Strategic planning has its strengths and limitations. Professor Stéphane J.G. Girod confronted this dichotomy head on in the webinar “Strategic planning is dead, long live strategic planning”.
The strengths and limitations of strategic planning can be seen, for example, in the cogs at work at LVMH. What makes the conglomerate so successful in driving discipline and success? One major driver of its strategic planning, we learn, is the generation of multiple insights followed by the whittling down of options among which to choose, and the simultaneous culling of others.
On the other hand, the longish cycles of its planning leave the group exposed to the unexpected and quickly emerging threats of fast-moving consumer goods.
They can also be seen at Packfood in the B2B sector. Strategic planning had always served the company very well but in the last decade, the company did not react to a market shift fast enough.
What did they do? Turned the situation around by added strategic agility into the mix.
Strategic planning with agility: the perfect balance
The lessons that Packfood took on board perfectly demonstrate the need to embrace uncertainty, rather than ignoring it. Girod explains how the company decided to include “scenario planning” in company strategy: we don’t know what we don’t know.
Packfood became more agile by defining four possible futures and is today tracking whether these futures are “emergent”, “maturing” or “here today”. It’s a case of frequently asking this question: Is the future we were betting on still the future today, and if not what should we change?
But here’s the conundrum: who decides? Everyone, argues Girod.
“Strategic planning, especially when done by a small strategy department detached from the business, can become the stuff of an ivory tower operating with only the top management knowing what is going on,” he says.
Packfood was able to become more agile by encouraging employees to “assess, flag and signpost solutions, making the scenarios their own,” Girod explains. As such, the new leadership mindset is “to have the courage to question assumptions and revisit areas when needed”.
Resource allocation needs to be more agile, too
According to Girod, cross-silo collaboration and innovative issue-based planning (such as one held by LVMH with 4,000 employees across the Maisons, to get employees’ novel ideas to respond to threats for the group) are key.
“It enables companies to reallocate funds for new things emerging out there – be it issues related to green, women or consumer journeys of the future – that were missed in the formal strategy process,” he explains.
We learn that top management typically knows 100% of strategy but 10% of issues. In contrast, employees know 10% of the strategy and 100% of the issues.
So, the answer resides in asking how to bring those two “icebergs of ignorance” together and support people in co-creating the company strategy to drive entrepreneurial spirit and play to win, instead of to survive.
He stresses that involving employees also entails creating the trust for them to express their ideas.
The slow burners
Agile resource allocation to boost areas that can create value goes hand in hand with divesting in areas that are no longer creating as much money as they should be – or “killing the sacred cows that no-one wants to” as Girod puts is.
Sometimes, the best resource allocation is in slow burning areas. When LVMH realized it had no response to the ethnic beauty trend, it invited Rhianna to make her own line. The upshot was a small revenue for the firm at the time. However, when the following year it decided to give her the platform to launch a fashion brand, the firm felt the benefits of how progressively increasing the stakes can pay off.
The take-home message is for firms to foster a long-term vision, yes, but also to plan ways in which they can adapt and to do so by drawing on the collective ability of employees.
But choose the degree of agility you need depending on your circumstances; firms operating in slower-moving industry cycles may do well by adapting their existing strategy process to become nimbler; whereas firms in faster-moving industries will need to do the same with the add-on of launching parallel and supplementary forms of strategic planning.”
Professor Girod is grateful for the support of Patrick Reinmoeller, Professor of Strategy and Innovation at IMD, in the managing of and insights into audience polls for this webinar. Girod’s forthcoming book, “Resetting Management”, further explores many of the topics in the webinar. It is available at Amazon.