Strategic planning is the eye of the evolutionary storm.
Strategic planning is the eye of the evolutionary storm.
It's September. Most companies follow a January through December fiscal year and go through a strategic planning exercise
You are likely leading or integrally involved with planning at your company. If you feel excited about dovetailing the whole company, you should be.
Strategic Planning is one of the six parts of the Congruence Method. Public companies do strategic planning. Small companies go through it. Even non-profits like my church go through it.
Even governments do... wait—do they? Some do! The ones with a five-year plan and clear communication with their stakeholders, which include citizens and trading partners, do. Do you know which country doesn't have one? America!
American citizens (equivalent to company employees) appear baffled by the lack of a clear path for at least two decades. America's customers, which include many OECD countries, are confused about what they can expect from their most significant partner. America's vendors, which span China, Mexico, and much of Asia, seem confused about whether they can consider America a reliable customer. As a citizen, I can't find a tangible strategy or plan for the nation. Okay, that's my election cycle rant.
Without getting into politics, we can all see that even the wealthiest country in the world can lack a viable setup for future success. We want to avoid such systemic incongruence for a company.
Strategic planning is the nucleus of our only opportunity to address our company's path forward.
Getting started with planning…
Strategic planning is the only proactive opportunity to evolve the entire company each year. So, if you haven't started yet, do one thing immediately:
Schedule a conversation between the CEO, CFO, and the Playmaker.
The Playmaker is the person who connects all the dots across the company (more on this role another day).
Evolutionary mindset
Strategic planning aims to achieve everything EXCEPT maintaining the status quo. Evolution is inevitable. It's far better to shape it ourselves than to have it forced upon us!
Strategic planning always involves a choice of whether we evolve proactively. To choose evolution, we must set an intention that the future will be different from the present, however successful the present is.
Embrace the mindset of a high school senior, anticipating that the next year will be completely different—full of new challenges, opportunities, and a break from the familiar.
A same-school, same-friends mentality leads to stagnation and a government mindset of budgeting and forecasting based on history. This results in reducing strategic planning into a continued business-as-usual chore.
If we are running a monopolistic operation or a traditional business model with decades of precedent and are clear on our purpose that we only want to keep the business running for the short term, that's fine. Can a sports team run the clock out when they are ahead and take the win? Absolutely. But that is purpose-clarity.
Let's assume we are in a more exciting company lifecycle stage.
Imagine being super tired after not sleeping well for multiple days and sitting down to read a book at night. How easily will you fall asleep? That's how easy it is for strategic planning to become a check-the-box exercise. As you kick off strategic planning, consider these three high-level themes to get things going.
1: Focus on the why
Start with an accurate pulse on present operations. Indicators that "we are winning" or "we are losing" are not practically helpful information because they are fungible and not actionable. We want to know "why we are winning" and "why we are losing," which is our company's true pulse.
I found this Hello Fresh delivery on the street this week. Does Hello Fresh's internal database label this box (delivered to the sidewalk of a major street, not inside the building) as a 'good delivery' or 'bad delivery?'
Well… I don't know about this specific box. It's not even mine. But this is about the gap between reality and our perceptions of business operations.
Over the past twenty years, I've seen many 'boxes' like this flagged as 'good delivery' and 'earned revenue' in headquarters data and colorful charts.
It is essential to go into strategic planning with an accurate pulse on current operations and focus on why we are winning or losing—not just on the binary thinking, 'Yay, we are winning. Let's do more of the same.'
Focusing on the why reveals the reality behind 'boxes' like the one in the picture: the contents were never consumed. Thinking 'we are winning' or 'we are losing' rarely uncovers the truth behind the scenes.
All relevant data comes from real-world actions, objects, thoughts, and promises. Data is always a snapshot of the real world. It is sometimes as rudimentary as a child's drawing and other times as detailed as a 4K video. It's typically somewhere in between. More data doesn't necessarily mean a better grasp of reality. Ask yourself:
How accurately does your data reflect the reality of your operations?
Relying on data that reflects the aspired version of our company leads us astray.
2: Strategic planning thrives when we are free from anchoring bias
Effective decisions are predicated on objectivity. Biases nudge us towards story-telling, which is different from reality and actionability. We must address many biases, and anchoring is a primary planning risk.
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Don't anchor to past decisions, expectations, promises, ideas, targets, ways of working, or investments. Everything can and often must be reset during strategic planning.
Anchoring to past decisions limits the number of variables we can access to achieve optimal outcomes. As Keynes said, "When the facts change, I change my mind." We should, too.
We should reset any unrealistic expectations or promises we have made in the past. Not doing so is like moving forward with a ball and chain attached to our company.
Some ideas are good, but most are not. Strategic planning is a trade-off exercise. Avoiding emotional attachment to unproven ideas helps us choose the good ones.
Targets set based on benchmarks have no practical relevance to our company. They often force us to subscribe to short-term decisions and unsustainable activities.
Don't grow plaque around how we used to work last year and how we invested. Spending more capital effectively requires us to start by optimizing the capital we have already deployed.
3: Say NO to silos.
Strategic planning needs to be run by a person with the knowledge and experience of doing so. This person must be empowered to stitch together the whole company. We need someone who can chisel the right pieces into the appropriate shapes and dovetail them. This is our Playmaker.
Think about it this way. Taking a bunch of random objects and supergluing them together is quick and easy. But:
Planning is intended to achieve the opposite of both.
Humans love teams so that we can feel comfortable in a pack. There are many survival benefits to this mentality. But it also prevents us from seeing the bigger picture and caring about others and other packs. Strategic planning is a big-picture exercise with an opportunistic need to zoom in to dovetail details.
For strategic planning this year, don't pick a representative from each team or function. It's not surprising that the US Congress's approval rating is perpetually below 20%; most representatives tow party lines and concentrate on reelection.
Select people who can speak for and think about the whole company. Pick people who are willing to put the company first, solve problems objectively, and are willing to lose their jobs for doing the right things.
In addition to these calibration and warm-up ideas for strategic planning, check out the sidebar Volkswagen story.
Sidebar: "We are Volkswagen — you are not.”
Traditional auto players made some strategic mistakes in the past few years. Several European and American players, including Volkswagen, followed Tesla and Chinese EV manufacturers in choosing electric as their north star. If we followed their step-by-step plays over the past few years, it's evident that these players lacked the conviction or core strengths to choose the 100% electric path. It was an "I don't want to be left behind" fear-based choice.
One traditional player did not - Toyota. The company stuck with its long-term hybrid play and is having the last laugh. I see this general theme play out with companies in all sectors - following a hype cycle into something we don't understand or aren't aligned with our strengths. AI and electric vehicles are obvious hype cycles. But if we look carefully, even a niche space with three or four companies can induce a follow-each-other pattern where one or more companies eventually end up in a tight spot by following others. From a strategic planning perspective, consider this:
Every company is different. We want to choose a unique strategy that aligns with our unique strengths.
More recently, like many other auto manufacturers, Volkswagen has been trying to shut down factories in Germany after their disappointing follower commitment to electric. The last CEO, Herbert Diess, was replaced soon after he questioned the company's workforce size.
The new executive team is having similar challenges. German labor laws are unique. VW also trapped itself through a 1994 job security agreement for employees. But the rallying cry from factory workers against executives, "We are Volkswagen — you are not," is far from unique.
In fact, this misinformation has become very popular, where many roles in a company do not recognize the simple reality that a CEO and executives are also employees with responsibilities.
As a change agent, I see this struggle often. When I kick off talks with a mixed audience, I sometimes ask: What is a company? An investor recently responded, "It is not important that people agree what a company is!" Well, if we don't, we have the VW chant.
So, as you kick off planning this year, prioritize this question with your one-company-minded planning team:
"What is our company?"
I will provide my recommendations on answering this question in another issue.
Regardless of the market problem a company addresses, workforce rationalization
If you have friends or colleagues who would appreciate this type of thinking, please invite them. Let's connect more Playmakers who care about the whole company and solving complex problems. Sign up here!