The Rise and Fall and Rise of Strategic Planning

I began to hear the debate about the value of strategic planning during my short engagement as an interim executive at an Internet company. When I joined the company in 1999 it was post-IPO and growing fast, primarily through acquisitions. I was one of the “grey hairs” they hired to inject some experience and sustainability. Of course, the first guard of young build-it-and-they-will-come technologists resisted the planning and process we were implementing, and hence the debate of its value. “We have to work and produce in internet time” was the thought. “In the time it takes to develop a strategic plan, the landscape has changed and the plan is worthless.”

There was some truth to that philosophy. Particularly since our competitors had the same perception, and wired on some of the best coffee venture capital could buy, they were working around the clock to beat us to a fickle and rapidly changing market that none of us really understood. It was an exciting and intriguing time for me, since I had just begun the Doctor of Management program and the environment was great fodder for my studies. But what intrigued me was how the chaos actually had some order and worked up to a point.

The Rise of Strategic Planning

Strategic planning in the United States has its roots in “long-range planning” when, in the 1970s, businesses began to place increased emphasis on environmental forecasting and external considerations in formulating and implementing plans (Pearce & Robinson, 1994). Subsequently, the positioning approach to strategic planning emerged – a planned, analytical approach often credited to Michael Porter of Harvard. The Porter philosophy of strategic planning, which was the dominant view of strategy formation during the 1980s, seeks competitive advantage based upon analysis of the external and internal factors that shape the industry. Strategic planners were analysts that focused on four forces; the threat of potential new entrants to the market, the bargaining power of supplies, the threat of substitute products and services, and the bargaining power of buyers. The vision and preferences of management were of secondary concern.

When technology and globalization cranked up the acceleration of change in the business landscape during the late 1980s and early 1990s, management began to grow frustrated with the increasing inaccuracy of the analysis that underpinned organizational strategy. Prahalad and Hamel (1994) popularized another school of thought about strategic planning that challenged the positioning school. In their view, strategy making is an emergent process, strategist can be found throughout the organization, and “formulation and implementation intertwined” (Mintzberg & Lampel, 1999, p.25).

Prahalad and Hamel also introduced the concept of “core competence” to the business world, espousing that organizations must use their evolving strengths to create change themselves rather than allow themselves to be limited by the industries in which they compete. This new thought inspired organizations growindg during the dynamic and volatile 1990s to look at strategy and managing through an intrielynew lens.

The Fall of Strategic Planning

Strategic planning is an emergent process based upon the core competencies of an organization. This was all that the entrepreneurial leaders of the fast-paced new economy had to hear to justify jettisoning their planners (or never hiring them at all) and taking strategy back. To the purists that held on to the notion that strategic planning was an analytical science, the king was dead. Even Porter, himself was conceding. In a 1996 Harvard Business Review article, he wrote that “developing a strategy in a newly emerging industry or in a business undergoing revolutionary technological change is a daunting proposition” (Downes & Mui, 1998, p. 5).Undoubtedly, the paradigm of strategic planning was shifting and the culprits of the shift were global competition, flexibility, dynamic responsiveness, and new technologies. No static “positioning” would do in such a rapidly changing environment.

Henry Mintzberg has long contended that Porter’s approach to strategic planning dismisses the concept of strategic learning (Mintzberg & Lampel, 1999). Mintzberg’s school of thought argues that the strategy of a company emerges through a collective process influenced by the preferences of its management and the culture of organization (Mintzberg, 1994). Though it appeared that this was the approach to planning that was so widely embraced by companies like the one in my experience, many companies merely used this shift as an excuse to abandon strategic planning altogether.

Abandoning the traditional approach without structure for a new one forced a reliance on management intuition and organizational culture which sometimes worked, depending upon leadership. The internet company in which I was a part was driven by a vision of being the world’s email provider. The culture supported that vision through an environment that was attractive to the workforce in demand during those times and that resonated with a sense of purpose. As a result, the work toward achieving the vision was getting done. The leadership, culture, and near-term outcome were examples of Mintzberg’s theory in practice. Strategy emerged from the vision and culture. As opposed to traditional strategic planning theory that vision/mission is the product of strategic analysis.

Of significance, however, is that the productive outcome in my example was short-lived, just as it was for many of the technology companies that could not sustain the deceptive expansion of the Internet bubble. The reason often cited for the technology bust is the abandonment of traditional management practices. Traditional strategic planning is one of those practices. The Internet messaging provider I worked for made nine acquisitions during the first year I was on board. Only four of those acquisitions were directly related to our vision and the business. The other five were questionable deals that appeared to only benefit the venture capitalists that had invested in the acquired companies. In other words, the acquisitions were not based upon a clear strategy to achieve leadership in the industry, as the vision espous

The Rise of the New Strategic Planning

At the time of this writing, we are in an economic downturn that has many organizations frozen or in retreat, which has the risk of making matter worse. But as an example of company that is continuing to sustain growth, consider Google. Five years ago, when it announced its IPO, Google’s founders also told the public that their decisions will be based upon the long-term interests of the company that were described in a strategic plan resulting from a thorough analysis of the search engine marketplace. But a key part of that strategy was two classes of stock – one for insiders, the other for everyone else. The insiders (management and employees) will have more voting power, ensuring that the organization’s strategy will continue to be heavily influenced by the preferences of management and the organization’s culture over other external factors.

Google’s continuing success demonstrates the effectiveness of strategic planning as the integration of both schools of thought, planned positioning as Porter presents it and an emergent learning process as Mintzberg describes it. The lesson may be simply one of evolution – new thought need not replace the old. We must learn how to best to apply all that we know to be effective – as we learn it.

Downes, L., Mui, C. (1998). The end of strategy. Strategy & Leadership. (26)5: 4-9.

Mintzberg, H., Lampel, J. (1999). Reflecting on the strategy process. Sloan Management Review. (40)3: 21-30

Pearce, J.A., Robinson, R.B. (1994). Strategic management: Formulation, implementation, and control. Chicago. Irwin Publishing.

Porter, M. (1996). What is strategy? Harvard Business Review.

Prahalad, C.K., Hamel, G. (1994) Competing for the future. Boston, MA: Harvard Business Press.