Tired of Strategic Planning? Many Companies Get Little Value from Their Annual Strategic-Planning Process. It Should Be Redesigned to Support Real-Time Strategy Making and to Encourage 'Creative Accidents'

'...chance favors only the mind.' --Louis Pasteur Senior executives generally agree that crafting strategy one of the most important parts of their job. As a result, most companies invest significant time and effort in a formal, annual strategic-planning process that typically culminates in a series of business unit and corporate strategy reviews with the CEO and the top management team. Yet the extraordinary reality that few executives think this time-consuming process pays off, and many CEOs complain that their strategic-planning process yields few new ideas and often fraught with politics. Why the mismatch between effort and result? Evidence we culled from research on the processes at 30 companies (see sidebar, About the research, on the next page) and work with more than 50 additional companies points to a common dispiriting explanation: the annual strategy review frequently amounts to little more than a stage on which business unit leaders present warmed-over updates of last year's presentations, take few risks in broaching new ideas, and strive above all to avoid embarrassment. Rather than preparing executives to face the uncertainties ahead or serving as the focal point for creative thinking about a company's vision and direction, the process is like some primitive tribal ritual, one executive told us. There a lot of dancing, waving of feathers, and beating of drums. No one exactly sure why we do it, but there an almost mystical hope that something good will come out of But something good ought to come out of it. In a business environment of heightened risk and uncertainty, developing effective strategies crucial. But how can companies reform the process in order to get the payoff they need? New goals for Part of the answer lies in taking a fresh look at the substance of business unit and corporate strategy. But a more important--and often overlooked--element to rethink the process by which strategy made. It can even be argued that without a strong process, it unlikely that the substance will come out right. A key starting point the acceptance of the counterintuitive notion that the strategic-planning process should not be designed to make strategy. Henry Mintzberg, a professor of management at McGill University, calls the phrase strategic planning an oxymoron. (1) He argues that real strategies are rarely made in paneled conference rooms but are more likely to be cooked up informally and often in real time-in hallway conversations, casual working groups, or quiet moments of reflection on long airplane flights. What then the purpose, if any, of a formal process? Our research persuades us that the exercise can add value if it has two overarching goals. The first to build prepared minds--that is, to make sure that decision makers have a solid understanding of the business, its strategy, and the assumptions behind that strategy, thereby making it possible for executives to respond swiftly to challenges and opportunities as they occur in real time. GE Capital, for instance, has consistently proved quicker to react and better able to value acquisition opportunities than have its competitors. Part of this success due to a strategy process ensuring that GE Capital's executives have a strong grasp of the context they operate in before the unpredictable but inevitable twists and turns of their business push them to make M&A and other critical decisions in real time. The second goal to increase the innovativeness of a company's strategies. No strategy process can guarantee brilliant flashes of creative insight, but much can be done to increase the odds that they will occur. In addition to formal at the business unit level, for example, Johnson & Johnson uses crosscutting initiatives on major issues such as biotechnology, the restructuring of the health care industry, and globalization in order to challenge assumptions and open up the organization to new thinking. …

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