After years of posting articles on operations planning for bridging the gap between operations and strategy, the time has come to put together a new perspective on this area.
It’s time we started talking about “strategy formulation” instead of strategic planning. The reason is the economic environment today is such that there is a blurring between planning and operations control. Both now need to be performed contemporaneously.
Russell Ackoff, in “A Concept of Corporate Planning” (1970), referred to “satisficing”, “optimizing”, and “adaptivizing” as the three main approaches to planning.
At the time he stated that “It (adaptivizing) is not prevalent today because we have neither developed a clear and comprehensive concept of it nor a systematized methodology for carrying it out. Therefore it is more an aspiration than a realization”
I maintain 3D computing (not printing)/Kbases have made “adaptivizing” a viable approach and will describe here below how you can get started with this.
The need for an adaptive approach is easily rationalized – whereas many corporations continue today to practice “satisficing” and suffer the consequences, there usually is not enough time for organizations to practice “optimizing”, so we are left with “adaptivising” as the only practical option.
A wide range of tools is available for achieving operational excellence,
Strategy formulation, on the other hand, requires special tools plus a considerable amount of crystal ball gazing regarding how to make best use of corporate assets.
Part science, mostly art.
Classic strategy formulation tools include figure of merit matrices plus SWOT analysis capabilities that accommodate risk /uncertainty assessments.
What is lacking is an electronic canvas on which to practice both strategy formulation and operations control.
The starting position for most new CEO’s arriving at a corporation is that corporate assets will be under commitment, accordingly, each new initiative requires a reallocation of existing resources, plus, in some situations, the acquisition and allocation of new resources.
Since demand usually exceeds supply, a means of prioritization of resource allocation/re-allocation requests is needed.
Corporations have traditionally looked to ROI analyses as a means of setting priorities. However, the complexity of decision-making relating to strategy formulation has increased to the point where socio-economic ROI analyses are now needed. It’s still all about money, but no longer with a singular focus on the short term
An example illustrating the need for socio-economic ROI is the failure of many offshoring initiatives. Many of these failed to anticipate the loss of control and gradual cost increases that led to a need for re-shoring and discovery that the infrastructure required for re-shoring was no longer in place.
With the benefit of hindsight, many offshoring initiatives were flawed. The exit plans for these initiatives were also flawed.
It’s clear that juggling multiple variables in an economic environment that is constantly changing is no easy task.
The variables are governments, industries, customers, prospective customers, products/services, new products/services, corporate infrastructure, staff, and competition, to highlight a few.
Suppose you have a set of KPI’s that you monitor monthly, what’s the guarantee that you are monitoring the right KPI’s?
No guarantee! The problem is things change.
A new product initiative can be on spec, on schedule, within budget. Suddenly, the organization learns it has been leapfrogged by a competitor.
Solution? The organization needs to periodically scan the horizon and assess whether changes to KPIs are warranted.
Consolidated planning information on products, new products, competitors, technology trends, industry dynamics plus in-progress legislation at a corporate Kbase along with operational data needed to calculate KPIs allows organizations to close the gap (finally) between operations and strategy.
Welcome to the new world of strategy formulation!
Check out “How do you like to view your big data?” for a dramatization of the need for 3D Kbases for one-stop-shop access to strategy formulation and operations control data.