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  • Writer's pictureGraham

The Psychological Challenges to Great Strategic Planning

Updated: Nov 2, 2023

Every company likes to think it's "strategic," that's it's got a vision and a solid, incorruptible plan that can realise it. Yet the truth is the strategies are often less than robust, and the plans don't take the company where it wants to go.

While strategic planning might be a corporate exercise, it is ultimately still conducted by people, which makes it a very subjective undertaking. There are various psychological challenges to the kind of long-term thinking that is necessary not just to create a strategy, but also to plan for it and execute it.

One problem is linear thinking. Our minds can cope with things staying the same, or changing at a constant speed. What we find difficult to get our heads around is acceleration, and there's a lot of acceleration around these days.

This acceleration represents what you might have seen described as exponential growth. Linear growth looks like 1, 2, 3, 4, 5, while exponential looks like 1, 2, 4, 8, 16. After just five steps, exponential growth is more than three times linear growth. After 10 steps it's more than 50 times larger!

This type of change is hard to understand, or even believe, yet it is quite natural and very common. The International Geosphere-Biosphere Programme monitored the impact of human activity on world, and produced some stunning charts showing the impact of exponential change. It is this kind of change that wiped out Kodak and Blockbuster.

Another problem is our obsession with predictions. Our minds are groomed to think about the very short term, where things are pretty stable and we can make reliable predictions about what will happen. Companies work on much longer timeframes, yet the individuals within them crave the same kind of reliability in their predictions about what will happen six months, 12 months or even three years out.

The result is a desire to crush the uncertainty of the future with information. The frenzy over big data a few years ago was an example of this faith in our ability to make predictions. In certain cases, it can work quite well. A British supermarket can reliably forecast from day to day how much Marmite it can shift. But three years ago it couldn't have predicted a 10 percent year-on-year rise in the purchase of healthy products as a result of a change in regulations. Data, therefore, can be very useful in the short term, but useless thereafter.

At the other extreme, our minds can simply shut down at the thought of the uncertainty of the long-term future. There are so many factors to consider, your mind simply throws its arms up in defeat. When I talked to business owners just ahead of Brexit how it would impact their companies, most told me the situation was so chaotic that they tried not to think about it. This is no way to run a business. The future isn't uniformly chaotic, and even seemingly unpleasant futures need to be assessed to effectively manage risk and, most importantly, to identify the areas of opportunity.

The final challenge is to create a plan that remains connected to the strategic vision through thick and thin. A strategy should identify the market opportunity and explain how it will be exploited, with a plan following on from that. The important thing isn't that the plan is executed like clockwork, but rather it is flexible enough to weather the inevitable surprises and deviations from expectations. Sometimes the vision is so fuzzy that no strategic planning could help realise it. Other times, the daily battle to survive quickly distracts attention from the original purpose of the plan. When it's time for people to raise their heads about the fray and look around, it's only then they realise they have lost direction.

Strategic planning is almost doomed to failure because of the expectations we attach to it. But by adjusting mindsets and applying the advanced tools of strategic planning and foresight, it becomes possible to create plans that bend but don't break.

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