Quantitative Approaches to Strategic Planning
Quantitative Approaches to Strategic Planning or Qualitative?
Over the past few years, I’ve noticed a great increase in what I think of as automated strategic planning. Some heavily quantitative approaches (like balanced scorecard) can be part of a good strategic planning process. The problem I notice is that often, companies use these approaches as a substitute for good strategic planning. I’m a firm believer in using measurable data in your strategizing. When you use metrics as a substitute for strategic planning, however, you are asking for trouble. Here’s why overly quantitative or automated approaches have failed in the past – and will fail in the future.
Are you asking the right question?
In 1995, everyone in the world admired Kodak. They were high-tech, efficient and dominated their markets. By these measurements, Kodak was doing everything right – except they weren’t. We now know a lot about why that didn’t work out. In that situation, relying too much on metrics kept Kodak away from the fundamental, scary question some of us will face. How do we preserve the value of our strategic competency in a world where technology will make it irrelevant?
Does your strategic planning give you the flexibility to change when you need to?
The downside of automation is that it can lock you into a specific way of doing things. For example, McDonald’s restaurants are highly automated, and getting more so all the time. The drawback is that this automation, to be efficient, must deliver a specific product mix to a specific customer base. When that changes, the cost of changing the automation can be very high. The same is true of strategic planning. If your approach works for selling computer parts through your current distribution channel, it also makes other options more expensive. Efficiency may make this worthwhile – as in the case of McDonalds – BUT – you are sacrificing some strategic flexibility.
Do you know why your strategy will work?
I love numbers. I love data. Ultimately, though, numbers and data may tell us WHAT is happening, but not WHY it is happening. Qualitative exercises will continue to be the best way to understand why your strategy will or will not work. Case in point: parking. In our Simplified Strategic Planning seminar, over the past few years, I’ve mentioned that a world of ride hailing apps like Uber and Lyft. Paired with driveless cars, these services will inevitably reduce the need for parking spaces and parking services. Simple systems analysis tells us why. We need less cars, and they can spend their idle time in less expensive places. Measuring what was happening won’t tell us this, though current metrics are beginning to show that this analysis was valid. Airports are reporting that ride hailing service availability has correlated very neatly with a 7-9% decline in parking revenue. We know the number now, but we need qualitative assessment to understand why. Good strategic planning should always focus on WHY your plan will work, not measuring how much you assume it will.
Have you found other benefits to qualitative strategic planning exercises? Is your company currently losing steam because of overly automated approaches to strategy? If you’d like help with that, consider holding a one-day workshop on Simplified Strategic Planning.
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Robert Bradford is President & CEO of the Center for Simplified Strategic Planning, Inc. He can be reached at rbradford@cssp.com.
M. Dana Baldwin is Senior Strategist with Center for Simplified Strategic Planning, Inc. He can be reached by email at: baldwin@cssp.com
Co-Author, M. Dana Baldwin
Co-Author, Robert Bradford