Planning: Has been around for a long time; involves planning out activities.
Strategy: A relatively newer discipline.
Strategic Planning: Often a misnomer; it combines planning and strategy but mostly focuses on activities rather than actual strategy.
Differentiating Strategy and Planning
Strategic Planning in Business: Often not true strategy, just a list of activities (e.g. improving customer experience, opening new plants, talent development).
Result: Lack of strategy means these activities won't lead to satisfying outcomes for the company.
What is Strategy?
Definition: An integrative set of choices that positions you on a chosen playing field to win.
Components:
Theory: Why choose this playing field and how to win there?
Coherence: Theory must be coherent, doable, and translatable into actions.
Limitations of Planning
List without Coherence: Planning often becomes a comfort zone for satisfying internal departments without a coherent goal.
Comfort Zone: Focuses on resource expenditure (cost control) which is within the company's control.
Challenges in Strategy
Outcome-Focused: Specifies a competitive outcome; relies on customers who are not controllable.
Examples:
Southwest Airlines: Competed effectively by choosing a differentiated strategy focusing on cost control, efficiency, and targeting a specific market segment.
Strategic Risks vs. Planning Comforts
Plans: Comfortable because they involve spending decisions within control.
Strategy: Uncertain and challenging as it relies on market outcomes that can't be guaranteed.
Example: Air carriers vs. Southwest Airlines.
Escaping the Planning Trap
Embrace Angst: Recognize the nerves associated with strategy; it's natural due to uncertainty.
Proving in Advance: Strategy can’t be proven in advance unlike plans.
Logic of Strategy: Lay out clear, logical steps for the strategy.
Tweaking Strategy: Strategy should adapt based on market responses and outcomes.
Simplifying Strategy
One-Page Strategy:
Where to Play
How to Win
Necessary Capabilities and Management Systems
Goals and Aspirations
Underlying Logic: Define what must be true for success.
Continuous Adjustment: Keep watching and tweaking.
Conclusion
Planning Guarantees Losing: Focused on comfort but not effective.
Strategy Increases Chances of Winning: Though challenging, it provides a clearer roadmap to success.