Most business people place great value on being strategic and making strategic choices, and yet the processes that companies use to plan strategy frequently fail to deliver on this premise. So why do so many leaders spend months each year putting their teams through detailed strategic planning exercises when the results often do nothing but maintain the status quo? Even when plans specify change they’re as likely to be ignored as implemented. It’s hardly surprising that many leaders feel deeply frustrated by the annual lack of momentum despite significant investment.
Rita McGrath, professor of management at the Columbia Business School and author of Seeing Around Corners: How to Spot Inflection Points in Business Before They Happen, explains this disconnect: “One of the real difficulties in real life is that it’s very hard to establish cause and effect…because a lot of times they’re disconnected in time and distance,” she says. “Strategy, when it’s done right, is pulling you into the future. Budgeting often anchors you in the past, because it begins with last year’s budget, and then, project approval; [incentive systems] and governance mechanisms are often not connected with either strategy or budget.”
But there are ways to counter those tendencies and get more value out of your strategic planning.
Set clear ground rules for the strategic process that give everyone a voice. McGrath recommends that leaders articulate their assumptions and make an agreement with the rest of the team about how those assumptions are to be used as starting tools rather than permanent rules: “‘Look, we’re going to make the best decisions we can based on these assumptions. If anybody has data that suggests these assumptions are off the mark, now is the time to raise it,’” she says. “Don’t wait until things blow up and then come back later” to critique what was agreed to. This requires creating an environment in which crucial data and opinions are not withheld but are welcomed, and where diverse perspectives are appreciated.
Make it acceptable to end initiatives and start new ones. It can be hard for organizations to take best advantage of their resources and talents when their most senior leaders are deeply experienced and successful in optimizing operations. McGrath refers to these leaders as “really good at exploitation,” but they may not have a thoughtful, consistent approach to considering when to terminate an initiative or line of business or, conversely, how to spark innovation and new development. It’s a real challenge to give up on something that you care about when the future itself is unclear, and “people tend to confuse their preferences with their predictions,” says McGrath. “The mindset shift you need is [away] from thinking about every project as one that’s going to be taken all the way through to commercialization.”
Because it’s so difficult for executives to look into the future, companies need a way to assess whether to continue down a path—and whether their current results will actually serve the organization of the future or not. So McGrath advocates formalizing your hypotheses and assumptions, sharing them widely, getting a diverse set of perspectives to weigh in, and then setting up a series of checkpoints at which you’ll evaluate data on results and impacts. Based on that evidence, you can then redirect funds and attention, accelerate your progress, continue as is or actually exit the field.
Don’t wait for a disaster before changing course. Executive teams that pursue strategic reviews as a standard part of meeting agendas are more likely to sound the alarm when change is necessary rather than miring the organization in a strategy that isn’t working. As an evaluative process, McGrath suggests that decision-makers choose a handful of future scenarios and then probe them deeply: “‘How robust are the choices we’re making today to reach those future possibilities? And what early warning signs do we see to know that one or another is becoming more or less unlikely?’ If you make [the future vision] robust enough it becomes much easier to [ask], ‘What decision [do] I wish I would have made if I knew this three years ago?’” The sequence of anchoring to a future date, anticipating potential outcomes in detail and then looking backwards to identify decision points lets you map out where trouble spots are likely to occur. Then you can strengthen the planning for your chosen scenario—or determine that the payoff will be insufficient and go with a different course of action.
Don’t rely on the hierarchy to determine the best course of action. Not all good ideas come from the top down. Often the best breeding ground for positive change is in the middle of the organization. “When we face an obstacle or challenge, we’re tremendously ingenious, and I think a lot of organizations fail to see the genius in their own companies,” says McGrath. She encourages individual employees to consider taking action from where they are, and find colleagues across the organization who share their interest. This group, she suggests, should “pick a problem that they can work on because [they] intrinsically think it’s a good thing for the customer or the stakeholders or other employees….If you get enough people in motion like that, that can actually be a force for change. Once you’re in motion, you stay in motion, and if you can get those forces going in the right direction, that can be very powerful.”
Focus on small bits of progress. Don’t expect a blinding flash of insight to inspire or create actual change. Make a case for new projects and experiment with pilots and prototypes to test out your premises as a way to generate new alternatives, even if they don’t work out the way you had expected. As you’re striving toward new innovations or new directions, McGrath recommends building your proposals around a simple “strategy spine” that includes assumptions about how your new idea will benefit the organization, data that shows why that would be so, the expenditures required to deliver on those assumptions and the infrastructure that’s necessary to support the necessary activities.
Strategy can be a vague and confusing pursuit. But if you structure it as a future-focused process that includes clear assumptions, diverse perspectives, and the opportunity to evaluate progress at multiple checkpoints, you’re much more likely to see productive outcomes, even if they’re not exactly the ones you had planned.