Why the customer is king in strategic planning

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Making career choices can be agonizing; I know it was for me. I followed a couple of avenues that failed to deliver the type of challenges I needed before getting into management. Even then, I had no clear idea of where it might lead. I just kept improving my skills and capabilities, with a watchful eye on where the next opportunity for advancing my career might come from. This approach meant I switched between industries a few times, giving me varied experience that eventually became a positive differentiator on my résumé. Most of you reading this will have gone through a similar process, and even if your career had some false starts like mine, you will have got to where you are today because you made choices.

I guess making career decisions is much harder in today’s job market where there is considerably more competition and far greater uncertainty. But we still have to face up to the hard choices to progress our careers. That is not something that can always be said of companies. Faced with a future that would appear to be both unknowable and uncontrollable, some appear to have slipped into the false comfort that it is best not to make too many firm choices, and instead let strategy emerge as events unfold to make the future clearer. Back in the 1970’s, Henry Mintzberg —still lecturing, writing and tweeting at the age of 75 —made the distinction between deliberate strategy that resulted from systematic business planning and emergent strategy, which he saw as a wait-and-see approach that came about as a company responded to a variety of unanticipated and unconsidered events.

Beware of extremes in strategic planning

Mintzberg recognized that most companies pursue strategies that lay somewhere on a continuum between the extremes of completely deliberate and completely emergent, which he saw as ideal types. He wanted managers to develop a strategy but at the same time he wanted them to carefully monitor for changes in their environment and constantly make course corrections to their strategy.

Such an approach to strategy formulation is entirely compatible with the best practice approaches to scenario analysis that I wrote about here. If scenario analysis is concerned with identifying plausible futures, then strategic planning is concerned with moving the company to a sustainable position in the most likely future — all the time monitoring critical events and technologies that will lead to that future and being ready to re-orientate as necessary.

Those companies that spend little time on strategic planning leave themselves exposed to the whims of an emergent strategy. Many believe that their markets are large enough to accommodate their growth aspirations without too much planning, or that they are a “fast-follower” and can rapidly adapt to changes in their markets. Adopting an emergent approach to strategy is clearly risky for a large company with a high level of fixed assets. However it may be entirely the right approach to strategic planning for a start-up technology company exploring which vertical markets to double down on or an entrepreneurial business unit of a large organization.

At the same time, being over-zealous in adopting a deliberate approach to strategy formulation can be risky too. This is because companies can easily immerse themselves in the detailed planning of revenue, operating expenses, and capital expenditure, and quickly delude themselves that they now know and can control the future. They clearly cannot. They might be able to control costs in the future, but only customers create revenue. That is why strategic planning should always focus on the changing needs of customers and how anticipated changes in market size and market share combine to generate future revenue streams. This is exactly the functionality Anaplan has packaged in its Market Share and Growth Forecasting app.

For me, mixing emergent and deliberate approaches is the best way of making career choices too. Sure there is a risk of waiting and seeing what comes up. But if you only have one ambition in life, failure can mean overwhelming disappointment, and by that time, your singular focus may have led you to close down too many other options. Making career choices and strategic planning have much in common. In fact the only difference is that while the first is about creating tomorrow’s you, the second is about creating tomorrow’s customers. In the next blog post in this series, I will explore what customer-centric strategic planning means in practice.

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