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9 March 2023

The Activity Piggy Bank

Why strategic planning is nonsense

I often hear companies say that “now is the time to start strategic planning”. I understand why this wording is used and why the phrase has become so stubbornly entrenched in the minds of managers, authors of management literature and media people. Nevertheless, I shudder every time I hear it. Not because I’m a know-it-all, but because I know how easily companies trip themselves up when it comes to identifying and implementing a good strategy.

In a nutshell:

There is simply no such thing as “strategic planning” and, in a certain sense, the concept is downright dangerous.

Why should that be the case? To understand the reason why, it is worth taking a closer look at the terms “goals”, “strategy” and “plan”.

This much can be revealed in advance: You either create a strategy or a plan, but never both together!

Goals/targets: For what purpose, on what basis, why?

Targets are usually abstract figures of some economic significance that need to be achieved: turnover, EBIT, customer satisfaction, market share and much more besides. The targets determine our course of action. They determine where we want to take the company:

For what purpose are we doing this?

One thing is clear: if we want to increase our market share in other European countries from 15% to 25%, we cannot do it with a snap of the fingers. If people want to buy something, there has to be a real basis for that willingness: a certain state of affairs that motivates them to buy. The more precisely we know this desired state, the more precisely and successfully we can bring it about. Now comes the crucial point:

Creating a strategy is never based on goals or targets, but always on the prevalent reality in the delivery room of which those goals are born.

Plan: How do we reach our desired destination?

A plan is always a package of measures that we first arrange in sequence and then work through chronologically. We can, of course, dream up some fantastic initiatives to increase our market share. But how do we know that they will actually be effective if we don’t know the state of affairs that our daily actions are supposed to contribute to?

Image: AdobeStock pathdoc

The plan can only ever be made once the goals have been determined and the target state (the strategy) is clear.

Why do strategy and implementation fail so often?

Let’s think of the countless organizations that start sales training when sales are sluggish, only to discover in frustration that the situation is showing hardly any sign of improvement.

That’s what they did in the past, it’s what they are doing now and, it is to be feared, it will continue to be so in the future.

It’s like a reflex: the numbers aren’t right – we need to clinch more deals – the salespeople need to get better – we’re desperate and we hire the most expensive sales coach in the country. The result? Unfortunately, rather sobering. The salespeople had long been performing at the top end of their ability, so the effects of the training were marginal. We have chosen to pursue a course of action that we know to have been “good from prior experience”, but it has no relevance to the target state, which in the current situation would be characterized by higher sales.

And that’s the way it so often turns out to be, if not almost always, and not just in terms of market share or sales. As soon as we have set certain goals, a little devil inside prompts us to embark on activities that may help us to achieve these goals, but this is by no means guaranteed. And when we finally realize that we have backed the wrong horse, our smarter competitors have long since galloped away from us.

Give the activity piggy bank a try

This is precisely why there is no such thing as “strategic planning”. Strategy is one thing, while planning is something completely different.

If, after setting goals, we immediately rush into activities, plans and milestones without knowing what the reality is that we are striving for, we don’t just have a bad strategy. Strictly speaking, we have no strategy at all, even if that’s the name we give to our program.

For this reason, I recommend holding meetings on the goals, on the strategy (again: the target state that the goals entail) and on the initiatives and plans separately. Preferably even on different days and never immediately after each other. This keeps your mind free for what is really important.

If you like, place a so-called “activity piggy bank” in the center of the table at the strategy meeting. Anyone who proposes an activity that doesn’t match up with a target state must put a coin into it – for educational reasons, of course. Preferably two euros, so that it hurts them as much as possible in the pocket. Believe me, this pain is far more bearable than the realization that we have just wasted 50,000 euros on an idea that, once again, failed to produce results.

Matthias Kolbusa

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