Why the Customer is King in Strategic Planning
Companies are faced with a future that would appear to be both unknowable and uncontrollable. Some appear to have slipped into the false comfort that it is best not to make too many firm choices, and instead let strategy emerge as events unfold to make the future clearer. Back in the 1970’s, Henry Mintzberg —still lecturing, writing and tweeting at the age of 75 —made the distinction between deliberate strategy that resulted from systematic business planning, and emergent strategy, which he saw as a wait-and-see approach that came about as a company responded to a variety of unanticipated and unconsidered events.
Beware of Extremes in Strategic Planning
Mintzberg recognized that most companies pursue strategies that lay somewhere on a continuum between the extremes of completely deliberate and completely emergent, which he saw as ideal types. He wanted managers to develop a strategy but at the same time he wanted them to carefully monitor for changes in their environment and constantly make course corrections to their strategy.
If scenario analysis is concerned with identifying plausible futures, then strategic planning is concerned with moving the company to a sustainable position in the most likely future — all the time monitoring critical events and technologies that will lead to that future and being ready to re-orientate as necessary.
Those companies that spend little time on strategic planning leave themselves exposed to the whims of an emergent strategy. Many believe that their markets are large enough to accommodate their growth aspirations without too much planning; or that they are a “fast-follower” and can rapidly adapt to changes in their markets. Adopting an emergent approach to strategy is clearly risky for a large company with a high level of fixed assets. However it may be entirely the right approach to strategic planning for a start-up technology company exploring which vertical markets to double down on or an entrepreneurial business unit of a large organization.
Follow the Money
At the same time, being over-zealous in adopting a deliberate approach to strategy formulation can be risky too. This is because companies can easily immerse themselves in the detailed planning of revenue, operating expenses, and capital expenditure, and quickly delude themselves that they now know and can control the future. They clearly cannot. They might be able to control costs in the future, but only customers create revenue. That is why strategic planning should always focus on the changing needs of customers and how anticipated changes in market size and market share combine to generate future revenue streams.
Ultimately, the customer plays the decisive role and every strategy for a business is a mix between responding to market demands and creating them. Businesses need agility and flexibility to walk the precarious line between each of these options – too far over to either side can have disastrous consequences, potentially leaving the organization trailing key trends or else going off in the wrong direction altogether.
Planning for Spontaneity
When it comes to adding agility, cloud computing now offers the most compelling argument. Facilitating real-time updates allows the entire team to be involved in collaborating on the best approach, whilst sharing accountability for the results as they are realised. The on-demand resources of the cloud provide businesses with unprecedented scale and the ability to cost-effectively manage and process data volumes that were previously unthinkable – crucial when it comes to analysing and predicting customer buying habits.
As strange as it sounds, organizations must try and plan for the unexpected trends. Simply put, your organization must be agile and flexible enough to keep the pace with rivals. Adhering to old-processes and clunky legacy software leaves a business at risk of being left behind as the market continues to embrace the cloud operation model and increase the speed of change within their organizations. Organizational flexibility doesn’t come solely from mobile working or a scalable cloud infrastructure but also from empowering business users to find the technologies and processes which best enable them to work most effectively. So find out from your staff what they need to be more agile.
Mixing emergent and deliberate approaches is the best way of making decisions. There is a risk of waiting and seeing what comes up. But if you only have one ambition in life, failure can mean overwhelming disappointment, and by that time, your singular focus may have led you to close down too many other options.