| Why is the typical approach to business planning and forecasting flawed? | |
| Strategic planning generally aims to get to an estimate of future sales and profits, so how these items are estimated is critical. Typically, you would start with a forecast for demand, and by assessing how competition could affect prices, get a value-forecast for the market. Setting targets for increased market share would then give a forecast for sales volume and revenue. There are however problems associated with this typical approach to business planning and forecasting… Continue reading » |
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Sep 022010
It Makes Sense to Adjust in strategy+business describes a simple process that any decently-led organisation should be using:
- “sensing” to detect changes and assess their likely impact, then
- “adjusting” policies to keep the strategy and performance on track.
Some sensible examples illustrate the approach, such as anticipating staffing needs in a cyclical business – though one wonders what on earth the companies discussed were doing before if they didn’t do this! It contrasts sense-and-adjust with reactive styles (do nothing until forced to) and programmatic change (keep changing as you planned, regardless of changed circumstances).
The article unfortunately misses the “Create” step – strong firms don’t just ‘sense’ the environment to see what might happen to them; they decide how they want their world to change and make it happen. This may be radical innovation, but is more likely to be just the relentless pursuit of known resource- and capability-building.
Shame, too, to see these sound basics of strategy buried in more nonsense about ‘constant transformation’ with the unsubstantiated claim that “… companies must be ready to repeatedly transform themselves” and that “A review of businesses faced with burning platforms (enterprise-threatenting events) would reveal that most have failed to make the transformations required”. Sense-and-adjust is just the minimum of decent strategic management, and if properly performed would avoid most burning platforms in the first place.
Jun 102009
Just came across a great piece, but curiously embedded in a McKinsey Quarterly article that seems to be about something else entirely – an update of how to decide what businesses should be in a corporate portfolio. The little gem is on the evolution of strategic management - which describes how strategy has evolved from a basically financial approach, through forecasting and then externally driven strategizing, to its ultimate, described as follows:
“When this investment [in strategic planning] is successful, the result is strategic management: the melding of strategic planning and everyday management into a single, seamless process. In this phase, it is not that planning techniques have become more sophisticated than they were in phase three but that they have become inseparable from the process of management itself. No longer is planning a yearly, or even quarterly, activity. Instead, it is woven into the fabric of operational decision making.” It goes on to point out that virtually no companies have reached this point, except perhaps some in the electronics sector, where very fast changes across multiple products and highly segmented markets make it imperative.
… but surely this should be our aspiration for all organizations? though as I have noted before, we are not likely to get to this point with strategy tools that are simply incapable of ever delivering this result.
May 112009
Useful reminder to avoid flaws in strategic planning in HBP’s Management Essentials. Especially good to see the first item:
- Don’t skip rigorous analysis.
- Don’t think strategy can be built in a day.
- Take care to link strategic planning to strategy execution.
- Make sure to hold robust strategy review meetings.
This may all seem verypedestrian in these exciting times of strategic innovation and reinventing your business model – but no less critical than it always was.
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Amongst the continuing stream of articles on this, some good ones [I've left out some bad or downright dangerous ones] include: Continue reading »
