Monday, July 21, 2008

Strategy School 2: The Planning School

2. The Planning School (Strategy Formation as a Formal Process)

This post is continuation of my previous posts on strategy, based on Mintzberg's book Strategy Safari.

Lot of work has been done on "strategic planning". Even though there are several models of strategic planning, the basic idea is this: take the SWOT model, divide it neatly into delineated steps, articulate each of these with lot of checklists with special attention on objectives and elaboration of budgets and operating plans. The figure below shows the Steiner model of Strategic Planning.


The main steps are as follows:
  • The Objective Setting stage: Quantify the goals of the organization. Used mostly to control
  • The External Audit stage: Forecasts about future conditions of the external environment
  • The Internal Audit stage: Study of Strengths and Weaknesses of the organization
  • The Strategy Evaluation stage: Mostly financial analysis
  • The Strategy Operationalization stage: Strategies are broken down to sub-strategies and detailed plans are churned out here
Premises of the Planning School:
1. Strategies result from a controlled, conscious process of formal planning, decomposed into different steps, each delineated by checklists and supported by techniques.
2. Responsibility for that overall process rests with the CEO in principle; responsibility for its execution rests with the staff planners in practice.
3. Strategies appear from this process full blown, to be made explicit so that they can be implemented through detailed attention to objectives, budgets, programs and operating plans of various kinds.

Scenario Planning
Scenario planning is a variant of strategic planning. It is based on the assumption that if you cannot predict the future, then by speculating upon a variety of them, you might open up your mind. There has been a good deal of interest after Pierre Wack described the scenario-building exercise at Royal Dutch Shell, that anticipated the nature of the 1973 dramatic increase in the world petroleum prices. Wack described the complexity and subtlety of the exercise, which depended on judgment beyond simply the foramal analysis ("less on figures and more on insight" in his own words).

Critique of Strategic Planning:
1. The fallacy of predetermination: Assumes that the organizations can predict the future or assumes that the environment remains stable.
2. The fallacy of detachment: Strategy planners are detached from the ground. Effective strategy making connects acting to thinking which in turn connects implementation to formulation - this is missing in this school.
3. The fallacy of formalization: The formal systems could certainly process more information, cosolidate it, aggregate it, move it about. But they could never internalize it, comprehend it, synthesize it.
For more information on Strategic Planning, you may want to refer to Henry Mintzberg's book The rise and fall of Strategic Planning.

We shall next look into the Positioning School.


Thank you very much,


RamP!

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