One of the earliest publications on the theory of strategic management can be attributed to “the father of strategy”, Igor Ansoff. His book, Corporate Strategy, was published in the mid-1960s, and provided insight into a strategic-planning process that was extremely complex, but was recognised for its groundbreaking credentials and relevance to that period of time.
Strategic Management Institute (SMI) conducted a survey in the mid-2000s into the use and application of strategy and strategic planning. We wanted to address one of our concerns: that Ansoff’s method of strategic planning was out of date not long after the time of its launch.
Ansoff wrote during a period when baby boomers’ parents had mastered the art of spending; the economies of the Western world in particular were experiencing exponential growth making the extent of economic growth pretty easy to predict.
Formal planning and forecasting is highly useful for management and control, but its relevance tends to be lost in environments of great uncertainty. The only certainty we enjoy in this decade is that certainty itself is a diminishing commodity.
Yet 80% of businesses still rely on the Ansoff’s planning methodology as a primary tool.
Market forces have had some impact on the use of planning tools, and new ways of strategising have emerged. An outcome of the first global oil shock that occurred in 1973 was that the notion of certainty and predictability in business started to evaporate.
Strategy practitioners, keen to find alternative ways to more effectively manage for the future, found the Boston Consulting Group “portfolio analysis” useful. This tool depicts the trade-off between a product’s market share and its potential for those products to generate positive cash flows (birthplace of terms such as cash cows, dogs and rising stars).
Even though this tool was found to be sometimes quite damaging when used in the wrong setting – it tended to mislead decisions on the use and application of scarce resources – our survey found that 72% of businesses were still relying on it to support their strategic decision-making.
The target audience for our survey was the top 500 corporations in Australia. We sought to identify what management tools were being used and their effectiveness in practice. At that time, when convergent technologies were transforming lives and businesses, globalisation was well under way and emerging technologies impacted competition, creating a shift in power from supplier to consumer.
It was disappointing to discover our top companies relying on practices most suited to static, certain environments. And, conversely, that tools more suited to dynamic uncertain environments were not being used.
To illustrate, 80% of respondents conducted competitive analysis addressing existing competitors, not unseen ones; 66% of respondents agreed that they use the high level “snapshot” (and in our view, low impact) SWOT analysis (strengths, weaknesses, opportunities and threats) as a way to determine ‘gaps’ in strategy.
On the other hand, only 31% of organisations conducted scenarios of the future, 3% used game theory and 0% used the ultimate tool of uncertainty: chaos theory.
Respondents to our survey are not stupid; they knew what they should be doing.
Here’s some examples:
Thinking: Only 44% of respondents believed that their senior managers were competent strategic thinkers and 35% thought that not all of their senior managers acted in accordance with the direction identified in their strategy.
Communication: 73% of respondents thought they could communicate their strategy more effectively (internally).
Change: 79% considered they should enhance their capacity to adapt to organisational change and renewal of strategy.
Innovation: 79% indicated they should be more entrepreneurial in the implementation of new ideas, and 75% agreed that could apply greater creativity and innovation to the strategy process.
Scenarios: 69% of respondents thought they should spend more time evaluating alternative scenarios of their future.
Perhaps most importantly, 73% thought they could implement strategy more effectively.
So what was preoccupying their time?
It’s an old story. While wanting to be more strategic in outlook, 93% of their time was spent on finding new ways to cut cost, 80% of their time went on finding ways to improve customer delivery mechanisms. Highly important tasks, no doubt, but there is always a trade-off: is it strategy or operations?
Have things changed? The SMI will be conducting a follow-up survey in 2013 as a means to identify what organisations do when strategising, and how well they think they do it.
Please get in touch if you would like to register your interest in participating.