Strategy as a Focus Rather Than a Plan

Posted by 21 September, 2008 Comments Off on Strategy as a Focus Rather Than a Plan

One reason strategic planning will never die is that without a strategy of some sort, there can be no clear focus. Many organizations are resuscitating strategic planning, in spite of their inability to see very far into their futures. But the role of strategic planning is fundamentally different. Let’s look at this interesting transition.
In most industries today, events are so fast-paced and unpredictable that no­body can write a plan or create a forecast worth the paper its printed on. H. Igor Ansoff has documented this change in an extensive series of studies. Ansoff’s formal title is Distinguished Professor of Strategic Management at the United States Univer­sity in San Diego-but many people in the marketing field refer to him as “the father of strategic planning” because of his important work in the development of this field. In recent years, his work has provided perhaps the strongest documentation that many of the conventional planning methods are antiquated. Most striking is his mea­surement of what he terms the turbulence level of a business’s external environment. Here is Ansoff’s turbulence scale:

Turbulence Level Name Description
1 Repetitive No change
2 Expanding Slow incremental change
3 Changing Fast incremental change
4 Discontinuous Discontinuous, predictable change
5 Surprising Discontinuous, unpredictable change

Further, he has demonstrated in a range of studies that “a company’s profitability is optimized when a company’s strategy and management capability both match the tur­bulence in the company’s environment.”iS This means, for example, that if your orga­nization used to face a turbulence level of 3 but now faces a level 4.5 environment-a transition typical of most industries over the last two decades-then the old strategies and management approaches will lead to failure today just as surely as they led to suc­cess yesterday. In the high-turbulence environments most businesses now face, Ansoff finds that entrepreneurial and creative strategies work, while reactive and anticipa­tory strategies do not. Yet conventional planning cycles, in which data is gathered, numbers crunched, forecasts generated, and long-term strategies formulated, are gen­erally reactive or at best anticipatory. Not entrepreneurial, and rarely creative.
Which is why, as we observed earlier, formal planning processes were downsized almost out of existence in many companies. And why Tom Peters, that most popular of management gurus, wrote that “madness is afoot” and advised managers that, in order to thrive on the chaos around them, they should abandon their long-range strategic plan in exchange for “a strategic mind-set” so as to be able to foster “internal stability in order to encourage the pursuit of constant change.”i9 In other words, strategic plan­ning as usual is dead.
But strategic planning is experiencing something of a rebirth in the late 1990s. (As Mark Twain once said, “The reports of my death are greatly exaggerated.”) Per­haps the most striking symbol of this rebirth is the rising stature of strategic planning in what was supposed to be its replacement-total quality management. And this is seen nowhere more clearly than in the annual judging criteria for the Malcolm Baldrige National Quality Award. These criteria are modified every year in an effort to provide a better standard for the management processes of U.S. firms, and lately strategic planning has emerged as a key component of the criteria. According to Vicki Spagnol, a member of the award’s board of examiners, “In recent years, Category 2, Strategic Planning, has undergone significant evolution, which has expanded its scope and made it more central to the overall criteria.” She summarizes the change as follows, “The scope of planning was broadened from planning for quality and op­erational improvements to developing an overall business strategy. Greater emphasis was also placed on translating strategy into action-oriented ‘key business drivers,’ which could be used to deploy strategy throughout the organization.” Why bring strategic planning out of moth balls, especially when many people argue it is what led to the need for new approaches like total quality management and reengineering in the first place? Because, in Spagnol’s words, “The faster the rate of change, the more important it is to understand the dynamics of the marketplace and to have a strategy that will enable an organization to outperform its competition over the long haul.” Fast change makes a good strategy more essential than ever. But-and here is the paradox-fast change (and the high turbulence with which it is typically associ­ated) makes coming up with a good long-term strategy almost impossible. Whatever knowledge base the strategy rests on will be antiquated by new events before the im­plementation is half-way complete. How do you resolve this paradox-this great need for good strategy in conditions which make it terribly hard to design good strategy?
The most successful answer-and the key to strategic planning’s rebirth- seems to be to use strategy as a source of focus and direction, not as a blueprint. Lis­ten to Steve Roemereman, vice president and strategy manager of Texas Instruments’ Defense Systems & Electronics business (which won the Baldridge Award in 1992):

Most of those companies that had a great decade did it not by planning out forty great quarters. They had a strategic plan, and then they executed forty great quarters more or less along the lines of the plan. Their people knew where the company was going, and the shared knowledge made it easier to get good quarterly performance.
In other words, the strategic plan gave everyone a common focus, a vision of where the company wanted to go. And then everyone did whatever seemed necessary to get there. The role of this plan, then, is to provide focus rather than direction, to give a common purpose rather than to give specific instructions. The entrepreneur­ial, creative elements aren’t in the plan. They have to be provided by the people who implement it. Nobody can forecast those. But without some agreement on where the entrepreneurship and creativity is supposed to take you, everyone would pull in dif­ferent directions.
In order for strategic plans to perform this focusing role effectively, everyone must have what is coming to he called a line of sight, which is a clear view of the con­nections between their own work and the big picture of the organization’s strategy. Without it, they cannot improvise without losing the tune. The American Society for Training and Development reported that the goal alignment provided by such lines of sight “has a significant impact on employee performance” because it “enables em­ployees to see how their work helps the company succeed.”22 Thus strategy still has a vital role-perhaps an even more vital role-because in turbulent markets it may be the only constant, the only clear beacon to aim for, amid the chaos.

Categories : Marketing Tags : ,

 

The 1980s: a Turning Point for Marketing And Strategy

Posted by 17 March, 2008 Comments Off on The 1980s: a Turning Point for Marketing And Strategy

MARKETING AND STRATEGY
Using Tested Concepts and New Ideas for Marketing Strategy.

 

THE 1980S: A TURNING POINT FOR MARKETING AND STRATEGY

If any single factor can be blamed for the death of strategic planning, it must be the failure of the U.S. economy to compete globally during the 1980s. This economic bot­tleneck in the United States forced a reexamination of every aspect of business man­agement. And even though the economy rebounded in the 1990s, that examination revealed too many warts for anyone to want to return to business as usual. The failure of conventional strategies and management methods became painfully obvious in the 1980s as the trade imbalance in categories such as autos, machine tools, consumer electronics, semiconductors, and textiles took a nasty turn for the worse on the econ­omist’s charts. A report from MIT’s Commission on Industrial Productivity summed up management’s initial response to the problem:

The decline of the U.S. economy puzzles most Americans. The qualities and talents that gave rise to the dynamism of the postwar years must surely be present still in the national character, and yet American industry seems to have lost much of its vigor. In looking for ways to reverse the decline, it is only natural to turn to the methods that succeeded in the golden years of growth and innovation. Many business managers have adopted just this strategy. The results, unfortunately, are rather like those of a man who keeps striking the same match because it worked fine the first time.
This failure to measure up to global competition left the people at Xerox look­ing through their pockets for another book of matches. Xerox’s story is an excellent il­lustration of what is happening to planning in U.S. businesses at this critical turning point in history. In 1974, Xerox had a stunning 86 percent world market share for photocopiers. What could possibly go wrong? As discussed shortly, conventional plan­ning models assume that strength and profits flow from strong market shares. But as new competitors, such as Ricoh and Canon, entered the market, Xerox fell back, all the way to a 17 percent market share in 1984.8 If strategic planning really was king, Xerox’s managers would have been beheaded! The company began to climb back out of its hole in the latter half of the 1980s, regaining lost share and improving quality. Along the way, Xerox invented new ways of planning and implementing strategy, and adopted many of the best techniques used by its Japanese competitors. We’ll start with a quick review of the planning models that led companies such as Xerox into so much trouble.
It is easy to dismiss the old approach to planning as worthless, but this is not fair. Managers today cannot ignore the old wisdom, but they also cannot rely on it to provide competitive advantage. One must know yesterday’s techniques to play the game, and must pioneer tomorrow’s techniques to win it. One must realize that the changing environment requires new tools, and the old tools by nature lose their edge when everyone learns to use them. As this lesson’s opening quote suggests, there is a sort of arms race in strategy, with the advantage going to the innovators. But, al­though “smart missiles” may now carry the day, it would still be folly to enter the bat­tlefield without a rifle. Business strategy is similar: Today’s planners must master both the old and the new. (And then, most likely, invent something of their own any­way. But more on that later!)

Categories : Marketing Tags : , , ,

 

Marketing And Strategy

Posted by 17 March, 2008 Comments Off on Marketing And Strategy

MARKETING AND STRATEGY
Using Tested Concepts and New Ideas for Marketing Strategy.

 

If the purpose of strategy is to gain competitive advan­tage, then by implication theories of strategy should be continually in flux. Any new insight that obtains wide currency. . . loses value in providing additional com­petitive advantage . . . This self-destructive aspect of strategic insight. . . has received limited attention, as has the attendant need to be continually innovative and creative.

Paul Schoemaker,
Graduate School of Business.
University of Chicago

If there’s a hell for planners, over the portal will be carved the term “cash cow.”

Stephen Hardis,
Vice President of Planning,
Eaton Corporation


If theories of strategic planning should be “continually in flux,” as Paul Schoemaker observes in the first of our opening quotes, then all is well with the world, Because there cannot be any field more turbulent or unstable in the entire management panoply than strategic planning and its alter ego, marketing planning.
“Strategic planning is dead; long live strategic planning!” seems like an appro­priate way to begin this lesson, for it is necessary both to mark the passing of the old strategic planning and to note the exciting emergence of entirely new approaches, much as the succession of kings was once heralded. But the problem is, nobody seems quite sure who the rightful heir to the throne will be.
Since its birth in the 1950s and 1960s, strategic planning reigned by giving managers a new and exciting set of more marketing-oriented tools for analysis, plan­ning, and control. Innovators such as the Boston Consulting Group and General Elec­tric discovered the wisdom of identifying opportunities based on market analysis rather than solely on financial analysis, and their philosophy and techniques spread rapidly throughout the 1970s and into the 1980s. But strategic planning’s growth stalled in the 1980s, with many companies abandoning their large planning staffs and forsaking more complex analytical methods and planning processes, and by the begin­ning of the 1990s, it was moribund. When Gary Reiner of the Boston Consulting Group wrote in 1989 that “planning is passé,” it was clear that a succession was immi­nent. The problem was that the old king had left no legitimate offspring, so managers must find their own. They face the daunting task of planning in the face of great un­certainty and rapid change, and without any simple prescriptions guaranteed to do the trick. As Michael Porter of the Harvard Business School sees it, “The state of practice in this area is very primitive.”
What has replaced the orderly strategic planning cycles of the 1980s? The ex­perts offer many answers, but no single approach has been sufficiently successful to rein in peace for very long. David Aaker of the Haas School of Business at UC. Berkeley believes that strategic market management displaced strategic planning in the mid-1980s because “the planning cycle is inadequate to deal with the rapid rate of change that can occur in a firm’s external environment.” And he characterizes this new market-driven approach to strategy as being highly responsive to the “strategic surprises and fast-developing threats” of the modern marketplace.
Strategic market management is like a new, faster, and more flexible strategic planning in that it encourages “real-time” response to external changes, rather than tying an organization’s rate of change to its annual planning cycle. In theory, at least, this rapid-response approach to strategy should keep businesses on or above the pace of change in their markets, allowing them to anticipate, even lead change.
But the most popular form of business strategy in the 1990s is the massive “re­structuring” that is generally accompanied by a major downsizing and a closing of fa­cilities and/or sell-off of subsidiaries or brands. The daily financial news should provide you with fresh examples whenever you read this lesson. Here’s just one typ­ical example from The Wall Street Journal on the day we wrote this paragraph:Tool and hardware maker Stanley Works swung to a second-quarter loss because of a charge for a restructuring program that includes closing 53 of its 123 plants and elimi­nating about 4,500 jobs, or 24 percent of the company’s workforce.The popularity of this sort of massive restructuring, with its deep cuts of prod­uct lines, divisions, facilities, and people, is the strongest possible evidence that strategic planning as practiced today is unable to anticipate and prepare for change. If companies grew and changed along with their markets, they would never get so profoundly out of alignment as to necessitate closing a third of their plants or firing a fourth of their people.
The failure of formal planning processes to anticipate important changes and align the organization with them in advance led Henry Mintzberg, a strategy expert from McGill University, to title his major review of the field The Rise and Fall of Strategic Planning. The king is dead. Long live the new king.., whoever he may be!

Why split hairs? Because many people and many managers think U.S. organiza­tions have already adopted the marketing concept, whereas in fact its essence is still missing at most companies.

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The Essence of Marketing — the Customer First, Last, and Always

Posted by 8 March, 2008 Comments Off on The Essence of Marketing — the Customer First, Last, and Always

Nothing is worthwhile unless it touches the customer.

–Edgar Woolard. CEO. DuPont’

As companies have downsized and tried to deliver services with fewer employees, customer satisfaction has fallen dramatically.

— American Sociery for Quality Control, reporting on the American Satisfaction Index

There was a tie when companies had never heard the name of marketing. Either they sold products or they didn’t sell them, depending on the success of the salespeople or retailers who were charged with making the sale. But even though the fundamental idea of marketing — to focus on how to better satisfy consumer– has been with us in a formal way only since 1950s, the message itself is timeless. You do not need a formal Marketing Department to “do” marketing, since it is most fundamentally a way of looking at your business. It is looking at your business from your customer’s point of view–not always a flattering perspective.

In fact, many businesses today still do not do formal marketing. The roadside vegitable stand has no marketing department, and doesn’t need one. Nor do many larger local businesses, and most entreprenuerial success only add marketing departments after they have made their first million. But whether or not there is a formal marketing department, every organization must do marketing to survive–and must do it exceptionally well to thrive.

Categories : Marketing Tags : , , ,