As we approach the end of 2016, our Managing Director, Richard Coates, reflects on insights we have gained through working with a range of clients across several market sectors and on various business and strategy challenges. We hope this short series of thought provoking blogs helps stimulate some ideas and plans as you look ahead to 2017.
We often meet very successful and growing companies that have been in business for many years and have coped perfectly well without having worked through a structured strategy process. Sometimes, they have reached a scale or there has been a particular trigger, that has prompted them to undertake such an exercise; this can be a range of circumstances including a new CEO or Chair, a new investor or planning for an exit event.
Why don’t companies do strategic planning at all?
Sometimes the business leaders decide to continue with the iterative and flexible approach that has served them well over many years. And if successful, one can never criticize that approach. However, that has prompted us to reflect on why some companies don’t undertake strategic planning.
For us, this isn’t a debate of internal or external resource undertaking the strategy review and development. Although, may firms that don’t undertake strategic planning don’t have dedicated or assigned strategy responsibility at an executive level, which often sits with either CEO, CFO, COO or CMO.
In our experience companies feel that the annual round of budget planning, combined with responding to ongoing business as usual activities and issues is sufficient, and no additional input, validation or challenge is required. Previous successes can reinforce a view that strategic planning is unnecessary.
What is the impact of not doing strategic planning?
The impact of a lack of planning on a fast-growing business can be quite dramatic, with an ever-increasing order book often being fulfilled via additional resources and infrastructure that are bolted onto the existing business rather than having been carefully planned and delivered in anticipation of further growth. This can often mean costs rise in a similar proportion to revenues and the company is creating an issue that at some point will need to be addressed.
So there is a lot of business sense in undertaking strategic planning, but sometimes the this does not take place for other reasons. For example, it can be due to the fact that senior managers have not had experience of strategic planning and have not been trained on the process and methodologies. If they have had experience, it may have been a negative one, with over engineered processes and overly rigid plans that have not delivered tangible outputs or commercial value.
It is also a question of who can help and what will be the cost and value-add. The cost of some professional advisors can appear to be prohibitive, and those that operate at the Corporate end of the market are excellent at what they do, although potentially out of reach for many companies, and will be a Rolls Royce solution.
There is often a belief that external consultants will not understand their business sufficiently well and that manager’s knowledge will be sufficient. Certainly, consultants will never understand the business as well as the owners and senior managers; however, they will help add an external analysis and alternative perspectives that can develop new growth opportunities.
Some senior managers seem to prefer flexibility and responsiveness over structure and analysis. In our view strategy and strategic planning should never remove this, as its role is add a framework to complement and support responsiveness and adaptability.
The importance of strategic planning today
In practice, managers are often simply firefighting and working hard to deliver the ‘here and now’ and put off the planning process to prioritise more urgent matters that have a material impact on business performance and the P&L, and perceive strategic planning as an unnecessary luxury of time and resources or something can be addressed ‘later’, or ‘if its not broke don’t fix it’.
This may be real and genuine in some cases. Although, perhaps there is also a fear of the unknown, and not wishing to ‘shine a light’ on issues. Arguably, we are all experiencing a period of unprecedented uncertainty with Brexit, the recent USA election, forthcoming European elections and what seems like constant technical and digital evolution changing customer behavior in many sectors. Disruption is the new norm.
Whether it’s a light or heavy lifting exercise, internal or external, having the confidence to undertake a thorough and rigorous review of business strategy and strategic aims has never been more important, whilst at the same time valuing the strengths and achievements of the company, and most critically avoiding navel gazing and irrelevant analysis.