A critical evaluation of strategic planning as an appropriate way of developing an organization’s strategyFebruary 2, 2022 2022-02-02 20:06
A critical evaluation of strategic planning as an appropriate way of developing an organization’s strategy
A critical evaluation of strategic planning as an appropriate way of developing an organization’s strategy
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It is factual to infer that strategy is everything in an organisation. This can be attributed to the definition of strategy that Weigl (2008) presents which elaborates strategy as a ploy, a position, a perspective and a pattern. Such definition coupled with the intensifying competition in the contemporary business world makes strategy an indispensible element for any firm. Strategic planning on the other hand is the process through which a firm gets to define its long term strategy. Steiner (2010) defines it as an organisational activity of prioritising actions and allocating resources to them and ensuring the entire organisation is committed to these priorities and goals. Strategic planning thusly stands as one of the roadmaps to strategy attainment. In light of this discussion, this essay intends to critically evaluate strategic planning as an appropriate way of developing an organisation’s strategy. The essay analyses the strengths and weaknesses of the same, addresses the alternatives and suggests an approach to strategic planning.
Strengths and pitfalls of strategic planning
According to Leonard and Mintzberg (1996) strategic planning is an important concept only that its contextual and innate meaning has been misplaced. In Bower’s (2007) discussion he notes that strategic planning is supposed to be a step by step demystification of the visions of the organisation into small formal procedures that need to be followed. In addition it is supposed to offer an insight as to what is expected at the end (Burgelman, 2002). In this aspect, strategic planning thus stands as advantageous because it creates a harmony in the conduct of activities in the organisation. It offers a pathway to success. However, Mintzberg, (1994) critiques modern applications of strategic planning as they blur the line between ‘strategic thinking’ and ‘strategic planning’. Another upper side to strategic planning according to Falshaw, Glaister and Tatoglu (2006) is that it offers a firm the capability to allocate resources rationally to different courses of action. This is a very imperative element is budgeting and consequentially financial performance.
During strategic planning, the involved team analyses the external environment and plans for it in advance (Harrison, 2010). According to Fairholm (2009), getting strategic planning to work means that not only will every individual and department know their place and expectation but the entire organisation gets to be coordinated. Parke (2012) in reference to the long-term orientation of strategic planning argues that it offers all the parties involved fore-sightedness and Kaplan and Beinhocke (2003) notes that it makes managers think strategically. A UK based survey on the importance of strategy workshops evidences that firstly, whether an employee realises or not strategic meeting changes their perspectives and personal view on the organisation. Secondly, analysis of their responses showed more understanding of the firm’s strategic intent than before (Hodgkinson et al., 2005). A case example of strategic planning in action is Tesco supermarket. According to Wood (2011a), in 2011 Tesco’s new boss Philip Clarke set out a new strategic direction for the firm. The major aim was to add to the already set strategic goals by putting more emphasis on creation of brands which ultimately signified addressing changing customer needs. The former Tesco boss Terry Leahy had been focused on expansion of the store into different locations and managed to do so (Wood, 2011b). In contrast the strategy taken by Philip Clarke was drawn towards both expansion and meeting customer needs through offering more Tesco brands. Ultimately these strategies have proven useful as Tesco remain the largest supermarket chain in the UK supplying over 30% of total groceries in the market (BBC News, 2014).
Strategic planning as much as it boasts of the aforesaid strengths is bound by different shortcomings. As Kaplan and Beinhocke (2003) note, there entire process of strategic planning can be termed as mediocre because managers ‘pretend to make strategic plans and also pretend to follow them’. One of the backdrops of strategic planning that has been majorly discussed is lack of flexibility – also termed as ‘too much focus’ (Wang and Walker, 2007). This is seen by Mintzberg, (1994) as a problem because the modern business world is dynamic and can hardly be transcended using a continuous uninterrupted pathway. This is especially so in the wake of current disruptive technologies in the different industries. What strategic planning suggests is the adherence to the same pathway regardless. In the end, the organisation may stand to lose. As discussed by Kaplan and Beinhocke (2003), the need for strategic planning needs not be in its application but in preparing the manager for critical times of decision making; the best strategic choices are not made in the boardrooms but in “office corridors” and “long flights” at turbulent business times.
Murray (2010) for example discusses the case of leading companies that have been often thrown out of the market by competitors just because they focused too much on “good” management provisions. Evidencing this, Thierer (2012) says that Blackberry was a celebrated phone brand a few years ago having been creative enough to come up with an appealing line of mobile devices. However, changes in the market, as characterised by Apple coming up with even better devices, could not have been predicted beforehand and thus Blackberry was phased out of the lead position. Murray (2010) suggests that a more “non-conventional” approach should be attached to firm in which case strategic decision can be made at the instance they are necessitated and more so by people that can see the need. An example of a company that has embraced such an approach is Google Inc. The firm accords the employee freedom to invest in side projects that have proven to be critical in sustaining a competitive edge for the firm (Murray, 2010). This is as opposed to a scenario where the step by step provisions of the strategic plan are adhered to unwaveringly.
Alternatives to strategic planning
As inferred in the introduction, strategic planning is one of the ways to achieving the perfect strategy for the organisation. However, this is not the only way since there are other roadmaps to developing an organisational strategy such as strategy crafting and the resource based view.
Mintzberg’s ‘strategy as craft’
Mintzberg came up with the idea behind strategic crafting. Essentially, the difference between strategic planning and strategic crafting comes up from the distinguishable definition of planning and that of crafting. Alluding to the act of a potter crafting different models, Mintzberg elaborates that the process of crafting should be of traditional skill, dedication, perfection through mastery of detail et cetera. In his view, strategic planning is to be attained nor by too much thinking but through genuine involvement, commitment and experience. Mintzberg suggests that just as a potter sits with her hands on the clay but her mind dangling between past experiences – what has worked for her and what has not – her future prospect, her capabilities and the market demand so should managers (Mintzberg, 1987).
In Mintzberg’s (1987) view the prevalent concepts where strategy is first thought of (formulated) then implemented is wrong since a manager needs to apply the ‘hand and mind’ explanation. A critical point that Mintzberg (1987) puts through is that some strategies as deliberate while other form themselves after a firm’s response to a scenario. A case example is eBay. eBay started out as a seller-buyer online market where different parties could engage in sale and purchase of virtually any goods. Along the way the firm has however embraced emergent strategies that have allowed it to further its market position and to diversify. For example, PayPal was founded to support transactions of eBay separately but eBay took an unplanned strategy of acquiring PayPal a firm that now boasts of immense success (Lee, 2009). Schory (2014) notes that the firm started out as a auction site but through innovation has managed to venture into PayPal –a digital money transfer service – and eBay enterprise – an omnichannel commerce, multichannel retailing and digital marketing service. Evidently as per the position of Mintzberg’s (1987) on the ‘hand and mind’ coordination, eBay has perfected this art as it continues to grow through innovation.
The Resource-based view
The genesis of the resource based approach to firms’ strategic decision making is the dissatisfaction associated with static, equilibrium framework nature of the industrial economist’s approaches to strategy such as strategic planning. The recourse based view, leaning on older theories of profit and competition (Grant, 1991). The underlying principle in the resource based approach is the role of the organisation in creating congruence between the resource capacity and the strategy chosen (Andersen, 2010). In other words, the resource endowment that a firm has determines the particular strategy that will be used to attain goals. As such, it is the work of the management team to conduct and analysis of the resource advantage of the firm. Such an analysis, Valentin (2001) says, should incorporate tools such as SWOT. A SWOT analysis unearths the strengths and weaknesses of a firm as well as opportunities and threats presented by the same. In light of this, Becerra (2009) avers that a firm can thusly match internal capabilities with the external opportunities presented by the market.
Grant (1991) summarises the application of the resource based theory as; analysing the resource base of the firm, improving on the firm’s capacities, identifying a strategy and extending the pool of resources and capabilities. However, this approach also has limitation because as Kraaijenbrink, Spender and Groen (2009) posits, the theory lacks a singular integrating framework for the different contributions made to it. Secondly, the theory lacks practical elaboration of the implication of its application.
So how should organisations approach strategic planning?
The above discussion has highlighted issues associated with strategic planning and even so the invaluable nature of strategic planning cannot be underplayed. Such important aspects of strategic planning, as identified by Harrison (2010) also, include the ability to coordinate the various organs of a firm for a common goal, rational resource allocation, long-term orientation and clear guidelines. As such, it would be inapt for an organisation to do away with strategic planning; however in this wake of dynamic business environment it needs to be approached as a contingent measure and a platform to strategic thinking. According to Moore (2011), deliberate strategies, as suggested from strategic planning use to work in the 80s and 90s but current world conditions call for more than that. In exemplification of this, Rao (2012) notes that having stuck with its initial vision and strategies, Nokia failed to prove competitive enough in the phone market. Strategic planning centres power on top management an element that partially inhibits innovativeness in the junior staff; an aspect that could lead to better strategies. As such, Rao (2012) continues to note that Nokia after a long struggle and ignorance of emergent trends in the Smartphone industry had to adapt or be phased out and ended up creating a partnership with Microsoft Inc. The example of Google Inc elaborates this better because as earlier noted Google allows usage of twenty percent of its resources to projects outside the stipulated realms. In doing so, Murray (2010) points out that Google manages to capture innovation that can be relevant in case the formal strategies fail.
Evidently, strategic planning is as essential as the rest of the approaches to strategy. Therefore this essay cannot expressly advocate for its segregation in implementation of approaches to strategy. However, key points that managers should note is that industries and forces surrounding the industries are divergent. As such, the context of the organisation needs to determine which approach serves best for strategic decision making. Strategic planning for example can be invaluable in static industries especially the manufacturing industries where the markets and market forces remain fairly constant. On the other hand, in industries characterised by sudden changes such as service industries or information technology related industries where the threat if disruptive technologies is imminent, there needs to be consideration of other approaches such as the crafting approach. Similar cases apply to the resource based approach and the scenario based approach.
Strategy is inevitable in organisation as every firm plans a path to attaining overall objectives. Being that important, it is critical that the beast strategy be applied in view of divergent issues surrounding the firm. The role of strategic planning, as discussed above, is important in several ways including offering foresight and coordination to the firm. However, there are situations that necessitate more than strategic planning. For example cases of rapidly changing external environments. As such the application of alternates to strategic planning is paramount for the survival of the firm. It is from such a perspective that this essay suggests a consideration of the immediate and extended organisational context before deliberation on the ultimate approach to strategy. Majorly, the focus in the end should be sustainability of business.
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