“There will be no more long-range planning”, Harold Geneen, CEO, ITT, 1959 – 1977
Geneen’s point, made in a famous one line memo to the management cadre at ITT, was not that long-term planning is unimportant, but that it was diverting attention from a focus on immediate, quarterly performance. He believed that missing the first quarter target made the rest of the year practically impossible to hit. No doubt this was a heartening message for his institutional shareholders, who generally like that sort of thing.
Now I’m not actually sure whether or not ‘long-term planning’ (as opposed to long-term guessing) has real value for businesses generally. I do know that a three or five year financial spreadsheet is almost always an exercise in fiction at some level. But my point is that the very idea of ‘long term strategy’ is fundamentally misconceived, and that the purpose of a ‘strategic plan’ is often misunderstood. So-called ‘strategic goals’ on the other hand are very often actively harmful.
The strategic position of a company at any given point in time comprises and is defined by a complex system of inter-related strategic conditions determined in large part (but not exclusively) by where and how the business competes. Stretching well beyond the boundary of the firm, some of these conditions have general scope (the so-called ‘macro-environment’), some derive from sector dynamics, and some from the resources and activities of the business itself. Often these conditions inform, reinforce or even frustrate each other in complex ways. In part (but only ever in part) this has elements of design, and in part it is emergent, both from within and without the firm.
All the time this system of inter-related strategic conditions is bumping up against similar but distinct systems in the form (usually) of its direct and indirect competitors.
And of course the key point is that these systems are necessarily dynamic and, at the same time, immediate. Strategy is present. It is ‘in the moment’. There is no such thing as long-term strategy.
So what do we mean by a ‘strategic plan’?
Within any given company system there may be an agent or agents trying to improve the strategic position of the business (or group of businesses) by altering certain strategic conditions and, implicitly or explicitly, the relationships between them, either in absolute terms or relative to competing systems. Those changes – to processes and activities, to resources (human or otherwise), to the structure of competition in the sector, even to the macro-environment, will typically need time and discipline to execute. A strategic plan, in short.
This has two implications in particular. Firstly, the plan is not primarily about hitting financial, customer or operational metrics, which are typically secondary effects with complex and often unpredictable influences. Hitting those metrics may or may not inform the validity of the project, but the plan itself is concerned with executing change to the strategic system.
Secondly, the timescale of the plan is determined by how quickly those changes can be executed effectively, which may be weeks, months or years. Or one phone call. It is complete nonsense to decide arbitrarily, in advance, and repetitively (year after year) that “there shalt be a three/five year strategic plan.” (Four year plans aren’t fashionable for some reason).
As for ‘strategic goals’, the CEO who declares that “our three-year strategic objective is to achieve a [insert financial metric of choice] of [insert audacious target]” is not usually talking about strategy at all. He’s just fantasising. Even if he turns out to be right.