Time to Retire Strategic Planning and Adopt Innovation Strategy
It’s almost that time of year again. Strategic planning teams all over the world will gather behind closed doors in a vain attempt to predict the future – except for the visionary ones who are saying “Enough!†They have realized that doing the same thing over and over again and expecting different results is, well, simply crazy.
Remember the first James Bond movie you ever saw? Regardless of who was playing 007, you couldn’t help but be swept up as he outgunned and outsmarted the bad guys and saved the day. Now think of the last James Bond movie you saw. Did it give you the same thrill? Or did you almost fall asleep? It’s not the actor, or the mind-numbing car chases and explosions to blame. It’s the fact that we’ve seen it all before, year after year, we know how it ends. We’re left feeling vaguely unsatisfied, hoping for something more substantial.
It’s the same with strategic planning. In the old days, executives could sit in a room and, armed with a battery of spreadsheets and presentations, devise a strategy that would beat down the competition. But over the years, the strategic planning process has become formulaic, and companies have come to rely too much on what worked in the past. Like 007, they try to recapture the old glory each year, knocking off “strategic†objectives like expendable thugs. In the end, they may succeed in cutting costs by 5 percent, or increasing customer satisfaction by 10 points, but these incremental improvements never amount to the substantial game-changers they were hoping for.
New Challenges Require New Tools
A recent IBM survey of more than 1,500 CEOs from around the world revealed that more than half are struggling with the quickening pace of globalization, technology, the economy, customer expectations – everything is more complex these days. And 79 percent of the executives surveyed expect things to get even more complicated over the next five years.
New challenges call for new tools, especially when it comes to planning organizational strategy. Many of the strategic planning methods in use today have been around for decades. MBO (Management by Objectives) was introduced by Drucker in 1954 (eight years earlier than the first James Bond movie, incidentally). MBO’s successor, Balanced Scorecard, has been widely used since the early 1990s. Now, how many CEOs do you think would admit, “We haven’t changed our approach to strategic planning for the past 20 years.†Or worse, “We run things just like we did in the 1950s.†But that’s exactly what they are doing.
MBO works if you know the objectives, 90% of the time you don’t. – Peter Drucker
Both MBO and Balanced Scorecard enable organizations to consistently track strategic objectives to make sure they are met. That’s a good thing to do. But, in today’s complex and changing business environment, tracking is all they are good for. You can’t use these methods to devise the type of strategy that is needed today.
History is No Longer the Best Teacher
Another problem with traditional strategic planning is that it relies primarily on historical data. Strategists study the past to plan for the future. The problem is that focusing on the past emphasizes what has worked before, instead of new ways of thinking and doing (the “James Bond†syndrome). The result is incremental improvement – not game-changing innovation.
As business and innovation strategist, Idris Mootee, puts it, “Many strategists are obsessed about yesterday’s competitive advantage (remember best practices are for those who don’t know what their customer needs are or have no idea of where the future is going). There are no best practices. Only good practices and next practices.â€
Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight. – Henry Luce, Co-founder of Time Magazine
The other drawback to relying on the past is that we can’t assume the future will be similar, at least these days. Given the pace of change, current trends provide a more reliable basis for planning. Yet traditional strategic planning falls short when it comes to leveraging trend spotting tools such as ethnographic research, focus groups, user analysis, social media, crowdsourcing, etc. Historical data, while it can’t be ignored, simply doesn’t provide the whole picture for the future.
Planning Should be a Whole Brain Activity
Traditional strategic planning is rooted in cold, hard, statistics. If you’re a left-brained, analytical type, you won’t see this as a problem. But these days our creative right brains need a seat at the table, too.
In fact, 60 percent of the CEOs in IBM’s aforementioned survey named creativity as the most important quality for leaders in today’s complicated business environment. Creativity, as these executives define it, means not only encouraging innovation, new ideas and risk-taking, but also making “deeper business model changes†that result in disruptive and breakthrough innovation.
Creative leaders invite disruptive innovation, encourage others to drop outdated approaches and take balanced risks. – IBM CEO Study, 2010
Innovation on this scale requires a different type of strategic planning. It requires an approach that is insightful, resourceful and forward-looking, and one that balances objective analysis with subjective discovery.
Inventing the Future is Better Than Predicting It
In order for a company to let go of its over-dependence on objective historical data, it must become adept at capturing and interpreting subjective data (customer surveys, competitor strategy, trends, gaps, etc.). This type of data scares the typical business owner. They would rather make decisions based on spreadsheets than a crystal ball, and that’s understandable.
Fortunately, we don’t have to rely on a crystal ball. There are many techniques that exist today for gathering and analyzing subjective, current data. Trend spotting, scenario planning, strategic foresight, technology roadmaps, data mining, voice of the customer, crowdsourcing, open innovation, outcome expectations – all these techniques help you uncover valuable data you can use to plan an innovation strategy that leads to competitive new products, services and even business models.
It’s a changing and complicated world. And the pace is getting faster. Businesses must innovate or die, and in order to do this we must act quicker, deliberate less, take risks, let go of the old, embrace the new, and be more creative. Then we won’t have to worry about predicting the future; we’ll be inventing it.
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Kamal Hassan is President and CEO of Innovation 360 Institute, and is responsible for leading the company’s global operations and customer acquisition.
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I couldn’t agree with you more. There is a chapter in our new book entitled “Innovation is the New Strategy.” This shift has occurred because of the shift from the industrial to the knowledge era.
But it’s not enough to shift from left brain to right brain thinking. It’s also about the shift from top down to bottom up. The knowledge to innovate is not held exclusively at the top of organizations. Managers must think about how to facilitate the flow of ideas, knowledge and innovation from the bottom up.
That’s the real promise of innovation: benefiting from creativity and knowledge at all levels of an organization, not just from the top.
Kamal,
I agree with you… to some degree
Organizations that use strategic planning in the way you describe are on their way out. But the key components of strategic planning are still very valid. The areas where I see innovation impacting greatest are
1. The tools and methods used to do the environmental scan – what’s likely to come down the pike that will disrupt business as usual
2. How to extract maximum value from current resources and capabilities but plan for their obsolescence and
3 Using innovation to develop strategic agility.
As one of my favorite authors put it contemporary strategy making is like playing a video game and the structure to support it must be held together with Velcro so it can easily be disassembled and re-stitched for results.
Thanks,
Remain true to your mission
Andrea
link with me on twitter if you wish
https://twitter.com/AndreaHarriott
Could you illuminate us with the source of that Drucker quote? Thanks.
What a great call to action for businesses to approach their future plans with creativity, optimism and inventiveness! I couldn’t agree more!
There is no question that ‘if you do what you’ve always done, you’ll get what you’ve always got’. To do things differently, one must be creative, as affirmed by the IBM survey referenced above.
It is also true that in these fast-changing, complex times, innovation is needed in all aspects of business. When I say that, I mean both big and small innovation – not just major business model or market game-changing moves.
Instead of “retiring†strategic planning in favor of innovation strategy, I think businesses need to re-examine their planning approach overall and consider how they can be more innovative both strategically (which opportunities, which markets) and operationally (which tactics, which tools). In my experience, business units and brands (particularly those that are part of large, global organizations) need an annual strategic planning process to ensure the rigorous review of recent performance and effective planning of budgets and activities in the short to medium term. In addition, they need an innovation and growth strategy to identify the big initiatives and investments that will capitalize on future growth areas.
The two processes are fairly different in terms of their outputs, but even more importantly, they are different in terms of mindset. The work of evaluating recent performance and planning creative, tactical moves for the next year is fundamentally different to the thinking needed to generate new products, identify new markets and pursue net new opportunities.
In today’s competitive marketplace, creativity and an innovative approach is essential to both of these processes.
I agree. Even strategic planning needs to move with the times. Your comments about needing to use the whole brain (not just the analytical side) hit home most with me because more and more capabilities are available in order to leverage the full potential of the human brain. And it is not limited to large corporations only – midsize companies can use these techniques as well.
Our Big Bang for Business is one such capability whereby we leverage, as part of our process the concept of memetics – which enables us to tap into the planning team’s subconscious minds in order to leverage the potency of their brainpower (without them really realizing that we are doing that). It is an incredibly powerful methodology because it opens their minds and creates a burst of creative energy that results in the highest number of options available to them. Ultimately, when this creative energy is exploded against their existing conscious reality, the resulting options represent the Big Bang for Business (a 1 + 1 = 3 effect).
Exciting and being used by many large corporations right now…
An excellent observation, Kamal Hassan!
It is time to make “deeper business model changesâ€. However, these changes must not necessarily be disruptive.
Consultants evaluate the failure of their former innovation, which revealed its futility a year or two ago. Then, based on this experience, they come up with a new innovation. Inevitably, the new innovation fails.
Why not go back some 300 years and evaluate the tremendous success of employment, the new Mode of Labour Utilization (MLU) introduced after the worker stopped being property of his employer, i.e. slavery or serfdom. With employment, mankind stepped into an era of rapidly growing wealth, industrial revolution, unheard of productivity, scientific progress, arts, music and literature unsurpassed until this day.
In the recent century the success of employment keeps spiraling down. Productivity is stagnant, few breakthroughs in science, degradation in art, music and literature…
Maybe we should look up for the reason? Maybe the reason is not rooted in some fault in approach to change two years ago but a change that continued all along the employment era and kept revealing itself for decades, ever stronger.
I undertook such an analysis some 50 years ago. Fifteen years later I have discovered this fault and soon after – the solution to it. I tried to promote the needed change. I am still trying.
At the outset of employment it was impractical for the employer to forfeit profit on labour to the workforce. An employer who would do that would fail, because almost all his expenses were on labour and only a tiny part on means of production.
As means of production started taking ever larger part of the employer’s expenses and as the control over his means of production shifted entirely to his workforce, forfeiting profit on labour to the workforce became practical and wise. However, no employer contemplated such a step until this day.
The employer who will take such a step will relieve the limitations on productivity established today and profitability will grow by leaps and bounds. This employer will beat all competition. The workplace will turn from a dull and unfriendly place to a challenging and happy one. With wide spread of the new MLU, unemployment will disappear because the workforce will consume much more and additional products and services will need to be produced to satisfy demand. Commerce will need more money and government will be able to print more money without causing inflation. Taxes will shrink and the country will turn into a tax heaven. Foreign investment will increase.
Go to ProfitOnJob.com and read my book Smiling for Profit for more details.
mottyperel@rogers.com
Isn’t it part of strategic plan or even just for a simple plan to incorporate different innovative strategies/approach + tools to monitor, evaluate, and re-calibrate if needed?