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Digging So Deep We Can’t See the Sun

Forest for the Trees
The question today is can we take it too far? Can we over-analyze ourselves into a corner as it relates to strategy?

I think the answer is yes.

We can take things too far. We can take business analysis so far that we actually get to a point of confusion, where we lack clarity, or worse, to a point where we get concerned about so many options that we are afraid to take action because of all the potential outcomes that we can see.

This relates to the importance of scenario planning.

But up to a point. There is value in scenario planning and understanding the potential good news or bad news or change in assumptions that we want to assess over the strategic planning horizon. But at some point, it can become too much.

At some point, we truly can get into analysis paralysis, to quote a cliché. And that is dangerous. That’s a dangerous place to be.

Why?

Because we begin to focus at a granular level, on details, when what we really need to do with the strategic planning discussion is focus on the big picture and the long-term. Classically, it’s the “unable to see the forest for the trees” problem.  We need to be focused on major trends that will impact our business/customers, and major initiatives that as an organization we want to take on. Or new areas for exploration in the market, new places that we can drive business, new customer groups that we can address, the needs, the trends, general direction, priorities that we need to take from an action perspective in order to take advantage of opportunities or to mitigate potential risks.

What a ramble .  . .

But we should be focused on everything except excruciating details when we plan strategy.

Over analysis, over scenario planning can really kill good strategic planning. What does this look like? What does the bad part look like? The bad part looks like discussing details and trying to assess every potential market change on our long-term forecast. You might recognize this if you and your team are asking questions like: “do we think that the risk of price is 10% or 12%.”  If you are, I hope that 2% is gonna make a big difference in your strategic decisions.


A real example of detail killing business strategy

I’ll give you a specific example. In a recent team meeting, we were working on our long-range strategic plan for the business that I run in Europe. And part of the corporate expectation of this process was not only did we need to build our base set of assumptions by product (over a 5-year horizon), keeping in mind our business constitutes of approximately 40 products, but also for us to explain the net sales and/or profit impact of every change and every assumption that we had within our base business and within our potential good news and bad news.

That is to say we had a baseline forecast for our business; outlined all the key assumptions that were most probable. And then we had to outline all of the other potential future scenarios (for our key customer segments (4) and for all 40 products).

And the specific follow-up question was always the same: “Well, how much could that impact your business?” The required answer is a specific sales number as well as profit number. Also, we needed to quantify in terms of more detailed assumptions, for example, market share or market growth. But essentially, we have to choose. Is it market growth? Is it market share? What is the variance year over year? Can we do better? How would we do thing differently?

Keeping in mind, we’re doing this for 40 products over 5 years and the variability, year over year, of the key factors that are underlying our primary strategy. Our approach into new markets and new territories is getting overlooked. The core strategic elements are getting overlooked; taking second priority for the focus on minute assumptions.


And this is where strategic planning can fail

When we focus so much on the granular detail, trying to understand to a dollar-level the impact of a particular actions or decisions. We end up with fewer decisions, more non-controllable factors, more questions and so more paralyzed.

So this is something, for me, very important to keep in mind as we do our strategic planning. This is an activity to focus on the big rocks. Focus on the major initiatives, major issues, and major trends. And focus on the major variables (positive or negative) that we could have as it relates to our business, looking at the future and the key drivers of that business – major shifts in demand, major shifts in customer groups, major shifts in pricing. These are some of the core components that we would expect in a good strategic plan.

The tactical, granular, real detailed numbers analysis can come out of our short-term or mid-term tactical plan as we identify specifically the actions we need to take. But that is after we have our final strategic priorities and know where and how would we need to adjust those actions based on potential shifts overall in the market.

Focus on the big rocks. Focus on the major trends. Focus on the changes that you need to be aware of and action to maintain a strong and successful business.

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