Playing To Win
Why Planning Over Strategy?
I am boggled that my video on planning versus strategy has gone viral, poised to hit over 1 million views in just a little over two months since Harvard Business Review put it up on June 29. But from the comments and reviews, people are really intrigued — including a fascinating guy who used the whole video, slice by slice to do an analysis of Tesla’s strategy versus GM’s plan. His has gotten almost another 100K views! Lots of the questions I have gotten have been about why is there such a predominance of planning over strategy in the business world? So, I decided to dedicate my 44th Year II Playing to Win/Practitioner Insights (PTW/PI) piece to Why Planning Over Strategy: And How to Fix the Problem. You can find the previous 96 PTW/PI here.
Why Planning Over Strategy?
As with many things in life, an outcome that doesn’t make sense, ironically, is often the product of a process that makes lots of sense. There is an enormous amount of planning in the modern world of business and very little strategy — for a reason. I have laid out the causal map (with feedback loops) above and will talk through it below.
Dominance of Analysis in the World
The world is on a zealously science-obsessed tangent by which it is attempting to apply science to everything whether suitable for scientific analysis or not, as I have written about repeatedly before (here, here, here, and most extensively but behind a paywall here). This science-obsessed view favors analysis of the known over any other kind of thought or work. There is an implicit assumption that whatever is will continue to be (and that assumption has to be implicit because if it was explicit, it would be embarrassing to the assumption’s holder).
Analysis Encouraged in Business
The world’s penchant for data analytics causes analysis to be strongly encouraged, supported, and rewarded in business. And planning fundamentally concerns the analysis of the known and setting forth a sensible set of initiatives that collectively manage the known — or at least appear to until things change and then the ensuing problem is blamed on ‘unforeseen chance events.’
Strategy, in contrast, imagines a desirable future and makes a set of choices with the best chance of bringing it about. It is fundamentally not analytical, which causes it to conflict with the analytical bent encouraged in and supported by business.
Business World Friendly to Technocrats
This belief in analysis that drives a love for planning renders the business world very friendly to technocrats. Technocrats focus more on inputs than outputs. They are driven to check all the boxes and follow the prescribed procedure (often prescribed by themselves for themselves). Planning is all about inputs: these are all the things that we are going to do, and since we have been thorough and analytical, all these initiatives are justifiable.
In contrast, entrepreneurs are laser-focused on outputs. They don’t check the boxes and rarely follow any prescribed process. And strategy, as I argue in the video, is all about producing outputs that you don’t directly control.
Feedback Loop — Makes Business World More Analysis-Friendly
The preponderance of technocrats in business makes the world of business even more friendly to analysis and planning, which attracts more technocrats to ply their inclinations and skills in a friendly and supportive environment.
Business Education Geared for Technocrats
With a business world highly friendly to technocrats, business schools gear their curricula to a technocratic view of business. They predominantly teach analytical techniques for studying what is currently operative. In strategy, that means mainly teaching it as a series of analytical techniques. It is very attractive to students who are already technocratically inclined and encourages those who are neutral to behave more like technocrats.
The schools, and their strategy professors (not all, but the vast majority) aren’t comfortable with teaching strategy as a creative endeavor aimed at shaping a future that does not now exist. Many business schools teach entrepreneurship (only because students and donors insist on it), but its teaching tends to be divorced from the teaching of strategy. When entrepreneurs come to business schools to lecture, they tend to show little enthusiasm for the analytical techniques that are taught in strategy.
Feedback loop — Business World Supplied with More Technocrats
Business schools populate the business world with a steady stream of technocrats who make the business world even more friendly to analysis and planning — and (inadvertently) less keen on strategy.
Business Technocrats More Interested in Buying Planning than Strategy Consulting Services
The planning-oriented business technocrats are more interested in and comfortable with buying planning services from the so-called ‘strategy consulting firms’ than strategy services. They want smart and capable planners, and they find plenty of them in the ‘strategy consulting firms.’
Consequently, strategy is a tiny business within the ‘strategy consulting firms.’ I recently spoke with a partner of one of the ‘big three’ (McKinsey, BCG, Bain) who had recently left to pursue other interests and I speculated that strategy as a percentage of billing at his former firm was probably about 10–15%. He laughed at how high my estimate was and told me that it was closer to 3%. He had nothing to gain from correcting me, so I assume he was close to the truth — strategy is a miniscule business.
Business Schools Pump out Analyst/Planners to Populate the ‘Strategy Consulting Firms’
Business schools are perfectly positioned to supply the ‘strategy consulting firms’ with an endless stream of high-quality recruits proficient in and enthusiastic about analysis and planning. So, ‘strategy consulting firms’ scale up with planners not strategists, which happily matches their business profile totally.
Feedback Loop — Analyst/Planners from ‘Strategy Consulting Firms’ Fill the Strategy Departments of Companies
Companies need planners to fill their strategy departments and the ‘strategy consulting firms,’ who they know well and trust entirely, provide a great place to find all the planners that they need to staff up internally.
In all, it is a coherent self-sealing system that is consistent with both global and business trends. It is amenable to business school schools and their professors, to professionals in company strategy departments, and to the ‘strategy consulting firms.’ It should be no surprise — at all — that strategy is becoming the lost art of business.
What to do About it?
This is a tough one about which it is hard to stay optimistic. The odds are stacked against the art of strategy becoming any less endangered. Business schools have no incentive to change. They call courses ‘strategy’ even though (with rare exceptions) they don’t teach students what to do if they have a strategy they don’t like and want to get one that they do. And it would be hard to teach practical strategy of that sort to students because it is not what the professors (again with rare exceptions) research or study. Instead, it is easier to teach the analytical techniques that they do know.
‘Strategy consulting firms’ have no incentive to change because they are absolutely thriving as planning firms. And it makes sense for them to serve the biggest segment of executives, which are clients of planning services.
Companies should have the incentive, and thankfully a minority of CEOs and strategy executives are not analytics obsessed but rather are output-driven. They recognize that their task is to formulate a set of choices to compel customer action. But they are a minority: the majority is totally happy to keep on planning.
Board directors should be interested in strategy, but again only a small minority of them are. And when they mandate a ‘strategy review,’ they are overwhelmingly likely to get a planning study instead.
To me, entrepreneurship offers the best prospect for a rebirth of strategy. It is a great new age of entrepreneurship, with more funding for new ventures than ever before. And funders are focused on outputs, not inputs. They care about choices that generate huge growth and that shape and invent the future. However, in the world of entrepreneurs and venture funders, strategy is not a beloved concept because it is often considered to be a technocratic exercise — no surprise because it usually is. In fact, entrepreneurs will often claim that they don’t have a strategy or do strategy. But as I argue, strategy is what you do, not what you say, so everyone has a strategy.
The thinking task is to reverse-engineer the choices of successful entrepreneurs to understand their choices, to see the patterns, to understand the things to which they pay attention. That could be taught in entrepreneurship classes because it won’t be taught in strategy classes. And the good thing about entrepreneurship classes is that they are often taught by adjuncts who have real business experience. Taught correctly, this could create more real strategists.
I would focus there: teach business students entrepreneurship as strategy and get them out in the world making a difference. When they are running big organizations, they will be more interested in strategy than in planning.
If you are a business student, it is fine to take strategy courses. You will learn a language system for strategy and one of the selling points of business school is to learn the various language systems of business — finance, marketing, strategy, etc. But be careful! Don’t let them turn you into an analytical planning technocrat. Take entrepreneurship classes and attend the speaking events featuring entrepreneurs. When you do, focus your attention on reverse engineering the strategy choices of entrepreneurs to attempt to teach yourself strategy.
If you are a manager, recognize that if you ask for strategy from either a subordinate or a consulting firm, you are likely to get planning instead. Happily for you, that may be exactly what you want. But don’t fool yourself. A plan isn’t going to get you what you imagine a strategy will. If you want to make a real difference and be capable of creating futures that do not now exist, you will need to learn the difference between planning and strategy and become competent in the latter.
If you are a board member, recognize (as above) that if you ask for strategy, you are likely to get planning. As a steward of the company, you need to raise your game and demand strategy. Otherwise, you will be acting as just another technocrat — and those are a dime-a-dozen regardless of their level. Get equipped to ask management for a set of choices that will compel customers to do something wonderful for the prospects of the company. Don’t settle for yet another sensible sounding plan that accomplishes little other than to expose your company to a winning strategy from some upstart that believes in inventing a future that doesn’t include your company in it!