Strategic Thinking & Strategic Action

Why not plan to be great, like Elon Musk?

Elon Musk has just announced plans for SpaceX to build a huge reusable rocket (BFR) that he and his firm believe will enable a permanent self-sustaining human presence on Mars in five years. (Watch the stirring YouTube video of SpaceX's CEO and Lead Designer announcing the company's audacious plan at the meeting at the International Astronautical Congress on September 29.)

This is not a "pie in the sky" prediction. Musk and his team have seized the vision of inexpensive space travel and settlements on other planetary bodies and have created an incredibly detailed and seemingly realistic plan building on the firm's accomplishments and knowledge for achieving the vision.

Musk and SpaceX, as well as his other ventures including Tesla, stick out as spectacular examples of dreaming big and then making a challenging but potentially achievable plan and going for it.

But just how prevalent are leaders and organizations who formulate a big vision of future success and then formulate strategies and execute a solid plan to achieve the vision? Are Musk, SpaceX and Tesla really outliers?

Even accounting for a less audacious vision, to what extent do leaders and organizations use the vision-strategies-plan-execution paradigm that seems to be carrying SpaceX and Tesla to such monumental achievements?

Let's celebrate those who get it

"It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something." - Franklin D. Roosevelt

We can give half of all organizations points for at least trying to achieve a vision of greater future success by developing and implementing winning strategies and a plan to go after the vision.

It's good news that strategic planning is the number two most used business tool globally. In the U.S., 50% of organizations use it, according to Bain & Company’s latest survey of executives. Strategic planning has scored at or near the top of the most used management tools list for years. (See Bain & Company Management Tools & Trends 2015.)

Here's some more good news. 58% of leaders say strategic planning is extremely or very important in their organization’s success. That’s according to our 2013 Strategic Leader Survey involving organizational leaders in decision-making roles, which tracked closely with the results of an earlier survey we conducted and with a McKinsey & Company survey. (All of our Strategic Leader survey reports, including our latest on strategic decision making, are available for free download at www.forrestconsult.com).

Reality

But, unfortunately, the reality is not nearly as good as it might seem. Unlike SpaceX and Tesla, organizations of all types are not living up to their potential.

Our finding that 58% of organizational leaders say strategic planning is extremely or very important in their organization’s success means that four of every ten organizational leaders say strategic planning has little or no importance in the success of their organization.

If, according to Bain, 50% of organizations don't use strategic planning, it's no surprise that those organizations can't attribute whatever success they are having to intentional strategy development and execution.

That's a shame, because the evidence is clear that developing and implementing a strategic plan is the path to greater success.

 
The big "fail"

“Most people don't have a plan. That's why it's easy to beat most folks.” - Paul "Bear" Bryant

Unlike Elon Musk, many leaders don’t get it.

It’s a failure of leadership, a critical lack of understanding, what King George III demonstrated when England lost the American colonies under his reign.

Our finding that 42% of leaders say strategic planning is unimportant for success is only part of the problem. The woeful reality is that in a majority of organizations, like Britain during the American Revolution, the top leader or just a small group are making the strategic decisions.

Our 2016 Strategic Leader Survey revealed that organizations most frequently make strategic decisions without the leader obtaining consensus: In 66% of organizations the leader typically makes the strategic decisions.

Here's the problem with leader-centered decision making, as opposed to using the power of the team and insight from the wider group of stakeholders in the decision-making and planning process: Leaders tend to have biases:

• Inability to self assess, overstating their abilities, competencies and characteristics.
• Illusory superiority, overestimating their desirable qualities and underestimating their undesirable qualities, thinking they can make better choices than others.
• Illusion of control, overestimating their influence on events and mistakenly thinking their actions will be effective.
• Power, a sense of control that produces overconfidence in their ability to make good decisions and to overestimate what they think they know, potentially leading to excessive risk-taking.
• Self-serving bias, evaluating ambiguous information in a way more beneficial to their interests than to the organization.

Evidence suggests that strategy developed through consensus decision making produces better organizational outcomes than that developed through leader-centered decision making. Our research shows that that organizations rated excellent or good are a third more likely to commonly use consensus decision making for strategic decisions rather than leader-centered decision making.

Nothing happens without execution

"The greatest strategy is doomed if it’s implemented badly." – Bernard Reimann

Even when organizations create a strategic plan, there is failure. According to the Balanced Scorecard Collective, more than 70% of organizations with a plan fail to implement it. For these organizations, planning is an exercise, not a core process. (Please note that even Bain & Company calls strategic planning a tool, not a process. I think that’s a disservice.)

The Balanced Scorecard Collective also reports that 60% of organizations don’t link strategy and budgeting. Hand in hand with implementation issues, a disconnect between strategy and resource allocation often exists. Resources are not focused on implementation.

The answer

“By failing to prepare, you are preparing to fail.” - Benjamin Franklin

The bleak picture of the use of strategic planning painted by the data presented above calls for an answer. The response could be, "Who cares?"

If strategic planning coupled with effective implementation were not such a powerful process for driving greater success, one might say "So what?" to the news that many organizations don't plan or implement.

Yet, way beyond the sample of one offered by SpaceX, extensive, repeated, solid research shows that organizations that plan and implement well do better.

Here's the proof

A while back, I uncovered a scholarly analysis I had not seen referenced elsewhere, conducted by a Danish researcher, published in 2010. It's a "meta-analysis" of 45 years of research involving 88 studies of the impact of strategic planning involving 32,472 organizations. The study concludes definitely that strategic planning improves performance, both in quantitative and qualitative terms.

The research was conducted by Anders McIlquham-Schmidt, now at Copenhagen Business School in Denmark. His published work has the imposing title, "A meta-analytical review of the relationship between strategic planning and corporate performance." You can read it yourself at http://www.hha.dk/man/cmsdocs/WP/2010/2010_01.pdf.

For the data geeks in the crowd, here are the correlation coefficients. For the normal people, what you need to know is that the greater the positive number (with 1.00 being the maximum possible), the greater the favorable relationship that shows that conducting strategic planning produces the resulting performance measure.

In McIlquham-Schmidt's analysis, qualitative performance measures (non-data geeks, that means measurable stuff), had very high correlation coefficients, r. To be specific, the analysis shows high positive correlations between planning and key quantitative measures of performance, from earnings per share to return on net worth, as follows:

• Earnings per common share +0.79
• Return on invested capital +0.64
• Return on owner’s investment +0.58
• Change in return on invested capital +0.56
• Return on net worth +0.42

Impact is more than financial

“It is interesting to note that those businesses that perform at the highest levels usually have some sort of formalized strategic plan in place and have implemented it well. On the other hand, those businesses that struggle usually have no plan in place and seem to flounder in their attempts to be successful." - Chris Arringdale

Even better, from my perspective as a person educated in quantitative analysis but as much a "soft measures" person, the analysis also shows positive correlations between planning and performance for less tangible but very important qualitative measures, including attainment of the organization’s objectives. (Non-data geeks, here's an example of using a qualitative measure. When a supervisor is asked to evaluate an employee's attitude on a 1-5 scale, that's using a qualitative performance measure.)

• Attainment of profit objectives +0.51
• Community acceptance +0.48
• Service efficiency +0.47
• Attainment of corporate objectives +0.44

Even better outcomes from a quality process?

Let's note that this conclusive evidence about the efficacy of strategic planning does not even look at the the quality of the planning and implementation process that the organizations studied used.

I think we can surmise that the "better" planners and implementers were more likely to drive desired, positive results than those who indeed planned but planned and implemented poorly. Certainly some of the underlying studies considered in McIlquham-Schmidt's meta-analysis show this to be the case.

Debate settled?

"Planning is bringing the future into the present so that you can do something about it now." - Alan Lakein

Can we now agree that any past debate about the positive impact of strategic planning has been put to rest? Can we get on with making creation of an engaging vision of greater future success and engaging in smart and effective planning and implementation a core process in the organizations we care about?

I would hope so!

Why not envision your own version of SpaceX's "Mars settlement," your shared view of what great success can mean for your organization?

Why not focus your organization on creating and implementing strategies to get to that inspiring future vision?

Why not start now?

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Only rarely have I promoted my firm, Forrest Consulting, on this blog. The focus of Strategic Thinking & Strategic Action is thought leadership, not marketing. However, in this case I am compelled to offer up Forest Consulting as a solution, because we are uniquely equipped to help organizations find a stirring vision, "plan to be great" and execute their plan. Turn to us for:

Better strategy. Have us facilitate creation of your strategic plan for greater success. We will tailor our agile planning system to fit your organization's needs. We can obtain stakeholder input; develop an environmental scan and a SWOT analysis, facilitate the planning sessions to create the vision, strategies, action steps and more; and draft the plan report. Our experience and tools will help you drive successful implementation.

Better decisions. Use our counsel and facilitation skills to help your Board, team or group be more effective and reach goals. Our expertise and research uniquely equip us to help leaders make and execute great strategic decisions.

Better results. Ask us to help you craft and execute "best practice" approaches to tackling strategic issues and opportunities. Our value is enhanced by our broad strategy, management, marketing and communications experience.

Let's talk. Give me a shout any time you want to have a 15-minute conversation to explore how we can help your organization craft and execute great strategy for greater success.

Email [email protected]
Cell 1-630-730-9619
Office 1-630-909-9360
LinkedIn www.linkedin.com/in/lee-crumbaugh-506266
Website: www.forrestconsult.com

Thank you!

Lee Crumbaugh, SMP

 

Thank you for our connection!

Twenty five years ago, before social media, British anthropologist Robin Dunbar found a correlation between primate brain size and average social group size. He theorized that humans can only maintain about 150 current stable relationships with other individuals. (Dunbar, 1992)

Today, in the age of social media, our close relationships are still limited, but most of us have what sociologist Mark Granovetter calls "weak ties" with  many, many more people. (Granovetter, 1973)

STRONG OR WEAK, OUR CONNECTIONS ARE IMPORTANT

Here's the thing: The people with whom we have weak ties can be just as important to us as those with whom we have strong ties. 

Granovetter writes, "More novel information flows to individuals through weak than through strong ties. Because our close friends tend to move in the same circles that we do, the information they receive overlaps considerably with what we already know. Acquaintances, by contrast, know people that we do not and, thus, receive more novel information. Moving in different circles from ours, they connect us to a wider world. They may therefore be better sources when we need to go beyond what our own group knows, as in finding a new job or obtaining a scarce service.” (Granovetter, 2005)

So, whether you are a close friend or an acquaintance, I value our connection. Thank you for being connected with me.

THANKING PEOPLE IS RIGHT...AND POWERFUL

A sincere "thank you," being grateful for the others in our life and what they mean to us, can go along way, both for the person we thank and for us.

Do you know that when people are thanked, they tend to take more actions to help others because they feel socially valued? (Grant & Gino, 2010)

Does it surprise you that people who are more grateful have access to a wider social network, more friends, and better relationships, on average? (Amin, 2014)

Research shows that whether being grateful is a trait or is triggered by another person's kindness, gratitude is linked to increased "prosociality," 
which is behavior intended to benefit others? (Ma, Tunney & Ferguson, 2017)

BEING GRATEFUL IS INFECTIOUS

Here's good news: Your gratitude can infect the group. Gratitude can spread, through group emotional contagion, the transfer of moods among people in a group. In groups experiencing positive emotional contagion, members experience improved cooperation, decreased conflict and increased perceived task performance. (Barsade, 2002)

Cooperative behavior cascades in human social networks. Individuals are influenced by fellow group members’ contribution behavior in future interactions with other individuals who were not a party to the initial interaction. Further, this influence persists for multiple periods and spreads up to three degrees of separation - from person to person to person to person. And clusters of happiness can result from the spread of happiness in groups. (Fowler & Christakis, 2008)

The value of being connected grows when one's connections spread across different groups. People who connect across groups have information, timing and arbitrage advantages that make them more likely to detect and develop rewarding opportunities. These "network brokers" tend to be better compensated, more positively evaluated, more likely candidates for senior positions, and more recognized as leaders in their organization and industry. On average, they are 50% more successful than those who do not engage in brokering but just interact with individuals like themselves. (Burt, 2004)

IMPORTANT FOR PLANNING AND IMPLEMENTATION

The research on the value of connections and impact of gratitude not only has personal and professional implications, it has organizational implications.

Think about it: When we bring loosely connected stakeholders and even outsiders into the planning process for voices and thoughts beyond our own, we are enabling the group to provide new information and access to their networks.

Likewise, making sure those involved in the planning know they have our sincere gratitude for their involvement and contributions seeds improved cooperation, decreased conflict and potent performance gains, that is, greater commitment to and involvement in implementing the plan.

I am grateful for our connection and your interest in strategic thinking and strategic action!

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References

Amin, A. (2014)."The 31 Benefits of Gratitude You Didn’t Know About: How Gratitude Can Change Your Life." http://happierhuman.com/benefits-of-gratitude/

Barsade, S.G. (2002). "The Ripple Effect: Emotional Contagion and its Influence on Group Behavior." http://journals.sagepub.com/doi/abs/10.2307/3094912#

Burt, R.S. (2004). "Structural Holes and Good Ideas." American Journal of Sociology. 110 (2): 349–399. ISSN 0002-9602. doi:10.1086/421787

Dunbar, R. I. M. (1992). "Neocortex size as a constraint on group size in primates." Journal of Human Evolution. 22 (6): 469–493. doi:10.1016/0047-2484(92)90081-J.

Granovetter, M.S. (1973). "The Strength of Weak Ties" (PDF). Amer. J. of Sociology. 78 (6): 1360–80. JSTOR 2776392.

Granovetter, M.S. (2005). "The Impact of Social Structure on Economic Outcomes". Journal of Economic Perspectives. 19 (1): 33–50. doi:10.1257/0895330053147958.

Grant A.M. & Gino F.  (2010). "A little thanks goes a long way: Explaining why gratitude expressions motivate prosocial behavior." J Pers Soc Psychol. 2010 Jun;98(6):946-55. doi: 10.1037/a0017935.

Fowler, J.H. & Christakis, N.A. (2008). "Dynamic spread of happiness in a large social network: longitudinal analysis over 20 years in the Framingham Heart Study Research." http://www.bmj.com/content/337/bmj.a2338.

Ma, L. K., Tunney, R. J., & Ferguson, E. (2017). "Does gratitude enhance prosociality?: A meta-analytic review." Psychological Bulletin, 143(6), 601-635.
http://dx.doi.org/10.1037/bul0000103.