Thursday, May 18, 2006

Strategic Planning and Innovation

In recent discussions, we've talked to several large firms about their strategic planning initiatives, looking out over several years. The strategic planning process to me seems at some level almost archaic, as if one could predict the future and lay out a course of action to pursue for several years. Given the rapid change in markets, in technologies and in consumer tastes and demands, any planning beyond 12 months or so seems awfully speculative right now.

I notice that more and more, individuals who have been associated with strategic planning within many firms are shifting their focus from "planning" to trend watching and innovation. I think this is a very logical approach.

Strategic planning springs from thinking from the late 50s through the 80s, where teams define the future and examine things like Porter's "five forces" and value chains and so forth. In an era where there was less cross-border competition and more stability in markets and economies, and less change, strategic planning made sense. Obviously, some things have changed in the environment. Product life cycles are shorter, there are more choices and consumers have become much more demanding. Markets have opened up and we compete with the vendor next door as well as the vendor in China or on the web. In short, attempting to define the business over a 3 or 5 year horizon is probably foolhardy at best.

However, what is very important to do is define strategic milestones or goals and determine how the firm arrives at those goals. For example, an electrical utility may determine it makes sense to offer content over its infrastructure, and needs to do so within 3 years. Now the strategic planning is really about how we can make that happen, which is really about the trends in the market (do people want this stuff? will the technology work?) and about creating ideas, products and services to move the firm to that goal. So, a strategic vision is necessary, but I'd argue that once that vision is in place, what's important is understanding and managing the trends that will enable or foil that vision, and defining the ideas that will become the products or services to realize that vision.

These are probably more "tactical" activities than pure strategic planning, but they give the firm more flexibility to react to changes in the market. Additionally, this approach incorporates more of the firm's personnel and skills, as strategic planning moves from a small, senior group into a set of actions to create new products and services.

I doubt we'll ever see the end of "strategic planning" but what I think we'll see over time is the realization that innovation and trend management is the actionable part of the strategic planning process.
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posted by Jeffrey Phillips at 10:29 AM

8 Comments:

Anonymous annette said...

Jeffrey - I've just come across your blog and am enjoying the archives. I wrote a post on precisely this topic recently - you can find it here:
http://www.inter-actions.biz/blog/?p=16
I like your idea of watching and innovation - I guess I'm also interested in strategising as distinct from strategy.

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