Beware of the Plan!
Legacy organizational culture, leadership, and strategy can be barriers to change.
I was recently working with a senior leadership team that had been focused on strategy execution for 18 months following a global acquisition. When I asked them, “What next?” during a planning session, I was greeted with a room full of blank faces. By focusing on executing the plan, alignment and frankly, a bureaucratic and slow cascade to ensure that everyone ‘was on the same page’, they had shot themselves in the foot and destroyed all hope of future innovations. Such company leaders were too busy looking at yesterday’s reports to make future decisions.
A quickly evolving environment means companies must stay innovative and agile while questioning traditional ways of business to remain competitive. A quickly evolving environment means companies must stay innovative and agile while questioning traditional ways of businesses to remain competitive A quickly evolving environment means companies must stay innovative and agile while questioning traditional ways of businesses to remain competitive I’ve lost count of the number of times that I’ve heard vision statements being used to galvanize teams around a long-term strategic objective. Don’t get me wrong, this can be a powerful and compelling set of words that draws everybody’s attention to what needs to be achieved. It provides a goal for all teams to rally behind and to gauge their everyday work and execution.
However, the idea of setting out a five-year strategic plan needs to be ‘balanced’ with behaviours in the volatile and uncertain environments in which many organizations now operate. We know that disruption can come from anywhere; examples such as Uber, Airbnb, Alibaba and the craft beer revolution have all demonstrated that the largest and most resilient of organizations and brands that are too focused on a set plan will suffer.
The mortality rate of organizations is higher than it’s ever been. Public companies are perishing much earlier in their life spans than ever before. Almost one-tenth of all public companies fail each year, a fourfold increase since 1965. (BCG Report, “Die Another Day: What Leaders Can Do About the Shrinking Life Expectancy of Corporations,” BCG website, December 2015).
Leaders lack visibility into lost business because they search for answers in surface level data.
Take the case of retail chain Whole Foods. In June 2017, Amazon announced that it will acquire Whole Foods Market, a grocery chain with more than 450 retail stores, for $13.7 billion. Amazon’s stock price rose 2.4%, but at the same time, the stock price of competing retailers like SuperValu, Kroger and Sprouts fell sharply. This was clearly a game changer for food retailers, and nearly every other traditional retailer.
Amazon has turned the traditional retail game plan on its head. Instead of starting out with bricks-and-mortar stores, and then layering the digital experience on top of that, Amazon brings super-sophisticated digital experience and integrates the physical store. Clearly no retailer, online or on the ground, can escape the disruption that Amazon has created in the industry.
Leverage cross-functional thinking to proactively adapt with market changes.
No retailer, and in fact no business of any kind today, is safe from such disruption. This means that organizations must change the planning and management mindsets in place, born out of a more stable environment. They need situational awareness, to stay ahead and compete with disruption like that of Amazon. Teams have to constantly seek new answers, and leaders have to be driven by discovery.
Leaders have to become more exploratory and discovery-driven. But if we ask them to focus too much on the ‘plan’, then we would simply be killing the opportunity for discovery. And all the data in the world will matter very little.
Traditional planning, as outlined above, worked well in the stable and predictable environments of yesteryear. Back then, leaders could articulate a 5-year vision, a series of annual plans and respective goals, and that was all. Today, things change too quickly to rely on that kind of planning.
Instead, we need to constantly adapt the plan, asking questions of the data, in order to identify what we need to do next. This is a sea change from what most leaders are doing today.
Responses from a recent Boston Consulting Group survey of 120 companies around the world in 10 major industry sectors showed that executives are well aware of the need to match their strategy-making processes to the specific demands of their competitive environments. Still, the survey found, in practice, many rely instead on approaches that are better suited to predictable, stable environments, even when their own environments are known to be highly volatile or mutable. Only one in four executives surveyed was prepared to adapt to unforeseeable events. (Martin Reeves Claire Love Philipp Tillmanns, “Your strategy needs a strategy,” Harvard Business Review, September 2012).s fro
Linear planning isn’t suitable for today’s volatile world. The closer you come to the horizon of uncertainty, the more leaders need to become more exploratory. Traditional scenario planning, using the classic tools that we all learned at business school, such as Porter’s Five Forces analysis or the Boston Matrix Model, which are based on assumptions of stability and predictability in the 1970s, are less suitable.
Everything is changing at such a rapid rate nowadays that the only way to stay informed is through the use of analytical tools in an iterative and interactive way. In this way, we can harness collective intelligence to prevent future loss.