Companies differ in their appetites for engaging in longer-term strategy development and planning. Some companies can be more process-driven and future-oriented whereas others can be more independent and entrepreneurial. That spectrum is normal.
To that end, it is not uncommon for executives to question the value of conducting a longer-term strategy process at all – especially when a company has been experiencing great performance.
However, even for growing and successful companies, I would recommend undergoing a longer-term strategy process for two specific reasons that directly impact a business’ profitability and growth: scarcity and sustainability.
By scarcity, I am referring to the scarcity of company resources, namely time and money. No company has infinite resources to invest, and effective strategic development and planning provides a focus and priorities for deploying those limited resources. This resulting focus and priorities should reduce “busyness” and other resource constraints by explicitly highlighting the critical growth areas and activities for the business.
On the flipside, this focus and priorities should delineate the unimportant areas and activities to eliminate – or to at least deprioritize. To quote the legendary Michael Porter, “The essence of strategy is choosing what not to do.” This means that effective strategy development requires making real choices and trade-offs, and should ultimately result in more available resources to focus on what will truly “move the needle” for a business.
By sustainability, I am referencing the health and defensibility of a company’s growth – because not all growth is equal. Without some form of a strategy development and planning process, a company risks rushing to judgments and potentially making sub-optimal choices for the business. Growth is not enough; we must aspire for growth that can be fortified and sustained for many years to come.
For example, some opportunities – when quickly or partially assessed – can appear attractive initially but ultimately represent marketplace positions that are difficult to protect for long. Meanwhile, other opportunities – when quickly or partially assessed – can go unnoticed although they represent more secure positions and greater value for a company, based on its unique abilities and resources. (In the wise words of Sun Tzu from The Art of War, “Invincibility lies in the defense.”) A thoughtful and effective strategy process enables a company to accurately identify and to efficiently target the most sustainable growth opportunities that will not flatten or decline within a few years.
An additional implicit rationale for and benefit of undergoing a longer-term strategy process is the process itself. It takes time, engagement, and debate among a company’s leaders to determine and agree on the most promising growth strategy. And the value of that effort and the resulting alignment is paramount, because it ensures a shared understanding of the path forward and key priorities that will instantly begin to inform the current business and its choices.
Strategy development and planning is a critical business activity. For some companies, it is a process that could be improved to deliver more impact for the business. (See my article on how to conduct the most effective strategic planning process here.)
But for companies that do not engage in any strategy development and planning, the consequences to the business can be dire. Without a strategy process, businesses risk ineffectively investing their scarce resources and incorrectly identifying growth platforms that are sustainable. Without a strategy process, businesses are not positioned to win over the long run.