Planning has been around for a very, very long time. People would make plans for what they were going to do. Recently, there has been a field of study called strategy. People have combined these two things to make what they call “strategic planning.” Strategy and planning, on the other hand, are not the same thing.
So it doesn’t help to just put them all together and call it strategic planning. In the business world, most strategic planning has nothing to do with strategy. It has the word, but it’s not what it says. It is a list of things the company says it plans to do. We’re going to make things better for the customer. We will start up this new plant. We’re going to start a new program to help people develop their skills. There’s a long list of them, and they all sound good, but the company won’t be happy with any of them because they didn’t have a plan.
What then is a strategy?
So, what is a plan? A strategy is a set of choices that work together to help you win on the playing field of your choice. So that’s an idea. Strategy is based on an idea. Here’s why we should be on this playing field and not the other one, and here’s how we’ll be better at serving customers on that playing field than anyone else. That theory needs to make sense. It must be possible. For this to be a good plan, you have to be able to put it into action.
Planning doesn’t have to be this way, and it’s usually a list of what people in manufacturing want, like to build a new plant, and what people in marketing want, like to launch a new brand, and what people in talent want, like to hire more people. This list usually doesn’t make sense to itself, and there’s no way to say how all of these things will help the company reach a goal.
Why do leaders concentrate on planning so much?
You can see that planning is very comforting. Most plans have to do with how you’re going to spend your money. So, we’ll come up with a plan. We’ll be hiring some people. We’ll be putting out a new product. These are all things that a business has to pay for. Who is in charge of your costs? Who is your cost’s customer? The answer is, “You are.” You decide how many people to hire, how much space to rent, and how many raw materials to buy. These are more comfortable because you have more control over them. A strategy, on the other hand, lays out a goal, a competitive goal that you want to reach, which means that you want customers to want your product or service enough that they will buy enough of it to make the money you want to make.
The tricky part is that you don’t have any control over them. Even though you may wish you could, you can’t. It’s up to them, not you. That’s a trick that’s harder. So, you have to put yourself out there and say, “This is what we think will happen.” We can’t prove it in advance, and we can’t promise it will happen, but that’s what we want and what we think will happen. It’s much easier to say, “I’ll build a factory, hire more people, etc.” than to say, “Customers will like what we have to offer more than what our competitors have to offer.” The hard part about planning is that while you’re doing it, someone else is probably figuring out how to beat you.
An actual case when strategy prevailed over planning
When US airlines were busy figuring out which routes to fly, a small company in Texas called Southwest had a plan to win. And at first, because it was so small, that didn’t seem to matter much. The goal that Southwest Airlines had in mind was a result.
They wanted to be an alternative to Greyhound, a way to get around that was much more convenient and didn’t cost too much more than a Greyhound bus. Southwest said, “Everyone else is flying hub and spoke.” They have hubs and fly with the hubs and spokes together. We’re going to fly from one place to another because planes don’t make money when they’re sitting on the ground. We’re only going to fly 737s, a single type of plane, so that our gates, systems, training, and simulations can all be set up for them.
We won’t be serving meals on the flights because we will focus on short trips. We won’t use a travel agent to make plans. We’re going to tell people to book online because it’s cheaper and more convenient for everyone. So, their strategy ended up being much cheaper than any of the big carriers’, which allowed them to offer much lower prices. Because it had a way to win, it grew until it has the most passenger seat miles of any airline in the United States.
The big airlines weren’t trying to beat each other. They all played to play. They played to take part, maybe buy more planes, get more gates, or grow a little, but they didn’t have a plan for how they could beat their competitors. And that was fine until someone came along and said, “Here’s a way to do this segment better than everyone else.” So that’s how that part ends. It’s gone, and the main players have to share what’s left of a smaller pie after Southwest takes what it wants.
How do I avoid falling into the planning trap?
How do you start to get out of this planning trap, this comfort trap where you do things that are easy but not good for you? The most important thing to know is that every strategy will cause you stress. It will make you a little nervous because, as a manager, you’ve probably been taught to do things you can prove ahead of time.
You can’t prove ahead of time that your plan will work. You can look at a plan and say, “Well, I guess I could do all of these things.” Let’s just do those, since we have power over them. But none of them will amount to much. In strategy, you have to say, “If our theory about what we can do and how the market will respond is correct, this will put us in a great position.” Just accept that you can’t be perfect and that you can’t be sure of anything. And that doesn’t mean you’re a bad boss. You’re a great leader if you do that, because you’re giving your group a chance to do something great.
The second thing is, “Make it clear how your plan makes sense.” What would have to be true about us, our industry, our competitors, and our customers for this strategy to work? Why do you do that? Because then you can watch the world go by. And if something you say in the logic has to be true for this to work but isn’t, you can change your plan. And strategy is a journey. What you want is a way to change, sharpen, and improve it along the way so that it gets better and better. Strategy is also helped by not letting it get too complicated.
It’s great if your strategy can fit on one page.
- This is where we have decided to play.
- Here’s what we plan to do to win.
- Here are the things we need to be able to do.
- Here are the systems for running things.
This goal will be reached because of this, this is what we hope for. Then you explain what must be true for everything to work out the way we want it to. Go do it, and keep an eye on it and make changes as you go. That might make you feel more anxious and worried than planning, but it can tell you that planning is the best way to lose. If you have a plan, you give yourself the best chance of winning.
Source: Roger Martin