In 2019 I think more mid-sized firms are shunning competitive strategy and strategic planning than in 1970, around the time of the Arab Oil Embargo when competitive strategy and strategic planning were king. Since founding my endeavor in 2016, I have only had the honor to work for mid-sized firms and not the business units for Fortune 500 firms as I did when I worked at the larger consulting firms listed in my bio below. So while I do not know the situation in those larger firms, I think I have a pretty good picture of the mid-sized firm. But this is an important observation if true as there are many more mid-sized firms than business units in the Fortune 500 in the U.S.
Granted currently many mid-sized firms are comfortable with basic skills and processes with respect to competitive strategy and strategic planning, as these basic tools and frameworks have been diffused enough to become almost commonplace. These firms have checked the box of “already done that”, even if they use only basic approaches and may have engaged a strategic thinking and planning cycle once.
But if my assessment of the situation is correct, why is this happening? As readers of this series know, I think strategic thinking, competitive strategy formulation, and strategic planning are very important executive skills and processes. But more importantly, this is an oblique way to ask what are the values of competitive strategy formulation and of architecting and installing a custom strategic planning process. Please see “Competitive Strategy Versus Operations Excellence: Is There Really A Difference In Today’s World?” published earlier for a related article if you have some time and interest (click here).
First, a few brief definitions to serve our purpose here:
Strategic Thinking – the entrepreneurial endeavor of deciding how the firm will win against rivals.
Competitive strategy formulation – the chosen method of competition to win against current and future rivals – generic choices are a low-cost provider or differentiator or dual method of competition.
Strategic planning process – the process by which the people of the firm take the time to think strategically and architect an ongoing competitive strategy to win against current and future rivals.
Strategic plan – the integration of the first three elements that serve as the action plan to compete.
The very popular topic of strategy execution is not discussed in this article. Where is this you might be asking? For the purpose of this article, I include this is Operations Excellence. I realize this is not quite correct. I wrote a 2004 book titled The New Science of Strategy Execution: How Established Firms Become Fast, Sleek Wealth Creators so I should know better, but we will take the strategy execution discussion off of the table here.
So what is a good approach to competitive strategy formulation and process for strategic planning supposed to do and achieve? Here are my favorite responses with the typical response of the naysayer. Note these naysayer sayings are real but they are an amalgam from a variety of firms, not the same firm for all of them:
- Provide a clear path for how we can win against current and future rivals. (Response of the naysayers: “Rivals schmivals – We do not have any competition. We are better than all of them”)
- Allow the firm to align with integrated responses to current “unstoppable trends”. (“These trends are clear to us and we have good enough responses already”)
- Allow the firm to notice faint signals of early new unstoppable trends before rivals do. (“Unstoppable schmoppable – We have informal networks among our rivals where we discuss these and all are able to enjoy some degree of preparation for emerging new unstoppable trends. Bill Bigler note: this is not illegal collusion – just legal informal networks).
- As a result of the first three items, reduce risk. For practitioners of finance, we know that if we can reduce the risk for any forecasted future cash flow stream, we increase the valuation of the firm automatically. (“We do not worship at the alter of fancy finance, it is hocus pocus anyway. Just give us simple debits and credits in the here and now”)
- Gain key customer insights about what they value the most from your firm and in rank order of importance. (“We know our customers already. We have been doing business with them for a long time. We just ask them over coffee”)
- Helps align employees with a central direction for the firm and gives them a sense that this is a company where they can flourish for years to come. (“We value our employees but they do not need to know everything. The next thing they will want is incentive compensation tied to achieving goals, input to key decisions, and faster promotions”)
- A good strategic planning process and plan helps give the board of director’s committees more rich information with which to perform their fiduciary responsibilities (“Board of directors schmecktors – we don’t want one if we do not already have one and if we do have one we try to keep them at arm’s length and a ceremonial group only. Do you realize all of the calls I will have to (or do) take from them every week?”)
So if the naysayers win out, the modus operandi is day-to-day decision making that may or may not be aligned to anything other than good common sense at the time of each decision. I think there is a modicum of truth to all of these naysayer sayings though. But can a firm full of naysayers really manage and lead so that the probability of the desired future is possible and becomes manifest? I personally doubt it although it can happen for ten or fifteen years if a firm is lucky. If the naysayers win out and one (that is you and I) cannot provide a persuasive statement of value for competitive strategy and strategic planning, then they simply will not enter the management agenda. Or if they do, they will be quickly shunned and forgotten.
So how are we to leave this discussion? As I have spent almost thirty-five years doing this work, my current view is this is a question of the leadership and decision making style of the CEO. If he or she has a holistic and analytical bent aimed at increasing the valuation of the firm, he or she will likely embrace competitive strategy thinking and strategic planning. The force of their leadership means the organization will as well. If he or she is a common sense, here in the now person, they will not tend to embrace these two aspects of executive management.
But I would like to leave you with a counter position that might serve as a super-ordinate goal. In our current form of capitalism, the CEO with the board of director’s oversight, if a board is present, is charged with growing the valuation of the firm while at the same time not wrecking the very attractiveness of the underlying industry in the process. This is the CEO tightrope act. Firms like Amazon and Wal-Mart could wreck the very attractiveness of their industries by driving firms out of business more than they already do. Question: how can day-to-day decision making, not aligned to anything other than common sense at the time of each decision, make growing the value of the firm while not wrecking or contributing to wrecking the attractiveness of the industry possible? Answer: I do not think it can. Thus enters competitive strategy thinking and formulation and strategic planning.
For the strategy professionals, both consultants and professionals in firms, out there: what is your take on this? Can you provide a better value proposition for competitive strategy and strategic planning or a view that common sense in the here and now is all a firm needs for its strategic management?
This article is part of a series on what causes a firm’s value to increase.
Dr. William Bigler is the founder and CEO of Bill Bigler Associates. He is a former Associate Professor of Strategy and the former MBA Program Director at Louisiana State University at Shreveport. He was the President of the Board of the Association for Strategic Planning in 2012 and served on the Board of Advisors for Nitro Security Inc. from 2003-2005. He is the author of the 2004 book “The New Science of Strategy Execution: How Established Firms Become Fast, Sleek Wealth Creators”. He has worked in the strategy departments of PricewaterhouseCoopers, the Hay Group, Ernst & Young and the Thomas Group. He can be reached at firstname.lastname@example.org or www.billbigler.com.