The Eight (New) Principles to Strategic/Tactical Planning

The following excerpt is taken from “Fail to Plan – Plan to Fail”

The Eight (New) Principles to Strategic/Tactical Planning

Principle One: Plan and Measure What Really Counts

So many things are not what they used to be.

One organizational item that has changed dramatically is “strategic planning”.

Here are eight principles you can use to create a powerful planning session for your executive team.

There are enormous complexities in doing business today.

Any action therefore that a manager takes can generate a myriad of unpredictable consequences for the organization.

This is called the Law of Unintended Consequences.

Therefore planning and measurement must be based on a carefully thought-through analysis of the business, one that links the objectives of the business to the things over which managers and front-line personnel have control.

Only then can planning and measuring lead to the actions that will correct the problem and improve the performance of the business as a whole.

There are many seemingly worthy, yet deceptive operational changes that a CEO can make to improve his/her company, that although well intended, might end up doing the exact opposite because they are merely creating “a domino effect.”

• Reconfiguring product and service offerings
• Increasing the speed at which products are picked from the warehouse shelf
• Improving the accuracy with which customer inquiries are dealt
• And lowering the cost of conducting a test for a product still under development

Connecting individual activities to larger company results is the great strategic challenge confronting the modern day CEO.

Focus on Outcomes, not Solutions

Planning for and measuring a company’s critical macro outcomes, such as:

• Market share,
• Return on equity,
• Customer retention,
• Employee retention,
• Adding more products

God is in the operational details to be sure, but seeing and being ready for the unseen weather in Iowa that is not so readily apparent, is even more important than operational, tactical reconfigurations because these macro developments are the real cause of the challenges we face and are therefore the only things that ultimately count.

So there are two systemic questions we must ask.

They are:

1. What is the outcome that will make us successful (as in the diagram above, check mate)?

2. What is the macro, systemic cause to our situation, that we likely do not see?

 

Principle Two: The Law of Obliquity

Don’t take shortcuts.

If the game is chess, play chess.

The Law of Obliquity states that major overarching goals cannot be pursued directly.

An overall company objective such as market share is a good example.

Managers have no direct control over market share.

Because you have little direct control over enterprise outcomes, they can only be pursued obliquely.

Rather, market share is the outcome of other factors over which we do have control.

The question is, however, precisely which factors?

If market share is down, what levers must we pull to increase it?

Among our options are lowering prices, introducing more products, improving manufacturing quality, and simplifying our invoices.

Indeed, managers can choose from hundreds of possible remedies to boost a company’s performance.

How do they know which are the right ones?

Without an explicit connection between desired outcomes and controllable factors, our planning and measurement system might be useful as “an observational tool” but not necessarily “a remedial one.”

So the question leaders must answer today is what oblique business objectives must I pursue to attain the outcomes I want and need?

It was not always so.

Principle Three: We Live in the Customer Economy

Before the advent of the customer economy, managers had little need or use for sophisticated planning and measurement systems.

In a world of placid customers and genteel competition, performance improvement was a relatively low priority.

Higher costs could be passed along, dissatisfied customers could be safely ignored, and innovation was optional.

• Customer demands were more narrowly focused
• Product lines were thinner
• Distribution channels were fewer
• The technologies of manufacturing were less intricate
• The size and the scale of most operations was a fraction of what they are today

In simpler times, the dynamics of business were easier to comprehend, and when planning and measurement indicated trouble, managers intuitively knew what to do

Today however, leaders face relentless pressures from customers and shareholders to improve performance and to do so immediately.

This has generated the need to merge the strategic and the tactical.

 

Principle Four: Make Sure Your Data Shows You How to Improve

As cited in Principle Two, the Law of Obliquity with today’s businesses complexities, it is not obvious to leaders what steps are required to get the outcomes they want and need.

A company’s planning and measurement systems must be able to reveal the sources of performance inadequacies.

However, in spite of the fact that the customer economy with its’ attendant complexities and ambiguities is an acknowledged fact, most contemporary planning and measurement systems have not caught up with the realities that companies now face.

They provide managers with little more than lagging financial data and a laundry list of miscellaneous performance figures.

Managers who review these items so carefully in fact often have no idea as to what they could do to improve any of them.

And if they do are sometimes reluctant (fearful) as to how to proceed.

Principle Five: the Age of Intuition is Over

In a complex environment, managerial intuition about what is important is more often wrong than right.

The most controllable actions are those performed by individuals.

If we measure, say, how much time it takes someone to pick ordered items from the shelf (a mere trickle of water washing over your street shoes to be sure), or to calculate an invoice, we can hold these individuals accountable for their performance and expect them to improve it.

The difficulty is that while readily controllable, the impact on the business as a whole is infinitesimal.

Formal analysis must now trump gut feel.

Principle Six: Once Again With Feeling, the Age of Intuition Is Over

Businesses are so complex and so rapidly changing that a ‘gut feel” for what is important is extraordinarily difficult to develop and impossible to maintain.

Managers are consequently reduced to either playing a passive role or to instigating initiatives more or less at random in the hope that something will make a difference.

In modern and complex businesses, leaders’ intuition about how to make things better is sadly deficient and their planning and measurement systems can even be dangerous and actually impede the company’s efforts to better its performance.

Principle Seven: What Constitutes “Good Planning?”

Good “Strategic – Tactical” planning is now a “must” for the modern day manager.

And that plan must be measurable and accurate in capturing the condition it is supposed to analyze.

1. Most importantly, it must be tied to the larger causative macro outcomes that will make it successful using the Law of Obliquity.
2. It must be objective, not subject to debate and dispute.
3. It must be comprehensible, easily communicated and understood.
4. It must be inexpensive and convenient to compute.
5. It must be timely, that is, not requiring a long delay between the occurrence of the condition and the availability of the data.

Constructing measures that meet these criteria is not as easy as listing them.

It is truly more art than science.

Principle Eight: A Positive and Conducive Environment

 The most accurate planning and measurement system in the world will fail if it is implemented in an inhospitable environment.

Creating business models and using measures to drive performance improvement are more than technique.

They are a way of life.

They represent a fundamental shift in how managers view themselves and their business.

This approach demands that business planning and measurement are not an accounting afterthought but an essential and integrated dimension of the business.

Business practices must be supported by a culture that values objectivity over opinion, commitment to improvement over excuses for why it can’t happen, honesty rather than irresponsibility, openness rather than defensiveness, and problem solving over problem avoidance.

It requires that people respect data and facts more than intuition and wishful thinking, and that the entire executive team collaborate first to understand what performance needs to be achieved, why it is not, and then to close the gap.

In a word, what is needed is teamness.

I trust that this post on strategic planning has been helpful.

This is pretty heady and not unsophisticated stuff.

For a deeper analysis and prescription of how to effectively plan check out “Fail to Plan – Plan to Fail”.

For more on this topic, we recommend the following
	Fail to Plan – Plan to Fail How to Conduct a Powerful Sixty Minute Strategic Planning Session Click Here For Video and Full Description   If you found this article useful Email to a Friend