The material was prepared by Svyatoslav Biryulin, CEO of Sapiens Consulting.
The word “strategy” in Russian business practice has become overgrown with numerous myths, the most hot distributors of which are, according to our observations, people who have never developed a strategy. One of the main complaints about business strategy is that the classic strategic toolkit was developed many years ago, during the industrial revolution, and is unsuitable for the current digital age. I will try to show that it is not.
The spread of ideas of rejection of the strategy as a management tool in Russia was promoted by Nassim Talleb with his “black swan”.
The idea of a "black swan", that is, an unpredictable external factor, was liked by businessmen because it frees them from having to plan ahead. What is the point if something happens that you are not ready for? But the strategic planning tools allow us to expect a smooth business development, in the absence of negative scenarios, and at the same time prepare for risks and unforeseen situations. Relatively speaking, to the "black swans". To do this, strategic management has the tools of risk management and scenario planning.
But the main thing - the modern world is changing not only faster than before, but also much more predictable. Of course, it was impossible to foresee the currency crisis of the end of 2014, it is really a “black swan”. But there are not so many such “swans” in the life of ordinary business, mostly the time and efforts of its creators go not to overcome crises, but to fight for the consumer, for sales, for primacy over competitors. And this, on the one hand, every day becomes more difficult, on the other - the world has become global, not only in the technological, but also in the information sense. There are hundreds (and if you read in English, thousands) information sources at your service, and free of charge, which allow you to get an idea of current consumer and technological trends.
It’s easy to imagine the main development vectors of the technological vector of our country, it’s enough to get an idea of what is happening in the United States or China in this sense, and you don’t even need to leave your office to do this - just go online. At your service are reviews, analytics, trends, forecasts - almost for any market, for any product.
The Achilles' heel of long-term planning is the inability to accurately predict the future. What will be our market in three years? What will our consumer be in three years? What, accordingly, should be our product in three years? Previously, it was much harder to predict than now.
Uncertainty of the future does not exempt from planning. The future is always uncertain and always about the same as in the Middle Ages and in the 21st century. But management, whatever one may say, is decision-making in the face of uncertainty; the manager never has all the information for decision-making anywhere. This is part of the concept of "doing business".
Russian companies most often use only one plan for management - an annual budget. Others prefer to plan the future with short financial sprints, one quarter ahead. But both methods have a common flaw - they both contain only financial indicators. And then, comparing the plan with the fact, you, too, at best, will be able to compare some financial indicators with others. But no financial indicators will answer your question: "What exactly do customers not like your product, and why its sales are falling?".
An additional disadvantage of the annual budget is that, say, in November, the company has a plan of work just a month in advance. The old year is ending, the new budget has not yet begun, and sometimes huge federal companies in early December clearly understand what they will have to do only twenty days in advance.
Maybe this is scary? Maybe in the era of universal agile and should manage the company?
Most business decisions are long-term - whether you like it or not. Buy a new chair or hire a new secretary, this, of course, is not a strategic decision. But such decisions should take no more than 10% of your time.
To recruit a new team or do the old? Expand staff or wait? Open a representative office in Singapore or Nizhny Tagil? Buy a new equipment or wait for the results of the season? You make all these decisions now, and you will see the consequences at best next year. Even the decision to train employees or save on training will not significantly affect your business in the next month. But after a year or two, you may regret your choice - or rejoice at his vision.
Of course, simply moving the “buy” button on the website to another corner of the screen is not a strategic decision. But such decisions in your life, if you are a businessman, are extremely few. Most issues are long-term, and to make decisions on them, we need a long-term plan. Otherwise it is irresponsibility.
Concept of strategy
Let's look at the problem of strategic management otherwise. Let's see what is meant by the concept of "strategy", and ponder what can be not necessary companies in a fast paced world.
We follow the classic approach to strategy development. It implies:
- Analysis of the macro environment (world and local economy, key political, social and economic trends) and forecast of its changes for 3-5 years.
- Analysis of the microenvironment (market, competitors, consumer) and the forecast of its changes for 3-5 years. For this analysis, we use market research, industry reviews, and any other relevant and reliable sources. For visualization, you can use the Porter model 5 forces or any other options that the soul asks for.
- Analysis of the internal environment of the enterprise, its strengths and weaknesses. Each company has its own DNA, each business can do one thing well, and cannot do it at all - the other. Each company has its own competencies and experience, and this should be taken into account when developing plans. If you know how to bake bread well, but are weak in logistics, is it worth discovering the direction of bread delivery?
- Analysis of the enterprise’s activity in recent years, search for successful and unsuccessful projects to more accurately determine the strengths. Portfolio analysis - a portfolio of projects, products, businesses.
- The search for the best combination of the company's strengths and the capabilities of the external environment is where the development strategy is born, at this intersection point. This is done using SWOT analysis. Maximum success can be achieved by a company that uses its advantages in the market where they are most in demand.
- Selection of basic vectors of development strategy: differentiation, focusing or cost leadership. The choice of development options for Ansoff.
- The formulation of long-term goals - 4-6 main (and accurately digitized) development guidelines for 3 years.
- Decomposition of objectives at the operational level. Matrix of goals, moving from 4-6 macro objectives to 30-40 goals of a lower level.
- Drawing up plans: an action plan (for the year ahead in detail, another two - enlarged), development budgets, a financial model.
- Development of a balanced scorecard for operational control of the implementation of the strategy. Yes, it is not enough to develop it, we must also implement it.
The toolkit of strategic management is described in sufficient detail in various literature. For example, in the book M. Peteref, J. Gamble, A. D. Strickland III, A. Thompson "Strategic management. Creating a competitive advantage."
The concept of a business model is vividly and convincingly described in the book by A. Osterwalder and I. Pigne, Building Business Models.
I also recommend the works of M. Porter "Competitive Strategy" and "Competitive Advantage", as well as F. Kotler: "Strategic Management for Kotler".
Once again, with my mind’s eye on the resulting list, I understand that you cannot throw a word out of this song. The exclusion of even one of the tools automatically devalues the entire document, since there is a clear logic in this order of reasoning and decisions: from the general to the particular, from the market and the consumer to internal plans and projects.
What other document can link changing consumer requirements for product quality and production plans? What other document can combine the requirements for the level of service (or, say, the level of reserves) with financial indicators or with plans for the development of personnel? Only strategy. And if you don’t have a startup that is allowed to make pivots almost once a week, but a serious company, you don’t have a strategy.
What has really changed in comparison with the 20th century is the frequency and speed of updating the strategy. Previously, it could be developed every five years and live quietly along it. Now fine tuning has to be done at least annually, sometimes, in extreme cases, more often. But this does not mean that the need for strategic planning has disappeared.