What is the number one mistake (other than having no strategy at all) that companies make when doing strategic planning?
is a leading business strategy keynote speaker, founder of Outthinker
, former McKinsey consultant, and author of four business strategy books
. Kaihan Krippendorff has over a decade studying corporate conflict. Blending Eastern philosophy, military theory, and modern business strategy, helping ambitious companies outthink their competition.
KK: My favourite quote on strategy is “vision without action is a daydream, but action without vision is a nightmare.” To avoid the dream and the nightmare each reach strategic clarity: knowing where you want to go and being confident you have a strategy to get there. The problem is that most strategic planning processes are not designed to create strategy. They are designed to create consistency and predictability. They were developed in the 1950s when businesses evolved into larger multi-business corporations and leaders like the Rockefellers needed to better coordinate unwieldy organizations. So, the biggest mistake in strategic planning in my view is that we confuse the active coordinating our actions and priorities of design and innovative, differentiating strategy.
Are there any strategic planning tools and methodologies that you are particularly fond of?
KK: Of course, I put the methodology and set of tools that we developed at Outthinker at the top of the list because I believe it works extremely well. Essentially, it says that a good strategic planning process involves five steps:
Some say that it today’s world long term planning is simply impossible – things change too fast, entire industries get disrupted, and the rise of developing markets, China and particular, make strategic planning an exercise in futility. What’s your view?
- Imagine: defining where you want to go and what the key strategic question is that you must answer to get there;
- Dissect: identifying the key issues and barriers that will prevent you from achieving your vision if they are not addressed;
- Expand: creating ideas, or strategic hypotheses of what you can do to overcome the barriers to achieve your vision;
- Analyze: choosing which ideas you will pursue in which you will avoid;
- Sell: selling the resulting strategy internally so that everyone understands it and is working in lockstep. This includes setting up your execution rhythm.
KK: Strategic planning originated out of the desire to understand and prepare for change. In the 1930s corporations began looking at economic cycles in order to make smarter decisions about when and where to invest. That effort is what gave birth to what we now call strategic planning. Dealing with uncertainty is fundamentally what strategic planning exists for. Sure, cycles have shortened kisses not mean that you give up planning. There are techniques to deal with faster moving, more volatile environments. For example, in a more volatile environment you need to start looking at the “option value” of your choices. You give more weight to strategic moves give you the flexibility, in the future, to pivot.
You can think of this way, you should be setting five sets of priorities:
- Thinks you will avoid doing;
- Things that will strengthen your core business;
- Things that are scaling up (generating revenue but not yet significant profits);
- New businesses you are building but are not yet generating meaningful revenue;
- Activities that create “option value” such as developing a new capability or getting access to a technology that you think may be critical in the future.
If fast-moving environments you need to do more #5
activities. In slow-moving environments you can spend more time on #2
Even best plans can go wrong. Do you have simple rules for helping managers to understand that it’s time to scrap their old plans and reconsider strategy, rather than to stick to their guns into the oblivion?
KK: That is tough question. Many experts say that the key differentiator of successful entrepreneurs is their willingness to persist with an idea when things seem to be going wrong. In my experience there are three factors to consider when deciding whether to persist or not:
What return do you expect? By looking at the leading indicators rather than the lagging indicators (e.g., looking at the number of leads you putting into your pipeline rather than the revenue you are generating) can show with facts that you making progress? If you do succeed, what will be the return on your effort and investment? Is it big enough?
What is the risk? Think through what failure will cost you and assess what the lost in terms of time and money you would incur if you persist and fail. Consider your “plan b” and “plan c” to accurately assess what the worst likely case will be. When Richard Branson launched Virgin Airways, for example, he took far less risk than many think. His deal with Boeing allowed him to return the plane he was renting quite easily if the venture failed.
What can you afford? Given the time and resources you have, and given the risk you have estimated, how much can you afford to risk? Many ventures die not because their idea is bad but simply because they run out of money.
The name of your book is Outthink the Competition. Why do you believe that it's better to 'outthink' others rather that 'outdo' or 'outperform ’ ?
I think your goal should be to outperform you competition and you do this with a combination of outthinking (finding a compelling, innovative solution to a problem that matters) and outdoing (executing that solution). Ray Crok, the founder of modern-day McDonalds, said “My attitude was that competition can try to copy my style but they can’t read my mind so I will leave them a mile and half behind.” Mahatma Gandhi said “First they ignore you, then they laugh at you, then they fight you, then you win.” Most great innovators start with outthinking their competition.
What strategic planning resources, books, blogs and podcast do you recommend?
KK: One of my favourite books on strategy in general is “Competition Demystified”
by Columbia professor Bruce Greenwald. I also love listening the Wharton Radio podcast and the Harvard Business School Ideacast. My most recent book, Outthink the Competition
, lays out a five-step process strategic planning process which we have also just developed into an online course.
Thank you for the interview.