus on continuously identifying and addressing the strategic issues that can most affect the organization’s value.

Why traditional strategy development fails

The batch model for strategy development has at least two major shortcomings.

  • The time problem. In many organizations, the planning process does not afford leadership sufficient time to address the issues and opportunities which most affect performance. Many issues, particularly those spanning multiple businesses, crossing geographic boundaries, or involving entire business systems, cannot be resolved effectively within a three or four-month planning window. As a result, top leadership does not use the strategic planning process to address these complex problems. They turn instead, to some other process for guidance and make their most difficult strategy decisions outside the planning cycle. 
  • The timing problem. Even when the time allotted for strategy development is sufficient to make tough decisions, the timing of the process often creates problems. Markets and competitors are dynamic. New business threats and opportunities emerge that cannot possibly be predicted in a traditional strategic plan, and when these threats and opportunities arise, top leaders can’t wait until the next planning cycle to take action. They must act quickly now, to safeguard the organization’s performance.

A continuous strategy model

A few leading organizations have recognized the weakness of traditional strategy development and are employing an entirely different model for strategy development and execution - one in which assessment and action are under continual review.

For example, the strategy development process is organized around a strategy agenda which lists the issues and opportunities top leadership believes must be addressed in order for the organization to deliver superior performance. Some issues are broad - others are narrower. But every issue on the strategy agenda has a direct, measurable impact on the organization’s intrinsic value and therefore must be addressed as part of the strategy development process.

Once the top leadership team agrees on a strategy agenda, its members establish clear accountabilities and milestones to resolve each item. One member of the team is made responsible for ensuring a particular issue on the strategy agenda is addressed in a timely and effective manner. Unambiguous decision timetables are established for each issue, specifying when the team will make a final decision. This process drives high quality decision making and accelerates the pace of strategy development and execution.

The continuous strategy development model differs from traditional strategy making in at least two fundamental ways:

  • different outputs: The output of strategic planning has traditionally been a strategic plan. The outputs of continuous strategy development are quite different. Under a continuous approach, strategy isn’t a plan. Rather, it's a direction for the company and the agenda of issues and opportunities to drive change in that direction. This process focuses top leadership on what matters most - setting the right strategic direction - and allows decisions to be considered in the context of that direction, in real time.

The notion that strategy is something that can be planned well in advance, and then executed, is out of step with our rapidly changing world. Since no top leader, not even the most brilliant strategist, is clairvoyant, strategic development today should produce not a plan but a direction and an agenda.

  • clearer accountabilities: Ironically, as elaborate as most traditional strategy development processes are, they establish few real accountabilities. No one individual can be held responsible for ensuring that a multiyear strategic plan is effectively executed. Even if everything were to go according to plan, most top leaders move on before any multiyear plan can be realized, and few top leaders control all elements of plan implementation during their tenure.

While leaders can’t be held accountable for carrying out a multiyear strategic plan, they can be held accountable for addressing key strategic issues. Each item on the strategy agenda should have an individual accountable for addressing it, along with a timetable for its resolution. Then, at the end of the year, if an issue remains on the agenda - that is, if no decision has been made, and no action taken - top leadership can incorporate this fact into its evaluation of the appropriate leader’s performance.

Because accountabilities are clearer under a continuous strategy development model than under traditional strategic planning, this approach frequently accelerates the pace of strategic decision making, and thus fuels value growth. Many top leaders have grown skeptical of strategic planning. Is it any wonder? After all, if the purpose of strategy development isn’t to drive an organization's strategy, then what is its purpose? And if driving an organization’s strategy isn’t about influencing top leadership’s decisions, then what is it about?

For strategy development to be worthwhile, the traditional development process needs to be redesigned to focus, not on developing a static plan, but on continuously addressing the issues and opportunities that will have the greatest impact on long-term value for shareholders and other stakeholders.