8: Strategic Planning
The idea of strategic planning heralds back to an era in which very little changed and industries were so settled that very granular decisions could be made about what would happen for the next five or ten years - and that reality would bear this out. In the present age, things change much more quickly. Strategic planning is still done, but it is far less granular and far more subject to change in a dynamic environment.
Basic Strategies
There are essentially two kinds of planning strategies an organization can pursue: to do the same thing as competitors more efficiently (and win consumers on basis of price) or to do something distinctly different (and win customers because they value that difference).
While it is a strategic choice made by suppliers, it is driven by market forces: efficiency arises in a market in which there is scarcity and suppliers are able to build a high profit-margin into their product whereas innovation arises in a market where there is surplus and suppliers must appeal to buyers by offering a better product (not just a better price). The two are constantly in flux because when demand exceeds supply there is no incentive to cut prices - but when new suppliers are drawn to the profitable market, supply catches up and then exceeds demand, shifting power to the consumer to offer a lower price - then competitors who are unable to sustain themselves on a thin margin exit the market, and supply decreases until it us lower than demand, returning power to the suppliers to demand higher prices.
The market never remains in a state of equilibrium between supply and demand for very long. It's mentioned that regulatory efforts to attempt to force a "correction" tend to do more harm than good. When entrepreneurs and business does not react quickly enough for a regulator's liking, subsidies to encourage production or discouragements to reduce it are implemented. These measures move the market to the opposite extreme and are not repealed or adapted when the market has changed. Left to its own devices, the market will self-adjust so that both innovation and efficiency are practiced at the appropriate time.
Planning Processes
(EN: It's worth noting that the author presents his own planning process in the next chapter - and while he attempts to describe other methodologies objectively, it seems obvious that he selected some of the weaker and outdated processes as easy opponents.)
There are various methodologies for strategic planning, most of which consider the external environment, the organization's mission, and its existing capabilities to identify specific objectives it should pursue, then determining how it will go about pursuing them.
The author provides a model as an example, but I do not believe it to be a good one because it starts with the organization's mission, which often leads to a strategy to continue to do business as usual. Good strategy always begins with the environment, and questions the validity of the mission: if the organization's mission is to make the finest videocassette recorders, it's necessary to periodically ask if the mission is still valid before determining how to accomplish it.
Then, the author mentions value-chain and supply-chain analysis as a method of doing strategic planning, but I again take exception to this as these are tactical rather than strategic decisions in most instances. These analyses presume business as usual and ask only if the firm should seek to own or outsource certain links in the chain. To my way of thinking, this considers more tactical matters rather than strategic ones, though a change in the integration/separation of steps in the chains can have a significant impact on an organization and requires planning, it is a solution rather than an objective. If our goal is to [do this] then we will need to internalize/externalize certain tasks. Such decisions change the capabilities of an organization, which should precipitate from strategic decisions rather than precede them.
He then summarizes Porter's five-forces framework, which considers five elements in a competitive environment: (1) threat of new entrants, (2) threat of substitute products, (3) bargaining power of buyers, (4) bargaining power of suppliers, and (5) rivalry among competitors. This model is better documented elsewhere, so I'm dropping much of the detail. I will also add that the five-forces framework identifies threats to existing operations and is not as effective in discovering new opportunities - which is a valid and necessary task - but as such it should not be the only approach to strategy.
He then mentions the resource-based framework, which considers the assets of a firm (mostly physical assets like plants and equipment, but also patents and copyrights, capital, and the like) as a way toward seeing what capabilities it derives from them, whether these capabilities are weaker or stronger than competitors, and whether the firm is doing what it does best. Again, I find this to be a good analysis but not necessarily a driver of strategy because it often leads to a "make the best of what we have" approach (rather than considering whether acquiring new resources can give the firm added capabilities) and benchmarks against competitors (which focuses on current practices and cannot consider doing anything that someone else isn't already doing). This analysis is a good prerequisite to tactical planning (determining whether we already have what is needed to pursue an objective, hence what we need to obtain to succeed) but, again, it is not a driver of innovation.
He also mentions the old-school SWOT analysis, which is another tool that often leads a company in the wrong direction (to capitalize on strengths and avoid/protect weaknesses even if they are obsolete or not germane to the external landscape). Naturally, I'm skipping this.