- Email: [email protected]
Strategic planning and the chief executive
Long Range Planning, Vol. 21, No. 4, pp. 57 to 64, 1988 Printed in Great Britain
Strategic Planning Chief Executive
0024-6301/88
Pergamon
$3.00 + .OO
Press plc
57
and the
Roy Forman
The author develops his own thoughts and experience of strategic planning as Chief Executive of an organization. The aim of strategic planning, he believes, is to identify opportunities and to be in a position to take advantage of opportunities when they present themselves.
Let me start with a true story. I used to live in York when I was a teenager and near our house there was a school for the blind. I used to play cricket with some of the blind students-they had a wicker ball with a bell in it-and I mention this just to emphasize how much they used to strive to behave like sighted people. That was what they were taught to do. To enable them to behave like people who could see, these blind students had to be given confidence and I was always impressed by the confidence and courage they developed but, as in any walk of life, blind confidence can lead to dangerous behaviour. One day, I saw one of the students striding fast and confidently along the pavement across the road from me and I was absolutely horrified to see him walk at speed straight into a lamp-post. Imagine yourself walking fast into such a big, metal obstacle without perceiving its potentially damaging impact! Naturally, he hurt himself but, more lastingly, he shook his confidence in himself and in those who had been directing his development. Now, that true story has some lessons for us all, but especially for those of us with managerial responsibility. The first lesson is that if you have the courage and the determination to do something that is difficult, provided that you build up the necessary competence and confidence, you will amaze yourself with what you can achieve. The second is that it is all too easy, especially before you have become experienced, for a person to be dangerously overconfident. The third is that you may feel so The author is Managing Patients Plan.
confident about the direction you are familiarly following, that you follow it blindly but you should not have such blind confidence that you move fast, in the short-term, into a situation that leaves you damaged in the longer-term. If I could just press the point of the story once more, let me quote from Edward de Bono who said this: ‘An opportunity is as real an ingredient in business as raw material, labour or finance-but it only exists when you see it’.*
Identifying
Opportunities
The aim of strategic planning, I believe, is to identify opportunities for or threats to your future business development; to work out how your organization should relate to the people involved and how to finance the resources required, so as to avoid the threats and to take advantage of the opportunities. There is no denying that some businessmen and some organizations have been and are very successful, without having a clearly expressed strategic plan. Some managers become very frustrated, if they have been running their departments happily and successfully by the seat of their pants and with no formal plan, yet are then obliged to take part in a planning process. They find that it intrudes into their day-to-day management. They point to the urgent demands on their time, such as: the replacement of vital staff who are absent; the need to reply to a client who has complained about poor service; the need to get a damaged vehicle repaired and they sincerely wonder and they ask how it can possibly be more important for them to leave such essential daily tasks, in order to spend time in talking about something so far ahead and so uncertain that it may never even happen. In my opinion, any senior manager who thinks like that has failed to recognize that it is a vital part of his particular job, because he is a senior manager, to
Director and Chief Executive of Private *Edward de Bono, Opportunities, Pelican Books (1980).
58
Long
Range
Planning
Vol.
21
August
spend time on thinking well ahead. But it is best if, in thinking ahead, he takes into account the forward-thinking of his senior colleagues too. They cannot afford to be pulling the organization, that they collectively manage, in directions which differ as a consequence of their thinking ahead but apart from each other. Put like that, of course, it seems absolutely stupid that the people responsible. together for directing a business should ever risk trying to direct it along differing routes, at differing speeds, with differing styles, to reach differing goals. Yet it is happening all the time! To avoid it, you need to work together on a strategic plan.
Method
and Motivation
To get something done, we need to combine method with motivation. Motivation without method is ineffective. Method without motivation sits on a bookshelf. So, I want to describe the methods of producing a strategic plan and the development of motivation to do so. Then, I think we have to recognize the importance of ideas and information for planning. Planning is all about helping to make decisions in conditions of uncertainty. It is almost true to say that if the information related to an opportunity is fully available, then you hardly need to take a decision. It could be said that the greater the uncertainty surrounding an opportunity, the greater the decision that has to be made to take advantage of that opportunity. It is, however, a mistake to think that yards and yards of information is sufficient to remove uncertainty. In fact, it can be a costly thing to computerize: produce stacks of regular print-outs and you find that you’ve erected piles of paper trees that obscure the wood that you were originally trying to see. Collecting more and more information will not, of itself, remove the uncertainty which makes it hard to take a decision. We need to select the information we want at senior management level and keep it to a minimum, because the information is only a spring-board from which we dive into the decision-pool. The information is a basis for that vital activity in management and planning, namely the formation of ideas. A mistake which people make is to concentrate on information to the detriment of ideas. For strategic planning, we need both information and ideas, as well as method and motivation. There is no short cut to opportunity search and development. Deliberate thinking time is required. Strategic planning is about reducing risk and pursuing opportunities. Let us consider the methods for planning. The ability to see requires more than eyes: it depends also on a conceptual perspective. We all know that, from looking at visual puzzles, where something looks as though it’s one way when it’s really another way: shapes that look different though they’re the same.
1988 In planning, if we are to identify the opportunities open to us, we must set the conceptual perspective that will allow us all to see things in the same light. But what is the proper perspective? I suggest that it stems from this thought: with a problem you search for the solution, with an opportunity you search for the benefit. The planning perspective should be benefit-oriented rather than solution-oriented. Repairing the leaks in an old boat will not build a new one and, in planning, we are more interested in thinking about what sort of boat we want to be in, in future, rather than how to keep afloat in the one we’re in now. That is the essential difference between thinking strategically and thinking tactically. Tactics are relevant to the battle but strategy relates to the whole war. Tactics are for problemsolving; strategy is for opportunity-creation. Tactics are urgent. Strategy is important.
The Common
Framework
So how are senior managers to think out the strategy for their organization? One way is the ‘bottom-up’ approach, by which each manager is asked to specify his plan for his own sphere of responsibility and the various plans of the numerous managers are drawn upon as sources for a single plan for the whole organization. You can see that the difficulty, in that event, is how to bring together plans which may have differing basic assumptions, differing time-scales, differing approaches to ultimate goals; in other words, plans that arc uncoordinated. Another problem of the bottom-up approach to strategic planning, which I think makes it less helpful than the top-down approach, is that it leads to plans that are bound to have a functional slant, rather than a corporate slant, such as we actually need to achieve. To overcome the co-ordination problem, whether in the bottom-up or the top-down approach, someone central and senior in the organization needs to spell out the framework and basis for managers to use in their planning and also the purpose of it and how each manager’s contribution will be dealt with in the planning process. So there needs to be a set of assumptions specified and every contributor to the plan should be bound by those assumptions. The assumptions need to define the circumstances or scenario envisaged as creating the climate in which the organization’s development is going to take place. Thus, the assumptions may relate to the United Kingdom alone or to countries overseas, or for a space research agency they may have to define which parts of the universe are relevant; there will need to be assumptions about the political factors relevant to the organization (for instance, any private health care business can plan only after taking a view of what’s going to happen to the National Health Service); the assumptions must also specify the general economic factors
Strategic expected to influence the organization’s development (for example, whether disposable incomes are going to grow, stabilize or fall) ; another assumption must relate to the development of competitorswhether existing competitors will compete more strongly, for example, and whether any of them will disappear during the period of the plan, or whether new competitors will enter the market. The setting of assumptions for a strategic plan is a process which is sometimes done too casually or may even be omitted altogether by inexperienced planners, yet it is an absolutely essential part of co-ordinating planning. Just think how often you have got into a game where you, or someone else who was playing, did not know the rules, or was playing to a different set of rules. This often happens with Rummy, which is a game played by many people and with many similar rules but some that differ in an important respect, such as whether you can buy a card, when you can and how many times you can buy. Even though all the players in a game intend to play fairly and for fun together, if they start with different rules in mind, they may soon end up at odds with each other. So it is with strategic planning. It’s a game for several adult players where the object is for them all to win together and they cannot hope to do so unless they all play according to the same rules. The basic assumptions and the timetable are, if you like, the rules to which planners must stick. So some central and senior executive has to produce a draft set of assumptions and a draft planning timetable. The drafts need to have at least the acceptance and preferably the support of the chief executive. After that has been secured, they should be discussed by senior managers, modified where necessary in the light of the discussion, then formally adopted as the basis for planning. One job of a chief executive is to set the values for an organization. Having set the values, it is then up to him to give a positive lead in developing the organization through a style of management closely reflecting them. If the organization intends to have a strategic plan, it plainly will set up undesired strains, within the managerial process, if the plan states a set of values or other features, which are not accepted by the chief executive. More than that, the plan must be in line with what he is trying to achieve; or else it will be more of a hindrance than a help to him in pursuing his aims for the business. Yet a chief executive’s views on how to run his business need to take account of the views of his senior colleagues. Indeed, one of the major benefits of producing a strategic plan is that it helps the chief executive and his senior managers to align their thinking so that short-term decisions can be taken in different parts of the organization in such a way that all short-term decision-taking, no matter which manager is making the decision, can be done with a set of common strategic aims and a common set of values in mind. So the strategic plan ought to have the support of and be seen as a help to the chief executive in setting the values, breeding the style and giving a positive
Planning
lead along achievement
and the Chief
Executive
commonly accepted of commonly agreed
paths goals.
59 towards
It should not be too long and should not be too detailed. Length and detail can often camouflage the lack in a plan of those essential ideas that would certainly enrich it. I used to be the officer responsible for corporate planning in the electricity supply industry and I was also responsible for electricity pricing. In our corporate plan, which at that time related to an industry with 140,000 employees, sales of L7000m and net assets of L27,000m, we stated as one basic intention that we would set electricity prices so as to reflect long-run marginal cost. Now that did not take many words to state but the idea behind those words was tremendous and the effect upon the finances of, not only the electricity boards in England and Wales, but also of, in particular, the biggest and most intensive users of electricity, such as steel and chemical companies, was so big that it has impacted upon them for a decade. So you don’t need many words to write a strategic plan that has a big effect. What you need is strong ideas about opportunities.
The Think-tank Part of the methodology of producing a strategic plan is therefore to have a think-tank session where the future shape of the business can be conceived. The senior management need to get away from their normal working environment to some rural inn and to spend a weekend-no more should be either necessary or allowed-to pool and discuss their ideas on development in the next 5 years. Some questions that act as useful starting points for discussion are: What markets is there an opportunity for us to be in? What sort of clients will we have? Where will we need to be to give them the service they will want? How will we compete best in giving them that service? What are the benefits for our company arising from each opportunity? Can we afford to pursue all the opportunities? Ifnot, which shall we give the highest priority? What are the pros and cons of pursuing the highest set of priorities compared with the next best set? If we pursue the chosen priorities, what will be the impact on our management of fundamental internal services, such as property, the communication system, the information system, recruitment and training, the mailing system and ultimately the finance of the company? What about the marketing and distributive organization? How best can we arrange to finance the prospective development? Does it put our ownership at risk? Does that matter to us? Quite often, a team of senior managers will ask an outsider to come and help them formulate their ideas. They do so because an outsider, having no axe to grind, can stimulate, steer and lubricate the
60
Long
Range
Planning
Vol.
21
August
discussion, in a way that is simply impossible for a member of the established team of senior managers. It is a role that you cannot ask someone from within the company, who is not a senior manager, to play because the discussion has to be uninhibited if it is to get to the essential heart of what is to make the company tick, and it should therefore reveal some matters best kept unknown to anyone within the except for the few people at senior company, management level. The outsider must plainly, therefore, be someone on whom you can rely completely to keep a secret and be discreet but also he must be an experienced businessman with patience, intelligence and diplomacy, if he is to play the role of planning catalyst successfully.
The Planning Period Now let us consider what determines the length of the planning period and how often you should review the plan. I think that the sensible length for the period of a strategic plan depends on the changeability of the markets you see as opportunities and the stability of your place in them. For instance, if you are a market-maker on the stock exchange and you are producing a strategic plan, you must decide in your basic assumptions whether it is your collective managerial view that the market is going to recover quickly to its September 1987 level, stay at the October 1987 level for a few years, or decline further. The plans of those marketmakers who had assumed a continuance of the bull market for the rest of the 1980s will now be in disarray, unless they had produced a contingency plan to deal with so sharp a fall as has actually occurred. That last point illustrates the link between the length of the planning period to be chosen and the way that you approach planning for changeability. If your plan has three projections, let us call them ‘optimistic’, ‘realistic’ and ‘pessimistic’, then it may be related to a longer period than if it has only one projection which is your best estimate. This is because your single series of best estimates will almost certainly be wrong and it may well be quite wide of the mark a year or two ahead, let alone 4 or 5 years ahead, especially if your target markets are volatile in themselves, or if your place in them is not assured. Any new venture is notoriously difficult to plan, for more than about 3 years ahead, with much accuracy. Yet if your company is in a steady, mature market with a relatively assured place in the market, a 5-year plan might prove quite accurate. It is, however, not the detailed accuracy of a forecast that matters in strategic planning. Detailed accuracy is more important in setting short-term targets and budgets as parts of an operating plan for the year ahead. But, for a medium-term plan of 3-5 years ahead, detailed accuracy is much less important than getting the general feel of the market judged correctly. It is not so important to get judgements right within 5 per cent accuracy as to judge
1988 correctly whether a market is going to boom or bust and, if it is going to change direction, when the turning point will occur and why. That is why ideas and opportunities are at the core of planning and not lengthy prose or detailed calculations.
Reviewing
the Plan
The strategic plan needs to be reviewed, so you have to decide, when you produce your plan, for how long you intend it to be the map that senior management will use for navigating. Even the Ordnance Survey has to update its very detailed maps to keep them reflective of developments. The less frequently they update them, the more annoyingly misleading and out of date they become. I think it was Harold Macmillan who, when Prime Minister, once criticized the economic and financial data then available for national economic management on the grounds that it was so out of date that it made running the country like trying to catch a train by using an outdated Bradshaw. Similarly, in a company’s overall management, the map needs to be regularly updated. For most companies a 3- to 5-year plan will need to be reviewed and probably changed every year. In that case, there can be an annual timetable for integrating all aspects of planning.
The Integrated Planning
Timetable
The integrated planning timetable is like Rubik’s cube in the complexity of its concept, leading to a simplification of movement towards a clear goal. The goal, for the planning timetable, is to get everyone in the company who does any type of planning about the company’s development to do it in a way, on a basis and in a sequence, such that it relates helpfully to what others are doing in planning, and actually reflects their planning inputs and outputs. This complex task of co-ordinating and integrating the whole management team’s efforts at planning is one of the essential tasks of the chief executive. He may well find it helpful to get it out of the long grass and onto a master timetable. If he does so, no one can then be vague about the date by which his division’s plan is first to be drafted, then discussed, then related to the plans of other then revised (for instance, divisional managers, because the company cannot afford to finance all the ambitious plans of every division), then finally put to the board for adoption. That must be prior to the starting date for implementing the plan (and not all plans manage to reach the stage of being approved before the start of the period to which they relate!). So the integrated planning timetable is really hard to design. I would expect the plan to need several years of endeavour before the integration of planning was smoothly achieved. The timetable must discipline
Strategic the whole organization’s senior management to be co-ordinated and integrated to do the planning tasks that may not even be done at all, or may only be done informally at present, and to accomplish them all so that each relates to the other, in a logical way, at a specific time, within the overall time allowed for the planning sequence to be completed. The integrated planning timetable lays down the process for producing a strategic plan, with specific dates for each stage of the plan’s production, and specific planning tasks for managers, culminating in the board adopting a medium-term plan. The timetable specifies the dates by which particular managers have to produce operating plans for their divisions to say how they propose to carry out the strategic plan so far as it affects their division. The timetable specifies a dated procedure for the joint consideration of divisional operating plans and for identifying their implications for the supportive divisions, providing the central services on which the operating divisions rely, and there should be dated procedures for revising and adopting the divisional plans for both operating and support functions of the organization. Assuming the plans are adopted, the timetable sets dates for the specific targets and budgets to be put forward and agreed for each function. Any changes of organization, changes of methods of accounting, changes in the company’s information system, changes in any of the factors that may cause significant company-wide effects that it is intended to introduce, should be taken specifically into account in the timetabling.
For an annual production of a strategic plan, it may be necessary to have a timetable covering 18 months because the preparatory thinking for a corporate plan may take place a month or two before the year during which the plan starts to be implemented and it may not be possible to finish assessing how successfully the plan has been achieved, after the event, until a month or two following the end of the first year of implementation. This means that it may be necessary to start producing Plan Two before we know the outcome of the first year of Plan One. If you are an accountant, intent on getting detailed figuring to hang together, this will bother you. If intent on keeping the top you are a planner, management’s thoughts updated and aligned, it will not. An integrated planning timetable, is valuable as a means of (i) communicating to each senior manager that he, as part of a collective effort, has to put forward his ideas and have them assessed in terms of resource requirement at the same time as (ii) disciplining the whole everybody else’s; management team to conform to the collective need for each person to play his part on time if others are not to be put under undue pressure; (iii) thinking out the sequence of the interdependent plan production process; and (iv) helping the chief executive to secure support in carrying out one of his most difficult tasks, namely the integration of management thinking and the co-ordination of managerial
effort basis.
Planning
and the Chief
on a consistent,
Executive
predetermined
61 and agreed
An integrated planning timetable might be hard to get right first time but I believe that the tremendous discipline and communication about planning that it exerts are well worth the effort needed to design ;+ IL.
Motivating
Managers to Plan
The advocate of planning has to find a message of motivation, of persuasion, that planning is good for him and for his company because for successful planning you need motivation as well as method. So, how do we motivate managers to plan? One way is to train them to think strategically, identify opportunities methodically and act as a team. If they already work well as a team in the short-term, it may be that they do so much less readily or successfully in relation to the mediumterm. This needs to be addressed as a training requirement in team development for managing strategically. Perhaps they could be persuaded to accept the idea more readily by being taken to see how the planning process is successfully operated by a major client, whose managers they respect, or by visiting a major supplier for the same reason. Motivation might be helped by showing the doubters the shortcomings resulting from the lack of integration of management’s thinking or the failure to co-ordinate effort in recent events within the company. The bad effect on a colleague of the doubting manager’s failing to think in conjunction with his colleagues may show up most sharply the need for him to contribute to a collective approach to management. More positively, it may be possible to show how the doubter’s own task might have been eased, had he been given the support from others that was not provided by them on time or in kind through lack of preparedness on their part, which could have been avoided under an integrated planning system. One fear of the doubter is wellfounded and it is important for those introducing the planning process not to aggravate it. That fear is the fear of excessive paperwork, fear of a loss of drive through becoming enmeshed in bureaucracy, fear that so much time is spent on the longer-term that insufficient time is left to manage well in the short-term. It is, of course, a real risk that these undesirable features may result from extending the planning process. They need not but they might and, as with any other management initiative, the process itself needs careful control, or it will get out of hand. Planning is worthwhile but like most worthwhile things, success in planning has to be achieved through a positive and controlled effort.
Generating Supposing
that
Strategic we
have
Options our
broad
planning
62
Long
Range
Planning
Vol. 21
August
methods worked out and our senior managers motivated to contribute positively to a think-tank discussion, how can we generate ideas about the strategic opportunities that are not part of our common view when we start our search for ideas? Is there some model that will help us to work through possibilities outside our traditional thinking, so that we identify whether our competitive opportunity lies, for example, in product innovation, vertical integration with a buyer or a supplier, horizontal integration with a competitor, economies of scale, product differentiation, or whatever? An American consultant, Charles Wiseman, whose company is called ‘Competitive Applications’* has produced a theory of strategic thrusts, that may well be a helpful model. He has identified five generic strategic thrusts, which arc: differentiation, cost, innovation, growth and alliance. In deciding the sort of competitive advantage we want to pursue, it may help us to produce ideas if we use those five headings as a check-list and think round each heading to see if it suggests opportunities for us to plan to benefit from. We might think also about each strategic thrust first from the offensive aspect and then from the defensive aspect. For instance, let us consider briefly the strategic thrust heading of ‘Cost’. At first sight, it seems as though the cost thrust will yield a competitive advantage, that could be either offensive or defensive, by our own reduction of costs, to help our profit or allow us to cut price. Alternatively and more subtly, however, it may be better to help a supplier or a client to decrease their costs; or costs may be used manipulatively and offensively to push up the prices of a competitor rather than lower your own price.
Competitive
1988
Strategic
Once the analysis of strategic thrusts has been completed, and we know our internal strengths and weaknesses, and have prioritized the external opportunities we want to pursue, then we need to identify our strategic targets. They fall into three classes: supplier targets, customer targets and competitor targets. Incidentally, the class of customer targets includes organizations who buy the product for their own use or organizations who act as middlemen. From a combination of these analyses, we can derive a strategic option generator, which helps create a substantial number of opportunities if used systematically. By working stage-by-stage through the strategic option generator (see Figure 1) the strategic targets can be identified, and the strategic thrusts needed to hit those targets can be worked out (of course, there may be more than one sort of thrust adopted in aiming at a single target) and you can clarify whether the mode is offensive or defensive. This is a really helpful structure for strategic thought.
Planning
Another model that may help in producing ideas is to discuss, in relation to the business, each of the five types of competitive force. They are: threat of new entrants, intensity of rivalry between existing competitors, pressures from substitute products, bargaining power of buyers, and fifthly, the bargaining power of suppliers. Those five sources of competitor pressure can be helpful ways of leading a planning discussion into new channels during a think-tank session.
for Information
Systems
Once the thinking has been done for the organization as a whole, then its implications need to be worked out in broad terms for each main function of the organization. One of the most difficult is the information function, so let us look at that. Information systems and their uses can be grouped quite clearly :
(9
Forces
Targets
they can be used for automating basic processes, like invoicing; these are called Management Information Systems;
(ii) they can be used for satisfying information needs; these are called Management Support Systems; and
1. What is the Strategic Target? Supplier ICustomer Competitor
In going through such discussion, a team of managers will be able to build-up their knowledge of the strengths and weaknesses of their company and of the threats and opportunities facing it. The strengths and weaknesses should each be noted on lists as they emerge from discussion and each threat and opportunity should also be listed. The sheets for the lists should be big enough for everyone in the discussion to see all the time, to help them to keep thinking together about the items on the lists. ‘See (1985).
Charles Wiseman,
Strategy and Computers,
2. What is the Strategic Thrust? Differentiation
[Growth)
Alliance
3. What is the Mode? Offensive
Source: C. Wisernan, (1985). Dow
1Cost 1Innovation
Defensive
Strategy and Computers,
Dow Jones-Irwin
Jones-Irwin
Figure
1. The strategic
option
generator
Strategic (iii)
they can be used for supporting or shaping competitive strategy; these are called Strategic Information Systems.
Most organizations have gone through the first stage of evolution, where their computers were used for automating basic processes, and are working their way through the second stage, of using computers for satisfying information needs. Not many have reached what has been the most rewarding stage for some forerunners in harnessing information systems for competitive strategy implementation. By considering these three types of information system in relation to each strategic opportunity thrown out by our strategic option generator, we can come to a reasoned study of the nature of information system needed if that strategic opportunity is to be pursued. To take us further in planning our information system strategy, we may find it helpful to identify which stage of growth in computer usage we have reached in our organization. Typically, it has been shown,* companies progress through the following stages in using computers: (i) initiation i.e. computer acquisition; (ii) contagion, i.e. intense systems development; (iii) control, i.e. a proliferation of controls to get the beast back onto its lead; (iv) integration, where the computer becomes oriented to the user’s requirements and may be managed by him; (v) data administration, i.e. preoccupation with managing the data bank rather than the computer; and (vi) maturity. It may therefore help, in considering the strategy for information development, to identify not only the information requirement for a given strategic target with a particular strategic thrust, but also how well the company’s management of information has developed in relation to the sort of information requirements thrown up by the strategic option generator. It may be that the information system, or the stage it has reached in the company, will have to be recognized as a constraint on the management’s ability to pursue certain strategic targets; or finance may be a constraint; or labour supply. Whatever it may be, the nature of any constraint, whether just possible or more probable, upon a particular line or scale of development must be indicated, if the plan is to be realistic. So for each possible strategic innovation there must be a rough assessment of the logistics-how its achievement will be brought about in terms of resources, broadly speaking. Following such discussions, a draft plan needs to be produced by or for the chief executive and, once it has been modified to his satisfaction, it should be discussed by the senior managers who took part in the original think-tank and any other managers who *See Richard Nolan and Charles Gibson, Managing the four stages of EDP growth, Harvard
Business
Review
(1974).
Planning
and the Chief
Executive
63
will be directly affected by it, so that as much as possible they will identify it as their plan and feel a positive commitment towards it, rather than the resentment that managers are sometimes made to feel because they have been left out of the planning process. Following any modification after the plan’s draft has been put to managers, a final draft should be put to the Executive Board and, with their endorsement, to the full Board for formal adoption. Once adopted, the plan should be communicated to all staff, as openly as commercial secrecy will permit, because it is of vital importance to all staff. I believe that a management gets a much better response from staff by being frank about its intentions than by being secretive. It is no use appointing an intelligent person to do a job and then acting as though he is unintelligent!
The Strategic
Planner
I take the planning process seriously but it requires time and effort and, whilst some of that comes from the chief executive, he is not necessarily going to draft the plan himself and it is most unlikely that he will draft an integrated planning timetable himself, though I would say he should play a dominant part in defining the basic assumptions on the economic, for the political, competition, etc. framework planning thinking. So, if the chief executive is not himself to draft the plan and the timetable, who is to do it? It depends on the size and structure of your organization and who you have in it around the senior level. Corporate planning is a little like to a long-term marriage : it is a commitment relationship that is of vital interest to all the parties involved. Like marriage, it should not be entered upon lightly or wantonly but discreetly and soberly. Hence, the person who draws up the equivalent of the marriage contract and performs the ceremony solemnizing the marriage should be technically and temperamentally qualified to do so. Larger businesses employ one or more people purely for strategic planning. Smaller businesses make this role part of the responsibility of someone such as a management accountant. Sometimes a marketing manager is given the job to keep him quiet because, in his position, he has been complaining for too long that he did not know what his strategy for marketing should be, as the company had no overall strategy for him to aim to implement. The choice of strategic planner is difficult and important: difficult because not many people have the intellect, diplomacy and other qualities needed. Important because if done well it can make the management work better together with strengthened thrust for clearer targets; whereas, if done badly, it can be divisive and lead to serious dissent and disruption. Strategic planning should live, as an integral part of the management decision-taking process. The stra-
64
Long
Range
Planning
Vol.
21
August
tegic plan should be a reference and starting-point for any document about the company’s future. If, after it has been produced, it becomes ignored by managers, then it will have failed. Ironically, though, on more than one occasion, I have pointed out to colleagues the importance of strategic planning as a means of getting the thinking of managers aligned towards the same strategic goals, by saying that I would be prepared to throw the corporate plan away if I thought we had succeeded, through the process of producing a plan, in aligning the strategic thinking of managers. This emphasizes that the plan is not an end in itself; the plan is a means to an end that is to improve strategic management. So let no one think that the production of a strategic plan is the ultimate achievement in strategic planning. Not a bit of it! It is no more than the marriage lines. The thing that counts is how well the partners to the marriage stick to their vows and honour their mutual commitment.
The Strategic
Plan
Finally, let me summarize the contents of a strategic plan. My younger general managers are strongly persuaded that a plan cannot be respected unless it starts by stating a mission for the company or division. I am not sure that the term ‘mission’ is preferable to the term ‘aim’ or ‘goal’, which I used to employ but, so far as I can tell, they mean the same thing anyway and this is the essential starting point: the plan should say in a sentence, with no quantification, what the purpose of the company is in broad terms. Secondly, it should set out the company’s tives. PPP’s objectives are:
objec-
(i) The provision on a sound financial yet caring basis of provident fund schemes for the purpose of offering private medical insurance to the British public at large, and overseas. (ii) Th e d eve 1o p ment of other activities complementary to private medical insurance, both in the United Kingdom and overseas. In providing to:
for these various activities
we shall aim
(i) Engender significant growth in volume and profit terms by meeting market requirements in: (a) protecting ness;
and developing
our core
busi-
the base of our operations, for (b) diversifying example into ‘health care’ and into ‘financial services’.
1988 of (ii) Provide for high standards and quality service to customers, meeting all reasonable requirements at equitable prices. (iii)
Provide interesting and worthwhile members of PPP staff.
(iv)
Act as a responsible member of the communities within which PPP operates.
careers for
Thirdly, the plan should say what are the assumptions forming the framework for the thinking in the plan. Fourthly, it could discuss external threats and opportunities and internal strengths and weaknesses. Fifthly, it should specify the strategic opportunities to be pursued and why it is most beneficial to pursue those rather than others. It should also indicate how internal weaknesses will be overcome and how strengths will be built on. Sixthly, it should give a broad assessment of the organizational structure, business system and resource requirements and any major changes needed to bring them into being. Seventhly, it should identify any financial, information, or other constraints on pursuing the strategic opportunities. Eighthly, it should summarize the statistical and financial projections of key measurements and key ratios, supposing the strategic opportunities to be pursued. Finally, so that in due course the success of the management’s performance can be clearly measured against the plan, the benefits it is intended to yield should be summarized. To aid presentation executive one-page
of the plan, there should be an summary of it.
May I end with a quotation from that stimulating book: A Passion for Excellence,* which points out: In the private or public sector, in big business or small, we observe that there are only two ways to create and sustain superior performance over the long haul. First, take exceptional care of your customers via superior service and superior quality. Second, constantly innovate. That’s it. There are no alternatives in achieving long term superior performance or sustaining strategic competitive advantage .. Yet one thing is missing. It is leadership. Leadership means vision. *Tom Peters and Nancy Austin, A Passion for Excellence, Random House (1985) (available in the United Kingdom from Fontana Paperbacks).
Strategic Planning Chief Executive
0024-6301/88
Pergamon
$3.00 + .OO
Press plc
57
and the
Roy Forman
The author develops his own thoughts and experience of strategic planning as Chief Executive of an organization. The aim of strategic planning, he believes, is to identify opportunities and to be in a position to take advantage of opportunities when they present themselves.
Let me start with a true story. I used to live in York when I was a teenager and near our house there was a school for the blind. I used to play cricket with some of the blind students-they had a wicker ball with a bell in it-and I mention this just to emphasize how much they used to strive to behave like sighted people. That was what they were taught to do. To enable them to behave like people who could see, these blind students had to be given confidence and I was always impressed by the confidence and courage they developed but, as in any walk of life, blind confidence can lead to dangerous behaviour. One day, I saw one of the students striding fast and confidently along the pavement across the road from me and I was absolutely horrified to see him walk at speed straight into a lamp-post. Imagine yourself walking fast into such a big, metal obstacle without perceiving its potentially damaging impact! Naturally, he hurt himself but, more lastingly, he shook his confidence in himself and in those who had been directing his development. Now, that true story has some lessons for us all, but especially for those of us with managerial responsibility. The first lesson is that if you have the courage and the determination to do something that is difficult, provided that you build up the necessary competence and confidence, you will amaze yourself with what you can achieve. The second is that it is all too easy, especially before you have become experienced, for a person to be dangerously overconfident. The third is that you may feel so The author is Managing Patients Plan.
confident about the direction you are familiarly following, that you follow it blindly but you should not have such blind confidence that you move fast, in the short-term, into a situation that leaves you damaged in the longer-term. If I could just press the point of the story once more, let me quote from Edward de Bono who said this: ‘An opportunity is as real an ingredient in business as raw material, labour or finance-but it only exists when you see it’.*
Identifying
Opportunities
The aim of strategic planning, I believe, is to identify opportunities for or threats to your future business development; to work out how your organization should relate to the people involved and how to finance the resources required, so as to avoid the threats and to take advantage of the opportunities. There is no denying that some businessmen and some organizations have been and are very successful, without having a clearly expressed strategic plan. Some managers become very frustrated, if they have been running their departments happily and successfully by the seat of their pants and with no formal plan, yet are then obliged to take part in a planning process. They find that it intrudes into their day-to-day management. They point to the urgent demands on their time, such as: the replacement of vital staff who are absent; the need to reply to a client who has complained about poor service; the need to get a damaged vehicle repaired and they sincerely wonder and they ask how it can possibly be more important for them to leave such essential daily tasks, in order to spend time in talking about something so far ahead and so uncertain that it may never even happen. In my opinion, any senior manager who thinks like that has failed to recognize that it is a vital part of his particular job, because he is a senior manager, to
Director and Chief Executive of Private *Edward de Bono, Opportunities, Pelican Books (1980).
58
Long
Range
Planning
Vol.
21
August
spend time on thinking well ahead. But it is best if, in thinking ahead, he takes into account the forward-thinking of his senior colleagues too. They cannot afford to be pulling the organization, that they collectively manage, in directions which differ as a consequence of their thinking ahead but apart from each other. Put like that, of course, it seems absolutely stupid that the people responsible. together for directing a business should ever risk trying to direct it along differing routes, at differing speeds, with differing styles, to reach differing goals. Yet it is happening all the time! To avoid it, you need to work together on a strategic plan.
Method
and Motivation
To get something done, we need to combine method with motivation. Motivation without method is ineffective. Method without motivation sits on a bookshelf. So, I want to describe the methods of producing a strategic plan and the development of motivation to do so. Then, I think we have to recognize the importance of ideas and information for planning. Planning is all about helping to make decisions in conditions of uncertainty. It is almost true to say that if the information related to an opportunity is fully available, then you hardly need to take a decision. It could be said that the greater the uncertainty surrounding an opportunity, the greater the decision that has to be made to take advantage of that opportunity. It is, however, a mistake to think that yards and yards of information is sufficient to remove uncertainty. In fact, it can be a costly thing to computerize: produce stacks of regular print-outs and you find that you’ve erected piles of paper trees that obscure the wood that you were originally trying to see. Collecting more and more information will not, of itself, remove the uncertainty which makes it hard to take a decision. We need to select the information we want at senior management level and keep it to a minimum, because the information is only a spring-board from which we dive into the decision-pool. The information is a basis for that vital activity in management and planning, namely the formation of ideas. A mistake which people make is to concentrate on information to the detriment of ideas. For strategic planning, we need both information and ideas, as well as method and motivation. There is no short cut to opportunity search and development. Deliberate thinking time is required. Strategic planning is about reducing risk and pursuing opportunities. Let us consider the methods for planning. The ability to see requires more than eyes: it depends also on a conceptual perspective. We all know that, from looking at visual puzzles, where something looks as though it’s one way when it’s really another way: shapes that look different though they’re the same.
1988 In planning, if we are to identify the opportunities open to us, we must set the conceptual perspective that will allow us all to see things in the same light. But what is the proper perspective? I suggest that it stems from this thought: with a problem you search for the solution, with an opportunity you search for the benefit. The planning perspective should be benefit-oriented rather than solution-oriented. Repairing the leaks in an old boat will not build a new one and, in planning, we are more interested in thinking about what sort of boat we want to be in, in future, rather than how to keep afloat in the one we’re in now. That is the essential difference between thinking strategically and thinking tactically. Tactics are relevant to the battle but strategy relates to the whole war. Tactics are for problemsolving; strategy is for opportunity-creation. Tactics are urgent. Strategy is important.
The Common
Framework
So how are senior managers to think out the strategy for their organization? One way is the ‘bottom-up’ approach, by which each manager is asked to specify his plan for his own sphere of responsibility and the various plans of the numerous managers are drawn upon as sources for a single plan for the whole organization. You can see that the difficulty, in that event, is how to bring together plans which may have differing basic assumptions, differing time-scales, differing approaches to ultimate goals; in other words, plans that arc uncoordinated. Another problem of the bottom-up approach to strategic planning, which I think makes it less helpful than the top-down approach, is that it leads to plans that are bound to have a functional slant, rather than a corporate slant, such as we actually need to achieve. To overcome the co-ordination problem, whether in the bottom-up or the top-down approach, someone central and senior in the organization needs to spell out the framework and basis for managers to use in their planning and also the purpose of it and how each manager’s contribution will be dealt with in the planning process. So there needs to be a set of assumptions specified and every contributor to the plan should be bound by those assumptions. The assumptions need to define the circumstances or scenario envisaged as creating the climate in which the organization’s development is going to take place. Thus, the assumptions may relate to the United Kingdom alone or to countries overseas, or for a space research agency they may have to define which parts of the universe are relevant; there will need to be assumptions about the political factors relevant to the organization (for instance, any private health care business can plan only after taking a view of what’s going to happen to the National Health Service); the assumptions must also specify the general economic factors
Strategic expected to influence the organization’s development (for example, whether disposable incomes are going to grow, stabilize or fall) ; another assumption must relate to the development of competitorswhether existing competitors will compete more strongly, for example, and whether any of them will disappear during the period of the plan, or whether new competitors will enter the market. The setting of assumptions for a strategic plan is a process which is sometimes done too casually or may even be omitted altogether by inexperienced planners, yet it is an absolutely essential part of co-ordinating planning. Just think how often you have got into a game where you, or someone else who was playing, did not know the rules, or was playing to a different set of rules. This often happens with Rummy, which is a game played by many people and with many similar rules but some that differ in an important respect, such as whether you can buy a card, when you can and how many times you can buy. Even though all the players in a game intend to play fairly and for fun together, if they start with different rules in mind, they may soon end up at odds with each other. So it is with strategic planning. It’s a game for several adult players where the object is for them all to win together and they cannot hope to do so unless they all play according to the same rules. The basic assumptions and the timetable are, if you like, the rules to which planners must stick. So some central and senior executive has to produce a draft set of assumptions and a draft planning timetable. The drafts need to have at least the acceptance and preferably the support of the chief executive. After that has been secured, they should be discussed by senior managers, modified where necessary in the light of the discussion, then formally adopted as the basis for planning. One job of a chief executive is to set the values for an organization. Having set the values, it is then up to him to give a positive lead in developing the organization through a style of management closely reflecting them. If the organization intends to have a strategic plan, it plainly will set up undesired strains, within the managerial process, if the plan states a set of values or other features, which are not accepted by the chief executive. More than that, the plan must be in line with what he is trying to achieve; or else it will be more of a hindrance than a help to him in pursuing his aims for the business. Yet a chief executive’s views on how to run his business need to take account of the views of his senior colleagues. Indeed, one of the major benefits of producing a strategic plan is that it helps the chief executive and his senior managers to align their thinking so that short-term decisions can be taken in different parts of the organization in such a way that all short-term decision-taking, no matter which manager is making the decision, can be done with a set of common strategic aims and a common set of values in mind. So the strategic plan ought to have the support of and be seen as a help to the chief executive in setting the values, breeding the style and giving a positive
Planning
lead along achievement
and the Chief
Executive
commonly accepted of commonly agreed
paths goals.
59 towards
It should not be too long and should not be too detailed. Length and detail can often camouflage the lack in a plan of those essential ideas that would certainly enrich it. I used to be the officer responsible for corporate planning in the electricity supply industry and I was also responsible for electricity pricing. In our corporate plan, which at that time related to an industry with 140,000 employees, sales of L7000m and net assets of L27,000m, we stated as one basic intention that we would set electricity prices so as to reflect long-run marginal cost. Now that did not take many words to state but the idea behind those words was tremendous and the effect upon the finances of, not only the electricity boards in England and Wales, but also of, in particular, the biggest and most intensive users of electricity, such as steel and chemical companies, was so big that it has impacted upon them for a decade. So you don’t need many words to write a strategic plan that has a big effect. What you need is strong ideas about opportunities.
The Think-tank Part of the methodology of producing a strategic plan is therefore to have a think-tank session where the future shape of the business can be conceived. The senior management need to get away from their normal working environment to some rural inn and to spend a weekend-no more should be either necessary or allowed-to pool and discuss their ideas on development in the next 5 years. Some questions that act as useful starting points for discussion are: What markets is there an opportunity for us to be in? What sort of clients will we have? Where will we need to be to give them the service they will want? How will we compete best in giving them that service? What are the benefits for our company arising from each opportunity? Can we afford to pursue all the opportunities? Ifnot, which shall we give the highest priority? What are the pros and cons of pursuing the highest set of priorities compared with the next best set? If we pursue the chosen priorities, what will be the impact on our management of fundamental internal services, such as property, the communication system, the information system, recruitment and training, the mailing system and ultimately the finance of the company? What about the marketing and distributive organization? How best can we arrange to finance the prospective development? Does it put our ownership at risk? Does that matter to us? Quite often, a team of senior managers will ask an outsider to come and help them formulate their ideas. They do so because an outsider, having no axe to grind, can stimulate, steer and lubricate the
60
Long
Range
Planning
Vol.
21
August
discussion, in a way that is simply impossible for a member of the established team of senior managers. It is a role that you cannot ask someone from within the company, who is not a senior manager, to play because the discussion has to be uninhibited if it is to get to the essential heart of what is to make the company tick, and it should therefore reveal some matters best kept unknown to anyone within the except for the few people at senior company, management level. The outsider must plainly, therefore, be someone on whom you can rely completely to keep a secret and be discreet but also he must be an experienced businessman with patience, intelligence and diplomacy, if he is to play the role of planning catalyst successfully.
The Planning Period Now let us consider what determines the length of the planning period and how often you should review the plan. I think that the sensible length for the period of a strategic plan depends on the changeability of the markets you see as opportunities and the stability of your place in them. For instance, if you are a market-maker on the stock exchange and you are producing a strategic plan, you must decide in your basic assumptions whether it is your collective managerial view that the market is going to recover quickly to its September 1987 level, stay at the October 1987 level for a few years, or decline further. The plans of those marketmakers who had assumed a continuance of the bull market for the rest of the 1980s will now be in disarray, unless they had produced a contingency plan to deal with so sharp a fall as has actually occurred. That last point illustrates the link between the length of the planning period to be chosen and the way that you approach planning for changeability. If your plan has three projections, let us call them ‘optimistic’, ‘realistic’ and ‘pessimistic’, then it may be related to a longer period than if it has only one projection which is your best estimate. This is because your single series of best estimates will almost certainly be wrong and it may well be quite wide of the mark a year or two ahead, let alone 4 or 5 years ahead, especially if your target markets are volatile in themselves, or if your place in them is not assured. Any new venture is notoriously difficult to plan, for more than about 3 years ahead, with much accuracy. Yet if your company is in a steady, mature market with a relatively assured place in the market, a 5-year plan might prove quite accurate. It is, however, not the detailed accuracy of a forecast that matters in strategic planning. Detailed accuracy is more important in setting short-term targets and budgets as parts of an operating plan for the year ahead. But, for a medium-term plan of 3-5 years ahead, detailed accuracy is much less important than getting the general feel of the market judged correctly. It is not so important to get judgements right within 5 per cent accuracy as to judge
1988 correctly whether a market is going to boom or bust and, if it is going to change direction, when the turning point will occur and why. That is why ideas and opportunities are at the core of planning and not lengthy prose or detailed calculations.
Reviewing
the Plan
The strategic plan needs to be reviewed, so you have to decide, when you produce your plan, for how long you intend it to be the map that senior management will use for navigating. Even the Ordnance Survey has to update its very detailed maps to keep them reflective of developments. The less frequently they update them, the more annoyingly misleading and out of date they become. I think it was Harold Macmillan who, when Prime Minister, once criticized the economic and financial data then available for national economic management on the grounds that it was so out of date that it made running the country like trying to catch a train by using an outdated Bradshaw. Similarly, in a company’s overall management, the map needs to be regularly updated. For most companies a 3- to 5-year plan will need to be reviewed and probably changed every year. In that case, there can be an annual timetable for integrating all aspects of planning.
The Integrated Planning
Timetable
The integrated planning timetable is like Rubik’s cube in the complexity of its concept, leading to a simplification of movement towards a clear goal. The goal, for the planning timetable, is to get everyone in the company who does any type of planning about the company’s development to do it in a way, on a basis and in a sequence, such that it relates helpfully to what others are doing in planning, and actually reflects their planning inputs and outputs. This complex task of co-ordinating and integrating the whole management team’s efforts at planning is one of the essential tasks of the chief executive. He may well find it helpful to get it out of the long grass and onto a master timetable. If he does so, no one can then be vague about the date by which his division’s plan is first to be drafted, then discussed, then related to the plans of other then revised (for instance, divisional managers, because the company cannot afford to finance all the ambitious plans of every division), then finally put to the board for adoption. That must be prior to the starting date for implementing the plan (and not all plans manage to reach the stage of being approved before the start of the period to which they relate!). So the integrated planning timetable is really hard to design. I would expect the plan to need several years of endeavour before the integration of planning was smoothly achieved. The timetable must discipline
Strategic the whole organization’s senior management to be co-ordinated and integrated to do the planning tasks that may not even be done at all, or may only be done informally at present, and to accomplish them all so that each relates to the other, in a logical way, at a specific time, within the overall time allowed for the planning sequence to be completed. The integrated planning timetable lays down the process for producing a strategic plan, with specific dates for each stage of the plan’s production, and specific planning tasks for managers, culminating in the board adopting a medium-term plan. The timetable specifies the dates by which particular managers have to produce operating plans for their divisions to say how they propose to carry out the strategic plan so far as it affects their division. The timetable specifies a dated procedure for the joint consideration of divisional operating plans and for identifying their implications for the supportive divisions, providing the central services on which the operating divisions rely, and there should be dated procedures for revising and adopting the divisional plans for both operating and support functions of the organization. Assuming the plans are adopted, the timetable sets dates for the specific targets and budgets to be put forward and agreed for each function. Any changes of organization, changes of methods of accounting, changes in the company’s information system, changes in any of the factors that may cause significant company-wide effects that it is intended to introduce, should be taken specifically into account in the timetabling.
For an annual production of a strategic plan, it may be necessary to have a timetable covering 18 months because the preparatory thinking for a corporate plan may take place a month or two before the year during which the plan starts to be implemented and it may not be possible to finish assessing how successfully the plan has been achieved, after the event, until a month or two following the end of the first year of implementation. This means that it may be necessary to start producing Plan Two before we know the outcome of the first year of Plan One. If you are an accountant, intent on getting detailed figuring to hang together, this will bother you. If intent on keeping the top you are a planner, management’s thoughts updated and aligned, it will not. An integrated planning timetable, is valuable as a means of (i) communicating to each senior manager that he, as part of a collective effort, has to put forward his ideas and have them assessed in terms of resource requirement at the same time as (ii) disciplining the whole everybody else’s; management team to conform to the collective need for each person to play his part on time if others are not to be put under undue pressure; (iii) thinking out the sequence of the interdependent plan production process; and (iv) helping the chief executive to secure support in carrying out one of his most difficult tasks, namely the integration of management thinking and the co-ordination of managerial
effort basis.
Planning
and the Chief
on a consistent,
Executive
predetermined
61 and agreed
An integrated planning timetable might be hard to get right first time but I believe that the tremendous discipline and communication about planning that it exerts are well worth the effort needed to design ;+ IL.
Motivating
Managers to Plan
The advocate of planning has to find a message of motivation, of persuasion, that planning is good for him and for his company because for successful planning you need motivation as well as method. So, how do we motivate managers to plan? One way is to train them to think strategically, identify opportunities methodically and act as a team. If they already work well as a team in the short-term, it may be that they do so much less readily or successfully in relation to the mediumterm. This needs to be addressed as a training requirement in team development for managing strategically. Perhaps they could be persuaded to accept the idea more readily by being taken to see how the planning process is successfully operated by a major client, whose managers they respect, or by visiting a major supplier for the same reason. Motivation might be helped by showing the doubters the shortcomings resulting from the lack of integration of management’s thinking or the failure to co-ordinate effort in recent events within the company. The bad effect on a colleague of the doubting manager’s failing to think in conjunction with his colleagues may show up most sharply the need for him to contribute to a collective approach to management. More positively, it may be possible to show how the doubter’s own task might have been eased, had he been given the support from others that was not provided by them on time or in kind through lack of preparedness on their part, which could have been avoided under an integrated planning system. One fear of the doubter is wellfounded and it is important for those introducing the planning process not to aggravate it. That fear is the fear of excessive paperwork, fear of a loss of drive through becoming enmeshed in bureaucracy, fear that so much time is spent on the longer-term that insufficient time is left to manage well in the short-term. It is, of course, a real risk that these undesirable features may result from extending the planning process. They need not but they might and, as with any other management initiative, the process itself needs careful control, or it will get out of hand. Planning is worthwhile but like most worthwhile things, success in planning has to be achieved through a positive and controlled effort.
Generating Supposing
that
Strategic we
have
Options our
broad
planning
62
Long
Range
Planning
Vol. 21
August
methods worked out and our senior managers motivated to contribute positively to a think-tank discussion, how can we generate ideas about the strategic opportunities that are not part of our common view when we start our search for ideas? Is there some model that will help us to work through possibilities outside our traditional thinking, so that we identify whether our competitive opportunity lies, for example, in product innovation, vertical integration with a buyer or a supplier, horizontal integration with a competitor, economies of scale, product differentiation, or whatever? An American consultant, Charles Wiseman, whose company is called ‘Competitive Applications’* has produced a theory of strategic thrusts, that may well be a helpful model. He has identified five generic strategic thrusts, which arc: differentiation, cost, innovation, growth and alliance. In deciding the sort of competitive advantage we want to pursue, it may help us to produce ideas if we use those five headings as a check-list and think round each heading to see if it suggests opportunities for us to plan to benefit from. We might think also about each strategic thrust first from the offensive aspect and then from the defensive aspect. For instance, let us consider briefly the strategic thrust heading of ‘Cost’. At first sight, it seems as though the cost thrust will yield a competitive advantage, that could be either offensive or defensive, by our own reduction of costs, to help our profit or allow us to cut price. Alternatively and more subtly, however, it may be better to help a supplier or a client to decrease their costs; or costs may be used manipulatively and offensively to push up the prices of a competitor rather than lower your own price.
Competitive
1988
Strategic
Once the analysis of strategic thrusts has been completed, and we know our internal strengths and weaknesses, and have prioritized the external opportunities we want to pursue, then we need to identify our strategic targets. They fall into three classes: supplier targets, customer targets and competitor targets. Incidentally, the class of customer targets includes organizations who buy the product for their own use or organizations who act as middlemen. From a combination of these analyses, we can derive a strategic option generator, which helps create a substantial number of opportunities if used systematically. By working stage-by-stage through the strategic option generator (see Figure 1) the strategic targets can be identified, and the strategic thrusts needed to hit those targets can be worked out (of course, there may be more than one sort of thrust adopted in aiming at a single target) and you can clarify whether the mode is offensive or defensive. This is a really helpful structure for strategic thought.
Planning
Another model that may help in producing ideas is to discuss, in relation to the business, each of the five types of competitive force. They are: threat of new entrants, intensity of rivalry between existing competitors, pressures from substitute products, bargaining power of buyers, and fifthly, the bargaining power of suppliers. Those five sources of competitor pressure can be helpful ways of leading a planning discussion into new channels during a think-tank session.
for Information
Systems
Once the thinking has been done for the organization as a whole, then its implications need to be worked out in broad terms for each main function of the organization. One of the most difficult is the information function, so let us look at that. Information systems and their uses can be grouped quite clearly :
(9
Forces
Targets
they can be used for automating basic processes, like invoicing; these are called Management Information Systems;
(ii) they can be used for satisfying information needs; these are called Management Support Systems; and
1. What is the Strategic Target? Supplier ICustomer Competitor
In going through such discussion, a team of managers will be able to build-up their knowledge of the strengths and weaknesses of their company and of the threats and opportunities facing it. The strengths and weaknesses should each be noted on lists as they emerge from discussion and each threat and opportunity should also be listed. The sheets for the lists should be big enough for everyone in the discussion to see all the time, to help them to keep thinking together about the items on the lists. ‘See (1985).
Charles Wiseman,
Strategy and Computers,
2. What is the Strategic Thrust? Differentiation
[Growth)
Alliance
3. What is the Mode? Offensive
Source: C. Wisernan, (1985). Dow
1Cost 1Innovation
Defensive
Strategy and Computers,
Dow Jones-Irwin
Jones-Irwin
Figure
1. The strategic
option
generator
Strategic (iii)
they can be used for supporting or shaping competitive strategy; these are called Strategic Information Systems.
Most organizations have gone through the first stage of evolution, where their computers were used for automating basic processes, and are working their way through the second stage, of using computers for satisfying information needs. Not many have reached what has been the most rewarding stage for some forerunners in harnessing information systems for competitive strategy implementation. By considering these three types of information system in relation to each strategic opportunity thrown out by our strategic option generator, we can come to a reasoned study of the nature of information system needed if that strategic opportunity is to be pursued. To take us further in planning our information system strategy, we may find it helpful to identify which stage of growth in computer usage we have reached in our organization. Typically, it has been shown,* companies progress through the following stages in using computers: (i) initiation i.e. computer acquisition; (ii) contagion, i.e. intense systems development; (iii) control, i.e. a proliferation of controls to get the beast back onto its lead; (iv) integration, where the computer becomes oriented to the user’s requirements and may be managed by him; (v) data administration, i.e. preoccupation with managing the data bank rather than the computer; and (vi) maturity. It may therefore help, in considering the strategy for information development, to identify not only the information requirement for a given strategic target with a particular strategic thrust, but also how well the company’s management of information has developed in relation to the sort of information requirements thrown up by the strategic option generator. It may be that the information system, or the stage it has reached in the company, will have to be recognized as a constraint on the management’s ability to pursue certain strategic targets; or finance may be a constraint; or labour supply. Whatever it may be, the nature of any constraint, whether just possible or more probable, upon a particular line or scale of development must be indicated, if the plan is to be realistic. So for each possible strategic innovation there must be a rough assessment of the logistics-how its achievement will be brought about in terms of resources, broadly speaking. Following such discussions, a draft plan needs to be produced by or for the chief executive and, once it has been modified to his satisfaction, it should be discussed by the senior managers who took part in the original think-tank and any other managers who *See Richard Nolan and Charles Gibson, Managing the four stages of EDP growth, Harvard
Business
Review
(1974).
Planning
and the Chief
Executive
63
will be directly affected by it, so that as much as possible they will identify it as their plan and feel a positive commitment towards it, rather than the resentment that managers are sometimes made to feel because they have been left out of the planning process. Following any modification after the plan’s draft has been put to managers, a final draft should be put to the Executive Board and, with their endorsement, to the full Board for formal adoption. Once adopted, the plan should be communicated to all staff, as openly as commercial secrecy will permit, because it is of vital importance to all staff. I believe that a management gets a much better response from staff by being frank about its intentions than by being secretive. It is no use appointing an intelligent person to do a job and then acting as though he is unintelligent!
The Strategic
Planner
I take the planning process seriously but it requires time and effort and, whilst some of that comes from the chief executive, he is not necessarily going to draft the plan himself and it is most unlikely that he will draft an integrated planning timetable himself, though I would say he should play a dominant part in defining the basic assumptions on the economic, for the political, competition, etc. framework planning thinking. So, if the chief executive is not himself to draft the plan and the timetable, who is to do it? It depends on the size and structure of your organization and who you have in it around the senior level. Corporate planning is a little like to a long-term marriage : it is a commitment relationship that is of vital interest to all the parties involved. Like marriage, it should not be entered upon lightly or wantonly but discreetly and soberly. Hence, the person who draws up the equivalent of the marriage contract and performs the ceremony solemnizing the marriage should be technically and temperamentally qualified to do so. Larger businesses employ one or more people purely for strategic planning. Smaller businesses make this role part of the responsibility of someone such as a management accountant. Sometimes a marketing manager is given the job to keep him quiet because, in his position, he has been complaining for too long that he did not know what his strategy for marketing should be, as the company had no overall strategy for him to aim to implement. The choice of strategic planner is difficult and important: difficult because not many people have the intellect, diplomacy and other qualities needed. Important because if done well it can make the management work better together with strengthened thrust for clearer targets; whereas, if done badly, it can be divisive and lead to serious dissent and disruption. Strategic planning should live, as an integral part of the management decision-taking process. The stra-
64
Long
Range
Planning
Vol.
21
August
tegic plan should be a reference and starting-point for any document about the company’s future. If, after it has been produced, it becomes ignored by managers, then it will have failed. Ironically, though, on more than one occasion, I have pointed out to colleagues the importance of strategic planning as a means of getting the thinking of managers aligned towards the same strategic goals, by saying that I would be prepared to throw the corporate plan away if I thought we had succeeded, through the process of producing a plan, in aligning the strategic thinking of managers. This emphasizes that the plan is not an end in itself; the plan is a means to an end that is to improve strategic management. So let no one think that the production of a strategic plan is the ultimate achievement in strategic planning. Not a bit of it! It is no more than the marriage lines. The thing that counts is how well the partners to the marriage stick to their vows and honour their mutual commitment.
The Strategic
Plan
Finally, let me summarize the contents of a strategic plan. My younger general managers are strongly persuaded that a plan cannot be respected unless it starts by stating a mission for the company or division. I am not sure that the term ‘mission’ is preferable to the term ‘aim’ or ‘goal’, which I used to employ but, so far as I can tell, they mean the same thing anyway and this is the essential starting point: the plan should say in a sentence, with no quantification, what the purpose of the company is in broad terms. Secondly, it should set out the company’s tives. PPP’s objectives are:
objec-
(i) The provision on a sound financial yet caring basis of provident fund schemes for the purpose of offering private medical insurance to the British public at large, and overseas. (ii) Th e d eve 1o p ment of other activities complementary to private medical insurance, both in the United Kingdom and overseas. In providing to:
for these various activities
we shall aim
(i) Engender significant growth in volume and profit terms by meeting market requirements in: (a) protecting ness;
and developing
our core
busi-
the base of our operations, for (b) diversifying example into ‘health care’ and into ‘financial services’.
1988 of (ii) Provide for high standards and quality service to customers, meeting all reasonable requirements at equitable prices. (iii)
Provide interesting and worthwhile members of PPP staff.
(iv)
Act as a responsible member of the communities within which PPP operates.
careers for
Thirdly, the plan should say what are the assumptions forming the framework for the thinking in the plan. Fourthly, it could discuss external threats and opportunities and internal strengths and weaknesses. Fifthly, it should specify the strategic opportunities to be pursued and why it is most beneficial to pursue those rather than others. It should also indicate how internal weaknesses will be overcome and how strengths will be built on. Sixthly, it should give a broad assessment of the organizational structure, business system and resource requirements and any major changes needed to bring them into being. Seventhly, it should identify any financial, information, or other constraints on pursuing the strategic opportunities. Eighthly, it should summarize the statistical and financial projections of key measurements and key ratios, supposing the strategic opportunities to be pursued. Finally, so that in due course the success of the management’s performance can be clearly measured against the plan, the benefits it is intended to yield should be summarized. To aid presentation executive one-page
of the plan, there should be an summary of it.
May I end with a quotation from that stimulating book: A Passion for Excellence,* which points out: In the private or public sector, in big business or small, we observe that there are only two ways to create and sustain superior performance over the long haul. First, take exceptional care of your customers via superior service and superior quality. Second, constantly innovate. That’s it. There are no alternatives in achieving long term superior performance or sustaining strategic competitive advantage .. Yet one thing is missing. It is leadership. Leadership means vision. *Tom Peters and Nancy Austin, A Passion for Excellence, Random House (1985) (available in the United Kingdom from Fontana Paperbacks).