“The key to doing better is to “bring evolution inside” and get the wheels of differentiation, selection, and amplification spinning within a company’s four walls. Rather than thinking of strategy as a single plan built on predictions of the future, we should think of strategy as a portfolio of experiments, a population of competing Business Plans that evolves over time.” – says Eric D. Beinhocker, author of “The Origin of Wealth” and senior adviser Mckinsey & Co.
I tend to agree. Most strategies fail because they come with their own predictions of the future. I think of Kellogs failing to make it to the Indian breakfast table despite their persistence over a couple decades now. They are still bleeding. While they relied on their experience in western markets where persistence paid off, they took the Asian palate for granted. It is very difficult to please Asians with something as bland as cereals and cold milk. Asians love their spices; they know how to cook a delicious breakfast. They have variety practiced over the ages. A cold bowl of cereals can never beat a steaming idly, sambar and chutney. Never. So has been the experience of Coke and Pepsi – they just can’t beat a fresh fruit juice, lassi or coconut water that are devoured in the region.
So how useful are the tools of conventional strategy analysis to make crystal-ball predictions about the future? Rather, they are best used to prepare minds, provide context for making real-time decisions and to help teams deal with all the uncertainties they knew would come their way. The strategic planning exercise purely for devising a forward strategy is wasted effort; it can be a critical way to get your senior team to communicate, to give them a common frame of reference, a shared understanding of the facts, and a language for talking to each other.
In the end, the Guru gives some broad outlines –
First, the process should be focused on structuring in-depth discussion and debate among principal decision makers. Typical planning processes result in underlings presenting slides to senior decision makers in precooked dog-and-pony shows—very little learning goes on in such meetings. Instead, the focus should be on creating a forum in which senior decision makers meet to roll up their sleeves and wrestle intensely with the issues (and sometimes each other). Such forums need to be small (if too many lieutenants are in the room, the senior people won’t speak openly) and have adequate time—a full day per business unit per year for the CEO and top team is a good rule of thumb, versus the hour or two typical in most company off-sites.
Second, the process must be fueled by facts and analysis. If only opinions are brought to the table, chances are that everyone will leave the room with the same mental models he or she walked in with. This means intense preparation in the months leading up to the strategy conversation, and while staff and consultants can help, the senior principals need to be fully engaged in the preparation as well. A shared understanding of a common fact base is the single most valuable outcome of the process.
Third, there must be other forums clearly designated for decision making. If the strategy process becomes overburdened with near-term decisions on budgets, setting targets, and allocating capital, then learning goes out the window. The decision-making forums should be linked to, but separate from, the strategic learning process.
Let future unravel upon us. If it’s unknowable, why waste energies predicting it? Chance favors the prepared mind, after all!