Here is a question that one of my associates sent me, which I think is worth sharing with the readers of this blog:
«You said in your lecture: ‘Strategy or policies that change frequently are neither strategies nor policies. They are tactics at best.’
«Shouldn’t the rate of change in strategies somehow correspond to the rate of change in the environment? Thus, more external change would demand more frequent change in strategy.»
His conclusion seems reasonable and logical. Right? If the environment changes, we need to change the plans, too. So frequent changes «out there» require frequent changes «in here.»
But notice what I said in my lecture: If you change strategies frequently, they are not strategies; their impact is tactical. A strategy focuses on the longer term than a tactic.
Then what should we do when the long term is unpredictable, and any decision we make now about that uncertain future might need to be changed? How do we avoid turning strategies into mere tactics because of the frequent changes?
Interesting problem, eh?
Let us try to solve it.
Eisenhower once said: «Plans are useless. Planning is priceless.» Which means: Change your plans as needed. They are not as critical as the process of making the plans.
What should happen during the process of planning?
When you plan, you identify policies for your organization -what to do and what not to do — and these should hold for a relatively long time.
These policies are what give you the «platform,» the guiding principle for changing your strategic plans without converting them into tactical plans.
Think of a constitution: Some laws can change, but the constitution does not change easily. And all new legislation has to comply with the constitution.
Policies for a company are like a constitution for a country. They define who we are, who we are not, and what we stand for.
During the planning process, you took into account many factors and made various assumptions. As the situation changes, you should regularly go back to that process, reevaluate those assumptions in light of the changes you have now seen, and adapt your strategic plan to the new reality while staying within the boundaries of the policies.
If your strategic decisions are made within well-defined policies, then they are strategies, even though you might change them frequently. When there are no policies, no boundaries, then changing strategic decisions frequently will convert those strategic decisions into tactics by default. Why? Because there is no guiding principle underlying the ever-changing decisions. The organization is keel-less.
Example. I had a large client who had the technology to produce armaments — in this case, tanks and armored vehicles. But the organization made a policy decision, based on its values, that they would not contribute to war; thus, they would not make weapons.
As conditions changed, their strategies — how to penetrate new markets or hold onto their current customers -changed, but the policy was not violated.
Another software development company made a policy that the company would only use new operating systems that had been in the market for at least a year. They decided to sacrifice the possibility of very early innovation in exchange for reliability and robustness.
Within this policy, strategies — which products to develop and how to market them — could change as needed, but the character of the company would never change so drastically that the market would not be ableto follow them.
Imagine a restaurant that changes its menu frequently, but has no policy about what kind of restaurant it is. Do they serve Mexican food? Thai? Are they a Russian restaurant? They want maximum flexibility to change the menu, but what effect would this have on customer loyalty? Their customers would never know what to expect.
All changes must be within boundaries.
Do not attach yourself to strategic plans. You should review their assumptions annually, and if the assumptions do not hold anymore, make the necessary changes — as long as they do not violate your long-term policies.
Is that all?
No, because changes in strategy often call for changes in structure. And that is where the real challenge is. In order to successfully change its structure, an organization must be flexible. It must be able to change with relative ease.
Most managers I know do not pay sufficient attention to the importance of structure.
Much attention is given (and millions, if not billions, of dollars are spent) on strategic planning, and not enough is devoted to making the organization flexible.
But what is the use of spending millions of dollars on mathematical economic modeling to more accurately predict the future, if the organization’s structure is so inflexible that new strategies cannot be implemented?
I very much agree with Michael Kami, who preached, more than forty years ago: Spend more energy on keeping your organization flexible and less energy on planning. The more you plan, the greater is the chance you will get attached to the plan and lose flexibility.
In a fast-changing environment, it is more important to have a highly flexible organization than to have accurate plans.
Long term policies, with a flexible organization, make strategic plans effective.