There is a curious exercise that occurs in the business world. Every year, executives huddle in resorts, hotels, and conference rooms to tell each other stories under the guise of planning. Commonly referred to as strategic planning, companies of all sizes follow this ritual annually to map out their organization’s future. Corporate storytelling as seen of a way of communicating key themes and messages but often fails to hit its mark where it counts the most – actually achieving change.
Missing the mark
There is growing evidence that traditional strategic planning falls flat during execution. In 2016, 67% of leaders indicated a failure to successfully execute on their strategic plans. Even the traditional consulting groups are saying that planning is missing the mark. Below is an example from McKinsey.
Every year, leaders create optimistic plans for growth. In my experience, these plans are often not revisited and no one is held accountable for their success.
This begs the question, why do leaders still undergo this annual rite of planning? It isn’t easy to answer, partially because once a habit is ingrained, changing the status quo is difficult. Secondly, academic research in this field is more opaque and lacking. Finally, traditional consulting groups push this, as part of their services as well so there isn’t a lot of incentive to change.
The counterpoint to this line of reasoning is that strategic planning still plays an important role. The process results in a budget, which then helps with resource allocation. In larger organizations, there tends to be greater layers of complexity with more departments, more people and more projects going on. Sitting down once a year to review to review and plan isn’t such a bad thing. Let’s call a spade a spade, this is budget and resource planning; there is nothing strategic about it.
We believe that this mode of working is incongruent with today’s reality. The market moves too fast to take a step back and solely focus on three or five year goals. Given the growing digitization of the global economy, “strategy” isn’t an exercise conducted on a ad-hoc basis. It is something that reviewed and exercised on a regular basis. Strategic planning as a corporate ritual needs to evolve lockstep with this new reality.
Strategic planning for the knowledge economy
The majority of software companies use a process known as Agile to create their products. As software is increasingly eating the world, we borrowed the principles of Agile and applied them to strategic planning. Agile by itself though isn’t enough. We look at strategy in three broad strokes: understand your current situation, defining the winning path and executing with an Agile plan.
Incorporating Agile into strategy design enables a greater degree of accountability, performance measurement and of course adaptability. We’ve also created an open source repository for the method that you can find here.
The first step in the process is about understanding the market (customer, technology and competition). Recognizing key technology trends for instance can inform where your organization needs to go and how to stay ahead.
Secondly, the ideal end state needs to be defined. In this part, the strategic priorities are identified which are called Epics. Put simply, what are the three to five key priorities that we want to focus on for the next year, ranked in order of importance. This is where the real choices are made. Strategy is about making tradeoffs and deciding on priorities is a key step. The winning path is about understanding what is the ideal future and clearly marking the success milestones
This is where most typical plans end, what we add over and above is solving strategy execution. The use of Agile fills an important gap in strategic planning. Each Epic is reverse engineered and broken down into a detailed backlog. Each backlog item is assigned a weight and prioritized by the leadership team. This has the beneficial effect of signaling to everyone around the team the road to achieving the plan.
Once the strategic plan is completed, the first sprint is outlined. Sprints typically last a month. At the sprint review, the leadership team reviews progress on execution of their strategy. The execution backlog is also reviewed in order to add or remove items. The conversation at the sprint should focus on what’s been working, what has changed in the market and focusing on moving even faster.
Choosing what works best for you
Agile strategic planning isn’t a panacea and isn’t made for every organization. Industry dynamics differ and an increased strategic cadence takes discipline. The recipe I’ve seen work centers on people, focus and communication. The right people need to be around the table and they need to buy into the process. An agile plan requires being comfortable with discomfort and takes flexibility. Secondly, by focusing on fewer initiatives, chances of success increase. This goes without saying yet it is commonly overlooked as well. Finally, everyone across the organization needs to be able to recite the Epics (e.g. strategic priorities). If people know where they are going, it takes less time to get there.
Thinking about one’s strategy on a continual basis is vital but action is also required. It takes active listening to important signals from the market and subsequent action. Being able to adapt your strategy to a constantly changing environment is a hallmark of success in the knowledge economy.