A COMPARISON OF STRATEGIC PLANNING & STRATEGIC THINKING
The ability to think strategically and navigate change effectively is key to creating a sustainable organization — yet true strategic thinking and planning skills are a rarity among most executives.
This Process extrapolates the organization’s future by adding estimates of growth. it does nothing to change the nature or direction of the company.
This process usually starts in the lowest departments of the organization and works its way up.
A bottom-up process produces numbers and assumptions that are usually optimistic. Managers faced with such presentations find it difficult to assess or evaluate the meaning of these plans end up shaving or timing the numbers rather than contributing any meaningful input.
No one in his right mind will project himself out of existence! This is human nature Let us assume you have four divisions. Two are doing well and two are not. You have set a goal of 8 percent real growth. Here is what a bottom-up process will produce: the two divisions that are doing well will come in at 7.7 percent and 7.9 percent, respectively. They will shave their estimates knowing that you will be back for more. The two that are doing badly will come in at 8.1 percent and 8.3 percent, justifying their existence. And guess what year of the five-year plan that will be achieved in? Right The fifth year. This is known as ” Hockey-stick planning”
Nothing is Eliminated
Many of our clients who rely heavily on a bottom-up process tel us quite candidly that they have difficulty “Pruning” or eliminating product lines or services. This is due to the pressure toward ” justification” that this process encourages.
This process uses primarily internally generated data, most of it historical in nature. As a result, the process is objective and based on protections. It requires long and exhaustive studies with a heavy numerical base it is a quantitative valuation of the business.
The input data is numbers based on historical performance. Skill required: Numerical analysis.
This process establishes a framework or profile against which ongoing decisions are tested. It reviews and questions the direction of the business.
Only one group of people has the right and obligation to shape the company’s future direction and that is top management.
A framework or profile developed with the full participation of management and their knowledge and expertise becomes a better test bed for the allocation of resources.
Guidelines for Emphasis
A good strategic thinking process will produce a profile for the company that can then be used to determine which areas of the business will receive more and which areas will receive less emphasis. The process, therefore, needs to be interactive between levels of management, so that managers whose areas will receive fewer resources in the future are still committed to the direction chosen by management.
This process produces a clear list of products and markets that need to be trimmed together with a clear rationale as to why this needs to be done.
Internal Plus External Data
This process incorporates an assessment of both the internal and the external environment. It is highly subjective since it is the personal perceptions of each member of the management team. Most of the information required is simple and easy to retrieve since it is stored in each person’s head. The key is to tap that knowledge and bring these perceptions into an objective forum. This process is a qualitative evaluation of the business and its environment and is thus both introspective and externally focused.
The input data consist of opinions and perceptions regarding future trends. Skill required: Synthesis.