Good input - the foundation of good strategy (part 2) - Missing or faulty data

You have all heard the computer cliche, “garbage in - garbage out.” What that means is simply that bad input results in bad output. In our context the output is strategic decisions. Missing or faulty input data is likely to cause strategic misdirection.

Strategic direction must be based upon a realistic understanding of what we must remedy or change. Otherwise, we will be playing with one hand unnecessarily tied behind our back.

Strategic direction must be based upon a realistic understanding of what we can and cannot do well. Otherwise, we will be developing unattainable expectations.

Strategic planning must be based upon a realistic understanding of market, technology, economic and sociopolitical forces. Otherwise, we will be setting out on the wrong course.

Most of us think we have a pretty good understanding of our business and the environment within which we operate. But even in the best of situations we will have serious and consequential misunderstandings. There is danger enough in not understanding. What if you had to sail across a reef and did not know where the gaps lie or the depths? This would obviously be very dangerous. But what if you had a faulty chart of the reef showing a safe passage where there was none. Ignorance is dangerous, but it is far better to be knowingly ignorant than to have false knowledge. The truly wise person is always willing to say “I don’t know.” Then he or she is in a position to either seek the missing information or (if the information is unobtainable) to cautiously proceed knowing that he or she really doesn’t know and is facing uncertain danger.

Ignorance is dangerous, but it is far better to be knowingly ignorant than to have false knowledge. The truly wise person is always willing to say “I don’t know.”

Missing or faulty information leads to faulty decisions. Missing or erroneous charts put ships on reefs. Missing or erroneous reading of resources, capabilities, limitations, competitive advantages and disadvantages, customers, competitors, suppliers, technology, the economy or the sociopolitical climate cause unnecessary handicaps, unattainable expectations or (worst of all) strategic misdirection which puts companies on reefs.

(part 3 – How Missing Data Comes to Be Missing will appear next week)

Good input - the foundation of good strategy (part 1) – Situation Analysis and Assumptions

There are two major prerequisites to strategy formulation. First, there must be good information about the current situation: situation analysis. Second, we must give thoughtful consideration to those possible future events and developments which might have a significant impact on us: assumptions.

Situation Analysis

Situation analysis is concerned with our business and the environment within which it operates as it exists today.

With respect to our business, we have a good understanding of both the quantity and quality of our talent resources and our capital resources; our competencies, capabilities, limitations, strengths and weaknesses. And we need to understand our ability to obtain additional talent and capital resources. We also need to understand our competitive advantages and disadvantages. Furthermore, we need to understand our organization’s structure, corporate climate, capital structure, cost structure and company performance.

With respect to the environment, we must have good knowledge of our markets, customers, competitors and suppliers. We must have good knowledge of the technologies pertaining to our products, services and processes. And we must have a good understanding of the economy and the sociopolitical climate within which we operate. All of this must be understood on a local, regional, national and global basis.

“We need to understand the current environmental situation from a tactical standpoint. But from a strategic standpoint what we need to understand is the future environmental situation.”

Assumptions

Even if perfect information about the current situation were possible, it would still not be adequate to our purposes. From a strategic planning standpoint, a good understanding of the current situation is merely the starting point for our understanding of the future environment. We need to understand the current environmental situation from a tactical stand-point. But from a strategic standpoint what we need to understand is the future environmental situation. A proper course and direction must deal with the environmental (external) situation as it will be - not as it has been in the past or as it is at present. Therefore, we must give thoughtful consideration to uncertain future external events and developments with respect to markets, customers, competitors, suppliers, technologies, the economy, and the sociopolitical climate on a local, regional, national and global basis.

(part 2 – missing or faulty data will appear next week).

How can we be confident that our planning will be successful?

Even in the presence of a structured strategic planning process, it is quite possible to formulate unsound, inappropriate strategy and/or to fail at implementation. There are many pitfalls, such as lack of commitment and involvement; inadequate process understanding; lack of conceptual focus; complexity; getting off base; inadequate analysis; rigid, mechanistic adherence to some pet theory; poorly conceived action plans; inadequate understanding of resource requirements and availability; planning not integrated into regular management process; assumption/presumption errors; inflexibility; failure to monitor progress and developments; etc.

What’s required is a sound approach, management commitment and good planning leadership. Robert Bradford and Peter Duncan have written a top selling book that is a good place to start: SIMPLIFIED STRATEGIC PLANNING: A No-Nonsense Guide for Busy People Who Want Results Fast! - - http://www.cssp.com/book.asp. Another good first step toward acquiring these prerequisites is to attend the seminar, Simplified Strategic Planning for Small to Mid-Sized Companies. This Michigan State University seminar lays out a streamlined, yet thorough, approach to strategic planning. It demonstrates a variety of techniques for obtaining management commitment. And it details the necessary attributes of good planning leadership. This seminar is presented in many cities across the U.S. every year.