For 9 out of 10 executives, strategic planning is not worth it. We need a fresh start
Norbert Reithofer, the chairman of BMW, recommended to his supervisory board members to read the book
The Black Swan by Nassim Nicholas Taleb. The book showed that seemingly impossible events—Black Swans—actually occur and have particularly profound effects, similar to those after the collapse of Lehman Brothers, which plunged the entire world economy into crisis—and
precisely because no one expects them. In times of extreme events, Reithofer says, predictions have become impossible.
For Wolfgang Reitzle, the former CEO of Linde, a €1.5 billion company that produces gases for the energy, chemical, and food industries, the secure times are a thing of the past. "It has never been more difficult than today," says Reitzle, "to make precise predictions about how the economy will develop in the future."
Only when their supposedly plausible scenarios during the recession we just experienced turned out to be a stark contrast to reality, did it dawn on managers that "strategic planning does not always work," as the
Wall Street Journal cautiously put it.
That is putting it mildly. "This downturn has changed the way we will think about the economy for years to come," said Steve Odland, CEO and chairman of Office Depot, in an interview.
Walt Shill, CEO of Accenture, the North American management consulting company, was even more explicit: "Strategy, as we know it, is dead."
Senior executives seem to share the radical assessment. Only 11% of executives in companies with over a billion in revenue believe that strategic planning is worthwhile. (Economist Intelligence Unit / Marakon)
Conversely, this means that 9 out of 10 executives have no confidence in strategic planning. A rather damning indictment.
Before dismissing this survey as an exception, look at these numbers:
- 75% of change initiatives fail. (Towers Watson, 2013)
- Only 5% of companies are successful in implementing their strategy. (Kotter, 2012)
- Only 30% of executives rate their changes as successful. (Keller & Aiken, 2008)
- 50% of changes fail. (Kotter, 2007)
- 70% of mergers and acquisitions do not meet expectations. (Weber & Camerer, 2003)
- 70% of changes fail. (Nohria & Beer, 2000)
- 60% of strategy implementations fail due to ineffective communication between executives, managers, and line workers. (Beer & Eisenstat, 2004)
- Only 42% of executives and 27% of employees have access to the strategic plan; when the plan is shared, it is so unclear that employees cannot follow it. (De Lisi, 2002)
- Only 13% of employees (or every eighth person) are fully engaged. (Gallup 2014)
- 68% of employees are not engaged at all. (Gallup, 2015)
- 60% of companies have no formal systems for executing the strategy; less than 10% of employees understand their company's strategy. (Kaplan & Norton 1996)
The evidence of the bankruptcy of traditional planning is overwhelming. What can we do—other than throwing in the towel and succumbing to depression?
First, since it's generally better to laugh than to cry, watch this 30-second clip about a somewhat extreme planning session.
https://www.youtube.com/watch?v=WjpAV_Y8On0
Seriously, we need a new approach. For this, we should ask in advance: What exactly is missing in existing approaches? From this, we can derive what characteristics a new approach would have. From my 30 years of experience with companies of all kinds—large firms and startups, government agencies and the UN, SMEs and the military—I see at least 8 shortcomings:
One: Conventional planning is static and linear. Strategy is a plan, a thing. This may work for building a house or the canal system of Mumbai, but not for human systems or rapidly changing landscapes.
> The new approach would be dynamic, non-linear, and oriented towards the purpose of the company.
Two: Conventional planning proceeds step by step, based on current circumstances and therefore on the past. "We had 1% growth last year, so we should achieve 1.5% growth this year."
> The new approach would enable entrepreneurial leaps, define the next strategic breakthrough, and transform the organization to achieve this.
Three: In conventional planning, the future is determined by the past track record.
> The new approach would consider the success story (the past) only as a base variable among others when forecasting future results.
Four: Conventional planning works with a strategic or functional "fit" that matches the organization's current capacity. Planners first look at existing resources and opportunities to then build the strategy on them. (I have experienced this from-present-to-future planning repeatedly, most recently in a government agency, but also in a European aerospace company.)
> The new approach (Hamel & Prahalad 1989) would create a strategic tension between the future—a "strategic misfit"—where the company's ambitions are out of proportion to current resources and capabilities (such as when the then tiny company Canon took on the Goliath Xerox with its battle cry "Beat Xerox," or when the startup Google set "Organize all the world's information" as its Strategic Intent).
Five: Conventional planning focuses on structures and processes (especially in the German-speaking region, but not only there, as I have observed during two decades in India, Japan, England, and the USA).
> The new approach would depart from existing processes or structures to ensure results and success.
More on the topic of Strategic Planning and the profile of Thomas Zweifel:https://www.speakers-excellence.de/redner/thomas-d-zweifel.html
