Strategic planning is a business oxymoron. It’s time to learn why.
The term strategic planning is thrown around as if, without it, a business simply cannot move forward without careful consideration and hours of brainstorming amongst senior leaders.
When prospects talk to me, they tell me they have a business plan, which almost always is an Excel spreadsheet. There is no strategy in it at all. There might not even be much planning in it. All of the focus has been on operational excellence, where they have taken their BAU (Business As Usual) and have decided that they’re going to get incrementally better at elements of BAU or look to their competitors to copy one of their initiatives that align with the desire to achieve best practice. That is not strategic planning.
Controversially, I think this term is a business oxymoron. Let me explain why.
What does strategic planning actually mean?
Strategy forces decision-making, which forces the confrontation of a future which is malleable and often unpredictable, particularly in the earlier stages of building a business. Strategic planning also forces financially driven corporate guesswork, which, if misjudged, can cost a career (no pressure).
Larger companies tend to focus purely on operational excellence, so unless you’re extremely deliberate at innovation, you might forget how to do it. Your vision of what you do and why you do it can become vague, resulting in a snowball effect of issues.
Strategic aspiration is essential. It’s the definition of your business. Without it, you will have nothing to prompt you to make decisions and nothing that pulls you into making changes or choices.
Real strategy is like innovation work. It requires making tough choices about where to play and how to win against the competition. My good friend Roger Martin‘s “Playing to Win” framework is an invaluable resource when considering strategic choices:
- What’s our winning aspiration? Why do we exist, and what does winning mean to both us and our customers? Who must we defeat?
- Where will we play? Which target segments, channels, products and geographies will we focus on?
- How will we win? Will we compete on cost leadership or differentiation?
- What 3-5 capabilities must we build to deliver distinct value?
- What management systems or processes will support our strategic capabilities?
Strategy starts with the customer – understanding their needs, gains, and pains. To do this, you need to be obsessed about over-delivering differentiated value vs chasing what you’re capable of selling internally.
Set audacious aspirations and then ground them in strategic reality.
Clarify who you’re taking on and what winning means to all sides. Guide the choices with insights from exploring options globally, not just your market.
Where to play involves narrowing your focus to the target segments, products, and channels where you can truly lead. As strategy guru Michael Porter says, “The essence of strategy is choosing what not to do.”
Once you make the strategic choices, align your organisation and invest boldly to build the 3-5 capabilities needed to win. Manage execution through systems, processes and metrics tightly linked to the strategy.
When this all comes together, magic happens. Let me share an example.
Macquarie Telecom’s Continuous Strategy Innovation
Macquarie started in Australia as a traditional telco, performing decently but needing fresh strategic jumps. Led by founder David Tudehope, they committed to customer experience and focussed on reaching a world-class net promoter score (NPS).
They’ve since achieved an NPS of over 80 and growth of over 20-30% annually. Macquarie succeeded in building new data centres and winning in public cloud consulting, disrupting incumbents.
The secret? Continuous strategy innovation guided by the customer. Macquarie regularly explores options globally, synthesises insights, and turns them into strategic hypotheses for growth.
Recent examples include investing in data centres despite growing public cloud, launching an Azure consulting practice, and doubling down on their customer experience.
For each hypothesis, they determine what capabilities and systems are needed to test it. They align the organisation around priority hypotheses, invest boldly, and then iterate quickly based on measured outcomes like NPS.
This cycle of strategic exploration, intentional choices, and rapid execution has powered Macquarie’s evolution.
Key Lessons from Macquarie’s Approach
Here are some key lessons from Macquarie’s approach to continuous strategy innovation:
- Explore broadly for customer and market insights
- Turn insights into focused strategic growth hypotheses
- Determine capabilities needed to test hypotheses
- Align organisation around intentional, strategic choices
- Invest boldly in chosen initiatives
- Measure progress through customer value like NPS
- Iterate quickly until hypotheses are proven
- Double down on what delivers superior customer value
This agility has allowed Macquarie to disrupt competitors and ascend to the top of Australia’s $50 billion telecommunications industry. They’ve become the disruptor rather than the disrupted.
This approach provides a blueprint for evolving strategy while delivering exceptional customer value. Using their approach as a case study offers several best practices which can be adopted easily:
Global exploration – Regularly visiting (or researching) other countries to explore emerging trends, business models, and innovations. This gives a fresh perspective beyond a core market.
Insights to hypotheses – The insights from exploration should be synthesised into concrete hypotheses for driving strategic growth. This turns ideas into action.
Capability mapping – Determining what capabilities and systems would need to be true for each hypothesis to succeed. This grounds ideas in reality.
Intentional choices – Leadership should engage in robust discussion and debate to ultimately make deliberate choices on where to place strategic bets. This focus is invaluable.
Bold investment – Invests aggressively in the chosen initiatives. Understand that half-measures lead to failure.
Tight execution – Execute the chosen strategies with excellence. Leaders should not get distracted by other ideas until strategies are proven.
Customer-centric measurement – Rather than relying on lagging measures like revenue, use leading indicators like NPS to gauge success. This keeps progress customer-focused.
Rapid iteration – Rapidly iterate on strategic hypotheses until they are proven, based on actual customer value delivery. Be willing to try, fail, learn, and then try again.
Acceleration once proven – Strategies that deliver results should be accelerated aggressively. Be ready to double down on what works for customers.
Pulling all these elements together allows strategy to evolve continuously rather than being wedded to rigid 5-year plans.
Great Strategy as a Hypothesis
To summarise, developing a great strategy is ultimately about hypothesis testing. You make a set of choices on where and how to compete. Then, you test those in the real world.
If your strategic hypothesis fails the test, you iterate or pivot. If it passes, you double down on execution. This requires investing boldly in the capabilities needed to win and managing tightly to your strategic choices.
So don’t settle for check-the-box planning. Sharpen your choices, pick a focused path, and run hard after proven strategic hypotheses. That’s how you become an industry leader rather than an also-ran.
Continuously evolving your strategy is imperative as disruption accelerates. Use global exploration, insights, intentional choices, capabilities mapping, and rapid iteration to stay ahead.
Test your hypotheses vigorously in the real world by delivering differentiated customer value profitably. When you find a winning strategic formula like Macquarie, go all in.