Strategic management is broken and not fit-for-purpose. It’s time to discard it and start managing strategically instead, argues John Bourke, President of the Business Excellence Institute
A quick look at a little history is all that’s needed to find the source of the problem. We only need to go back a century or so before we are in a time when management was almost entirely operational. Back then, strategy was the dominion of military commanders. In business, there was no real separation between “strategic management” and “operational management”.
Strategic management evolved in the 20th century out of budgeting and long-range planning, processes that assumed the future is predictable and that it will always be better than the present. As should have been predicted, this proved to be incorrect.
To enable better forecasting, more analysis was called for and this gave rise to strategic planning. It was slow and labour intensive so, in addition to numerous planning models coming to life, strategic planning departments sprung up in organisations around the world. The resulting delegation of analysis and strategic planning to a staff function blurred the lines of responsibility and accountability, added significant bureaucratic overhead, and produced a tendency for planning to become an end in itself.
In the late 70’s, Igor Ansoff – who is held to be the father of strategic management – admitted that even almost twenty years after the emergence of strategic planning, most organisations had not moved beyond long-range planning. Strategic planning departments gradually vanished but, unfortunately, the legacy of strategic planning continues to influence management today. It has left us with confusion about what strategy is, a separation between thinking and doing, and an inability for many organisations to manage themselves strategically.
In theory, strategic management focuses on establishing goals and objectives to deliver on an organisation’s mission and guide it into the future while operational management focuses on the present and on achieving objectives and goals. This segmentation divorces thinking from doing – strategy formulation from strategy implementation. It is highly problematic as, to quote Henry Mintzberg (one of our members), “there is no such thing as an optimal strategy, worked out in advance.” To be truly strategic, managers need to immerse themselves in the day-to-day of strategy implementation and operational management so that strategic learning can occur.
Managing strategically requires an understanding of strategy and how to craft it, a focus on implementation, and leadership for organizational adaptability. Most organisations fall at the first post, as they suffer from a poor understanding of what strategy is.
The need to marry thinking with doing is what makes it necessary to disrupt strategic management and to have leaders start managing strategically. This involves balancing long-term and short-term requirements while leaders contribute both to the crafting of sound strategy and to its implementation. They cannot simply grapple with a single part of strategy but must, to quote Henry again, “deal with the entire beast.”
Managing strategically requires an understanding of strategy and how to craft it, a focus on implementation, and leadership for organizational adaptability. Most organisations fall at the first post, as they suffer from a poor understanding of what strategy is. This is understandable since, although it might appear to be a simple at first glance, there is little agreement in the management literature on what strategy is. Strategy experts differ in their opinions of what constitutes strategy and even Michael Porter, in his influential article What is Strategy?, just described strategy rather than defining it. Without a common understanding of strategy, as Carl von Clausewitz held, one cannot hope to consider things clearly.
Given the difficulty of understanding strategy, the difference between being strategic and tactical, and the difference between being strategic and opportunistic, leaders throughout an organisation need to discuss strategy and arrive at a common understanding of what it is. This is important as the majority of strategic management courses, constrained by the traditional scope of strategic management (which used to be called “Business Policy”) and the legacy of strategic planning, teach little more than strategy formulation. The what, why and how to analyse various things and, on the better courses, something about how to combine the output of various analyses to arrive at a strategy.
As we’ve seen, there is no commonly agreed understanding of what strategy is. However, to help you construct your own understanding, here are some definitions:
- The “determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary” (Chandler)
- A “coordinated and integrated set of five choices: a winning aspiration, where to play, how to win, core capabilities, and management systems” (Lafley and Martin)
- A “coherent set of analyses, concepts, policies, arguments, and actions that respond to a high-stakes challenge” (Rumelt)
There are elements of each which people are likely to agree with and elements they are likely to disagree with. It’s a slippery concept and Henry believes that it needs to be thought of in five different ways to be understood. His “5 Ps” of strategy as a plan, a ploy, a pattern, a position, and a perspective. The Business Excellence Institute explains strategy pragmatically as being; “where you want to go, why, and how you are going to get there”. This allows for strategic learning and the dynamic adaption of strategy as the future unfolds.
Since there is no single agreed upon definition of strategy, it should be no surprise that there is no agreed upon approach to formulate or craft it.
Henry holds that there “is no one best way to make strategy”. However, there are certainly poor approaches to doing so. Richard Rumelt identifies some of these as relying on a positive mental attitude, avoiding painful decisions, and what he labels “template-style strategy” which people use to circumvent hard work. I would add… carving strategy in stone – holding on to the output of an analysis and decision-making process (which took time and energy) rather than updating strategy and changing course when needed.
Although the legacy of strategic planning is that many believe strategy is formulated through a process of analysis and decision making, not all strategy is deliberate. Some of it “emerges” and some “intended strategy” (the output of an initial analysis and decision-making process) is left unrealized. This why the phrase “crafting strategy” (which Henry introduced in Crafting Strategy, where he likened a manager to a potter using tacit knowledge while designing strategy to supplement the explicit knowledge derived from analysis) is so appropriate.
Once the initial intended strategy has been determined and is being implemented, managing strategically requires leaders to learn and adapt, deciding what intended strategy to discard and what emergent strategies to incorporate.
Crafting strategy is hard work but it’s also the easy part of managing strategically. Most of the challenges that organisations encounter are not those of strategy development but of strategy implementation.
Crafting strategy is only the first step in managing strategically. However, too many managers overlook this and, according to A.G. Lafley and Roger Martin, feel that having come up with a strategy they only need to “share their aspirations with employees”. This belief is the result of traditional strategic management education which assumes strategy formation and strategy implementation are separate, sequential activities.
However, as Helmuth von Moltke noted in his ground-breaking work Über Strategie, no plan of execution extends with certainty beyond the first moment of its implementation. So, in reality, strategy formation and implementation are nonlinear and need to be intertwined. Consequently, to manage strategically, leaders need to do more than merely formulate strategy and communicate it. They need to be open to strategic learning and to modify their plans to accommodate it.
Leaders need to focus on learning how to draw on strategic learning to craft and implement strategy. Tools can help here but the critical thing is for leaders to reflect on what derails so many carefully formulated strategies when it comes to deployment and consider what they need to do to overcome those challenges.
The separation of strategic management and operations management works against this as it limits the scope of strategic management to strategy formulation, relegating implementation to the domain of operations management. In reality, operations managers need not only to implement and deliver on strategy but also to help drive strategy and enable the organisation refine its strategy.
Consequently, to manage strategically, rather than focus on strategy formulation, leaders need to focus on learning how to draw on strategic learning to craft and implement strategy. Tools can help here but the critical thing is for leaders to reflect on what derails so many carefully formulated strategies when it comes to deployment and consider what they need to do to overcome those challenges.
Leadership for Organisational Adaptability
Much of the strategic learning that arises while implementing strategy comes from the fact that no matter how much analysis we do, you cannot be certain about the future. Consequently, to manage strategically, it is necessary to build organisations that are adaptable so that they are able to respond to dynamic changes in their environments.
This adaptability is not easy. It calls for ambidextrous organisations that can manage conflicting requirements – the tensions between the strategic and the operational, between what has been called “entrepreneurial behaviour” and “incremental behaviour”. The “exploration” of “blue ocean” and the “exploitation” in “red ocean”.
This requires the creation of what Mary Uhl-Bien calls an “adaptive space” between the operational and entrepreneurial. A space that acts as a buffer to absorb impact and enable adaptation. It is not a natural part of an organisation. Building it, is a strategic decision that requires leaders to actively create conditions in which people embrace conflicting forces, working with others who have different beliefs, competencies, knowledge, and preferences, to enable strategic learning be acted upon and the organisation to adapt accordingly.
With the ever-increasing speed and complexity of changes in our uncertain world, if organisations wish to survive and thrive, they need to forget about strategic management as a standalone concept, integrate it back into management, and start managing strategically. You are not obliged to change from strategic management to managing strategically. As W. Edwards Deming said – survival is not mandatory. However, the benefit of doing so will be better strategy and this should deliver better outcomes. The best time to make the change is in the past, so be strategic and don’t delay.
John Bourke is President of The Business Excellence Institute, a membership body, headquartered in Dublin, that is dedicated to helping people – and the organisations they work for – achieve outstanding results for all their stakeholders. It has members in 34 countries on six continents and supports organisations ranging from small family businesses, through universities, to federal governments with a portfolio of services delivered by its members.
John has 30 years’ management experience, working in 12 countries in a range of different industries and cultures. He has worked in large multinationals and medium sized organizations as well as starting three companies of his own. He has consulted for governments and companies such as Google and has supported MIT with some of its online courses. He holds a BSc in Applied Physics (NUI Galway), an MBA (UCD Smurfit Graduate Business School) and an MSc. in Business & Management Research (Henley Business School).