Companies that perform at their best are those that have the right combination of great operations and great strategies.
They are those that understand the difference between strategic thinking and long-range planning. Otherwise, your organisation can lose direction, resulting in lost resources and wasted efforts.
How does a company make use of strategic thinking and long-range planning? How can you utilise your full potential for advancement? Why do some plans become useless - even though resources are poured in - to come up with the best plan? And why can't plans effectively answer the need of the present situation?
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Planning is just a tool
While strategy involves thinking, planning is a tool. As such, long-range planning should be a result of strategic thinking. Strategies end up useless when they are held captive by plans that are inflexible. These may be excellent plans, but they just sit on the shelf so to say. Good plans allow for unforeseen events. Strategies should tell how contingencies must be handled.
Long-range plans are more often projections of current conditions into the future. Most assume that current operations will remain the same as in the past, and are then adjusted slightly for political, environmental or technological pressures, as distinct from using these variables as a basis for determining strategic direction.
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Clear objectives
It is very ironical to observe that many companies cannot set clear objectives. There are lots of available resources found in printed materials and on the Internet. All these should be enough to make good plans. A majority of top level management cannot come up with the right objectives because of some influential members of the board that have different ideas. This results in unclear targets that lead to poor performance.
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Objectives set in financial terms
There is also the danger of setting company objectives in financial terms. This becomes real when little qualitative thinking is done. There is lack of clear analysis as to what products or markets the company will be involved in. Assumptions are based only on the present situations. The future is seen based on what the objectives are "asking" for.
When too much emphasis is placed on attaining targets, a company is pressured to act safely, without taking risks to improve. Rather than explore areas offering opportunities for better performance, it follows the same road taken in previous years because it is safer to do so. Risks are ignored and the chances to perform better are overlooked. The organisation might seem to perform well, but it could perform better. Thus, the real potential for growth and development is missed.
- Planning from bottom up
Usually, planning starts at the lower level and is passed on to the next higher level of management. Good assumptions are made at the lower level, but their meanings are lost when consolidation is done at the higher level. What are carried over are the general assumptions which are mostly based on past performance. The basic assumptions are lost. When revisions have to be made, there is no way to point to a specific area. The management then is tied up to the plan, whether it works well or not.
Many plans are presented in large volumes of printed pages, or in PowerPoint presentations complete with graphs and charts. However, these are useless unless they allow the organisation to make the right decisions and clearly set direction. This rigidity of plans makes them very difficult to meet contingencies. Because of this, the organisation cannot react timely on difficult situations. New opportunities are lost and the organisation loses its chance to expand.
- Uncertainties destroy plans
Five-year plans should guide organisations to what it should become in the future. However, the management may be overwhelmed by the uncertainties of the next 2 or 3 years. What is clear to them are the present realities - good and bad. So, instead of looking into what they want the organisation to become, they just concentrate on this year's plan and work forward. This will eventually make the five-year plan useless.
How does an organisation avoid the foregoing situations?
The organisation must separate strategic thinking from operational and long-range planning. This will put everything in the right perspective. The organisation should also have a system or method of thinking strategically, analytically and creatively. Furthermore, it should be brave enough to draw out the consensus of the group. This must be dominated by ideas of a few. Personal influences must be set aside.
Can you identify your company's position in the following table?
Organisations want to be in the upper left - great strategy and operations. Most are in the top right - great operations but poor strategy. The newer ones are in the lower left - great strategy but poor operations. Of course, nobody wants to stay in the lower right.
Creating your organisation's future strategy
For an organisation to move into the top left quadrant it should have a clear direction. This can be achieved by determining the product / services, markets and user groups that the organisation will operate in. There should also be a specific time frame for these to be accomplished. Here comes the need for strategic thinking.
You have to consider the following questions:
- The products and services - Which are to be offered and which are not?
- The markets - To which market will these products and services be offered and not be offered?
- The customer groups - To which group will these products and services be offered and not be offered?
- The geographic areas - Where will the organisation operate in and where will it not?
The time frame should not be arbitrary. Do not decide on an arbitrary '3 year plan' or '5 year plan', but determine the time frame from the factors involved. You have to ask yourself:
- How long does it take to develop the product?
- How will market trends affect the time frame?
- How quickly do customer preferences change?
- How quickly will the technology change - when will obsolescence set in?
- What are the capital and liquidity requirements
- How fast will social, political and economic changes affect the plan?
- What are the life-cycles of the products?
From good clear thinking on these variable factors, you can formulate a strategic time-frame that is based on facts and not upon an arbitrary plan.
Summary
Planning is a tool that helps an organisation attain it objectives. Strategic thinking gives direction to the plan. Organisations have to think strategically, analytically, and creatively in order to put the plan into action. Although strategic thinking and long-range planning must be separated, they must be coherent so as to lead the organisation to its goals.
Great operations and strategies are attained if people in the organisation know how to take risks. They should also know how to make good use of important assumptions that are based on past and present experiences and performances. The quality of your thinking will determine your strategy. Remember: thinking, like strategy, is not a discrete event, but is a process, and how good that process is will determine the outcome of your strategy.