How Relevant is Long-Range Strategic Planning?
If competitive advantage is no longer sustainable, then what? Jim Heskett examines the latest thinking from Rita McGrath, who attacks aging strategies for long-range planning. What do YOU think?
by James Heskett
From time to time thinking converges around a set of ideas. For us this month, the topic is strategy planning and organization. Conventional thinking and organization that has encouraged us to seek sustainable competitive advantage in the past is being questioned in today's business environment. Some are even suggesting that the mind set that has given us strategic planning concepts such as SWOT (strengths, weaknesses, opportunities, threats) analysis, the "five forces," growth share matrices, five-year plans, and an emphasis on core competencies of the firm may lead to competitive disadvantage in a technology-transformed world in which markets, employee and customer mind sets, and innovations, evolve at a rapid rate.
The conversation was stimulated (can it be 16 years ago?) by Clayton Christensen's work leading to his book, The Innovator's Dilemma. In one sense, the book was mistitled. Some of its most salient material concerned issues confronting large corporations facing innovative upstarts with disruptive ventures, the non-innovator's dilemma. But it also dealt with the challenges of achieving innovation in a world of entrenched ideas about how products are developed and used. Implicitly, the book questioned traditional concepts of strategic planning in an environment populated by increasingly innovative and agile competitors.
Now comes a new book, The End of Competitive Advantage , by Rita Gunther McGrath. Hers is a frontal attack on accepted strategic planning methods designed, in her opinion, for another time. These are methods based on the presumption that competitive advantage is sustainable. It's a presumption that she claims "creates all the wrong reflexes" in a world in which the best one can hope for is "transient competitive advantage."
McGrath's prescription for achieving transient competitive advantage includes such things as smaller, faster, more agile organizations--and where management-by-consensus is a thing of the past. The emphasis is on marshalling rather than owning assets, including talent. In order to ensure the appropriate deployment of these assets from one opportunity to another, it will be necessary to recentralize control over the resource allocation process, moving it out of strategic business units (SBUs). It raises questions about the relevancy of SBUs as opposed to transient teams as a form of organization.
These organizations engage in "shape shifting" based on systematic innovation and the constant testing of assumptions, all required to maintain transient advantage. They are organizations designed to create and test options, practicing "continuous deployment," doing things "fast and roughly right" rather than relying on strategic planning as we have known it.
McGrath makes her points forcefully, but laments the slow rate at which these changes are being adopted in large organizations. If these ideas are so powerful, she asks, "why hasn't basic strategy practice changed?" Is her thinking on target but just a bit ahead of the curve? How relevant is long-range strategic planning and its assumptions of sustainable competitive advantage? What do you think?