In the realm of business, the terms “planning” and “strategy” are often used interchangeably, leading to confusion. While planning has been a long-standing practice, strategy is a more recent discipline. The conflation of the two into “strategic planning” has resulted in a lack of clarity about their distinct roles. Roger Martin, a leading thinker on strategy and former dean of the Rotman School of Management, delves into the differences between planning and strategy, emphasizing the pitfalls of conflating the two.
5 Key Takeaways:
- Distinct Differences: Planning involves outlining activities, while strategy is about making integrative choices that position a company to win in a chosen field.
- Comfort in Planning: Planning is comforting because it focuses on controllable costs. Strategy, however, involves predicting outcomes based on customer preferences, which are not directly controllable.
- The Importance of Coherence: A strategy must have a coherent theory explaining why a company should operate in a particular field and how it can outperform competitors there.
- The Southwest Airlines Case: Southwest Airlines exemplifies a company with a clear strategy. They positioned themselves as a more convenient alternative to bus travel, focusing on point-to-point flights, using a single aircraft type, and avoiding traditional booking methods.
- Strategy as a Journey: Strategy requires continuous refinement. It’s essential to outline the logic behind a strategy, understand what must be true for it to succeed, and be willing to tweak it based on real-world outcomes.
The business world has long been familiar with planning—outlining activities and resources. However, the introduction of the term “strategy” and its subsequent merger with planning to form “strategic planning” has muddied the waters. Most strategic planning in business today lacks the essence of strategy. It’s merely a list of activities, such as improving customer experience or launching a new product, without a coherent goal.
So, what truly defines a strategy? At its core, a strategy is an integrative set of choices that positions a company in a chosen field in a manner that ensures victory. It’s a theory, a rationale explaining why a company should operate in a particular domain and how it can excel there. This theory must be coherent, actionable, and translatable into specific actions.
The allure of planning lies in its comfort. Planning revolves around costs, which are within a company’s control. Strategy, on the other hand, is about predicting outcomes based on customer preferences, which are inherently unpredictable. This unpredictability can be unsettling for many managers, making them gravitate towards the more controllable realm of planning.
A classic example of strategy trumping planning is Southwest Airlines. While major US air carriers were engrossed in planning routes, Southwest formulated a strategy to win. They positioned themselves as a more convenient alternative to bus travel, focusing on short, point-to-point flights, using only Boeing 737s, and bypassing traditional booking methods. This strategy, rooted in a clear theory of winning, allowed Southwest to grow exponentially, capturing a significant market share.
For those looking to craft a winning strategy, it’s crucial to embrace the inherent uncertainty. Recognize that strategy will always involve some level of angst. Lay out the logic behind your strategy, detailing what must be true for it to succeed. This clarity will allow for continuous refinement as the market evolves. Keeping the strategy simple, concise, and on a single page can also aid in its execution and adaptability.
- Embrace Uncertainty: Crafting a strategy involves navigating the unknown. Accepting this uncertainty is the first step towards formulating a winning strategy.
- Clarity is Key: A well-defined strategy, supported by clear logic, allows for continuous refinement based on real-world outcomes.
- Simplicity Wins: Overcomplicating a strategy can hinder its execution. Keeping it simple and concise ensures better adaptability and execution.
In the ever-evolving world of business, the distinction between planning and strategy is paramount. While planning provides comfort, it’s the strategy that offers a path to victory. Embracing the uncertainty inherent in strategy, laying out clear logic, and keeping it simple are the keys to crafting a winning strategy. As Roger Martin aptly puts it, while planning might feel safer, it’s the strategy that offers the best chance of winning.