Four practical approaches can help to increase the effectiveness of the strategic planning process. (Image: G-Stock Studio/shutterstock.com)
In many companies, strategic planning remains ineffective. A key ingredient of an impactful processes is a careful balance between data and debate. Four practical approaches from our experience on BCG client projects can help.
Ineffective strategic planning often lacks balance
Many strategic planning processes remain ineffective and fail to trigger long-term thinking or influence important decisions. Those processes can often be characterized by opinionated negotiations, slide beauty contests, routine repetitions, or data crunching exercises; by too little or too much data, or too little or too much debate. To create convincing strategies, the strategic planning process needs to find the right balance—especially since most people agree on the importance of strategy.
In a recent BCG survey, 95 percent of respondents agreed that “strategic thinking is gaining more importance.” Of course, strategic planning should not be the only source of strategic thinking, but it can surely help to systematize strategic thinking and channel the strategic debate. One of the key aspects that needs careful consideration is the design of data and debate. For a more comprehensive discussion of other important elements, please refer to our BCG report Four Best Practices of Strategic Planning.
Four practical approaches around data and debate
Four practical approaches from our experience with companies in all industries can help to increase the effectiveness of the strategic planning process.
- The strategic fact base
Many companies still lack a common understanding of basic strategic facts. Market size, market growth and trends, key success factors, or market share should be clear to everyone. Creating a standardized “strategic fact base” can help to achieve a common agreement and facilitate communication between the business and the corporate center. Having standard templates on what type of information is really needed and a database of strategic information that all participants in the strategic planning process can access helps to provide sufficient depth and background for the strategy debate.
- The art of questioning
The value of the strategic planning process is significantly influenced by the quality of the strategic questions. Strategy should be the answer to a strategic question, the solution to a challenge. Effective strategy requires cultivating “the art of questioning.” Executives should dedicate time to identifying the right questions—time that is separate from that spent providing answers. Good questions should be neither too vague nor too detailed. They should encourage thinking outside the box without being aloof. Good questions will frame which data is truly needed and what really needs to be debated. As Peter Ducker said: “The most common source of mistakes in management decisions is the emphasis on finding the right answer rather than the right question.”
- Impact quantification
While some companies confuse detailed mid-term (financial) planning with strategy, others underinvest in understanding the financial impact of strategic alternatives. An order-of-magnitude quantification of options and initiatives can ground phantasy and help inform important trade-off debates. If the order-of-magnitude estimate is not convincing, a specific strategic option is probably borderline and not worth the risk.
- What you need to believe
Clear, qualitative arguments are important data input for any strategizing exercise. We have had good experiences distilling the “what you need to believe” for strategic options, the implicit assumptions that make or break certain strategic bets. This way of framing has often helped us to understand the essence of certain strategic moves and to objectify the strategy debate.
Planning Strategy Effectively
A good strategic planning process must of course be carefully tailored to a company’s specific challenges. The process differs, for example, in terms of centralization (informed by its parenting strategy), standardization (limited by the diversity of the business portfolio), and strategic priorities. In addition, integrating the above approaches to balance data and debate into existing processes can help improve quality and generate action-oriented