Or at least that’s how the WSJ reported it yesterday.
Years back when I was working in corporate strategy we used to have this yearly dance called strategic planning. Every year we would fan out to all the business units, look at what they were doing and try to figure out what they needed to be doing three to five years down the road.
This process typically lasted the better part of a quarter or so and culminated in a presentation to upper management on a direction to pursue for the business unit. What would happen next was often the best part. Some business groups would shelve the work and not look at it again. Other business units would invest time and effort to incorporate the strategic plan recommendations into what they were doing that year to try to make it happen in 3 to 5 years time. At the end of this process, annual budgets would be declared “done” and the world would go back to work.
But that was the old, dead strategy.
The “New Strategy”
The new strategy is defined by adaptability and flexibility to take advantage of any opportunity that presents itself. This results in strategic plans and operating budgets that are updated monthly, just-in-time decision making, and wider ranging planning scenarios. For example:
- Strategic plans and budgets updated monthly – as the economy tanked over the last couple of years, baseline assumptions were rendered useless in no time at all. Budgets updated yearly were no help. Even budgets that were updated quarterly were subject to significant tracking error. The only way to survive was to look at your budgets every month and adjust for cost of capital, inventory, and revenue mix. This way a company could adjust their product mix immediately to best match what was selling and thus, maximize return.
- Just-in-time decision making – the WSJ used a factory closing example in their article but I prefer to look at the SSD vs HDD product mix. When to get on the SSD bandwagon is a strategic decision. One can examine this decision yearly quarterly or monthly to see if it makes sense today or take the time to identify the trigger points that would make the decision for you. For SSDs, one could decide what price SLC-NAND memory has to drop to, say $X/GB, when SSDs would make sense. To make this decision, one must determine how long it would take to create and launch SSD product offerings, what SLC-NAND pricing trends look like today and back up the trigger point to take this all in account. But, after that all one need do is monitor SSD pricing daily and when it hits your trigger point start the product changeover.
- Wider ranging scenarios – all old strategic planning used economic variables such as cost of capital, revenue growth, and cost of goods sold, many would use a range of +/- 5% on each of these factors to generate operating scenarios that were then fed into the strategic planning process. The problem with such scenarios is that they didn’t take into account the extreme circumstances of the last couple of years. By widening the scenarios to something like +/- 15%, they became much more useful and would have reflected actual experience.
But in the end most of this speaks to speed and taking advantage of opportunities that are present.
All this reminds me of Colonel John R. Boyd (USAF deceased) who came up with a new military and competitive strategic paradigm called OODA or Observation, Orientation, Decision, and Action. Observe the competition (or market place), orient to (or appreciate what) the market is doing, decide what the most appropriate action will be, and then do it. John believed that the fastest OODA cycle always wins in the end. Any OODA cycle takes time to perform, one that is fastest will change the marketplace such that by the time your (slower) adversary sees what’s happening and reacts, you have already changed the world out from under them.
There was a good book on Col. Boyd’s life by Robert Coram, Boyd: The Fighter Pilot Who Changed the Art of War. Also there was a bio, Genghis John, written by a close friend, Chuck Spinney. If you are interested in understanding more on his views of conflict and strategy, I suggest starting at the bio but the book was an easy read.
How this all applies to the world with 6-18 month product development cycles, and 3 month marketing campaigns needs to be the subject of a future post…