Code Brain | Peter Drucker: Strategy Is Not Planning "What to Do in the Future"

Strategic planning prepares an enterprise today for an arriving future. It asks: "What should our business be?" It asks: "What must we do today to possess the future?"

Strategic planning requires making risky decisions, requires systematically abandoning the past, and requires clear definition and assignment of the work needed to create the anticipated future. The goal of strategic planning is immediate action.

01

What Strategic Planning Is Not

Managers need to be clear about what strategic planning is not.

1. It is not a magic box or a bundle of techniques. It is analytical thinking, the commitment of resources to action

In the strategic planning process, many techniques may be used, but no single technique is indispensable. Strategic planning may employ computers, but the most important questions — "What is our business?" or "What should it be?" — cannot be quantified or programmed into a computer. Modeling or simulation may be helpful, but they are not strategic planning, merely tools for specific purposes. They may or may not be applicable to a given situation.

Quantification is not planning. To be sure, in strategic planning one should use logically rigorous methods as much as possible, if only to make sure one is not fooling oneself. But some of the most important questions can perhaps be expressed only in qualitative terms, such as "larger" or "smaller," and "sooner" or "later." These are not amenable to quantitative techniques. There are other equally important areas — political climate, social responsibility, or human resources (including managerial resources) — that are not quantifiable at all. They can only be handled as constraints or boundaries, not as factors in an equation.

Strategic planning is not the application of scientific methods to business decisions. It is the application of thought, analysis, imagination, and judgment. It is responsibility, not technique.

2. Strategic planning is not forecasting. It is not designing the future. Any attempt to design the future is foolish; the future is unpredictable. Attempting to design the future only makes us doubt what we are doing

If anyone still harbors the illusion that human beings can predict even a short time ahead, let him look at yesterday's newspaper headlines and ask which of them anyone could have foreseen ten years earlier.

We must first accept as a premise that prediction as a human activity is highly uncertain, and that beyond the very shortest periods, it is worthless. Strategic planning is necessary precisely because we cannot predict.

An even stronger reason why forecasting is not strategic planning: Forecasting always attempts to find the most probable course of events, or at best a probability range. But the entrepreneurial problem is a unique event that will change the probabilities. The entrepreneurial world is not a physical world but a social world. Indeed, the central contribution of entrepreneurship is to drive a unique event or undertake a unique innovation that changes economic, social, or political conditions. The reward for this contribution itself is profit.

Xerox did this when it developed and marketed the copier in the 1950s. The entrepreneurs of manufactured housing did the same in the 1960s, when the trailer became a new type of permanent fixed housing and captured virtually the entire low-cost housing market in the United States. In the 1950s, Rachel Carson's book Silent Spring was such a unique event that changed humanity's entire attitude toward the environment. In the social and political sphere, this is precisely what the civil rights leaders did in the 1960s, and what the women's rights leaders did in the early 1970s.

Because entrepreneurs disrupt the probabilities on which predictions rest, prediction cannot help planners who seek to chart a future direction for an organization; nor is it of much use to planners who want to innovate or change how people work and live.

3. Strategic planning is not concerned with future decisions, but with the futurity of present decisions

Decisions exist only in the present. The question the strategic decision-maker faces is not what the organization should do tomorrow, but rather: What must we do today to meet an uncertain future? What futurity must be built into present thinking and action, what time spans must we consider, and how do we use this information to make rational decisions now?

A decision is a time machine that synchronizes many different time spans into one time — the present. We are only now beginning to understand this. Yet we still tend to plan for what we will decide to do in the future. This may be interesting, but it is useless. We can only make decisions in the present, but we cannot make them only for the present. The most expedient, most opportunistic decision — not to mention the decision not to decide at all — may commit us for a long time, perhaps permanently and irrevocably.

4. Strategic planning is not an attempt to eliminate risk

It is not even an attempt to minimize risk. Such an attempt can only lead to irrational and unlimited risk, and inevitably to disaster.

Economic activity means committing present resources to the future, that is, to expectations that are highly uncertain. The very nature of economic activity is risk-taking. An important economic theory, Boehm-Bawerk's Law, demonstrates that only through greater uncertainty — that is, greater risk — can existing means of production yield greater economic performance.

02

What Strategic Planning Is

We can now attempt to define strategic planning. Strategic planning is a continuous process that includes: systematically making present risk-taking decisions with the greatest possible knowledge of their futurity; systematically organizing the efforts needed to carry out these decisions; and through systematic, organized feedback, measuring the results of these decisions against the expectations that went into them.

1. Abandoning the past

Planning starts with the objectives of the business. For every objective area, one must ask: "What must we do now to attain our objectives in the future?" To attain future objectives, the first thing to do is "abandon the past." Most planning concerns only the new things one must do: new products, new processes, new markets, and so on. But the key to doing something different in the future is to stop doing the unproductive, obsolete, outdated things of the past.

Therefore, the first step in planning is to ask of every activity, product, process, or market: "If we were not already committed to it, would we now go into it?" If the answer is no, the next question is: "How can we get out — and quickly?"

Systematically abandoning the past itself is a plan — and one appropriate for many businesses. It forces people to think and act, frees people and finances for new things, and creates willingness to act.

Conversely, a plan that only specifies what new things to do without specifying what old, established things to abandon will not achieve results. It will always remain a plan and never become reality. Yet most long-range plans of businesses (and even more of government agencies) say nothing about abandoning past decisions, and this may be the main reason these plans never produce results.

2. What new things must we do: when

The next step in planning is to ask: "What new, different things must we do, and when?"

In every plan, there will be areas where what seems necessary is simply to do more of what is already being done. But the wiser assumption is that what we are already doing will never suffice for future needs. Yet "what must we do" is only half the question. Equally important is "when," which determines when to begin the new tasks.

In fact, every decision has both "short-range" and "long-range" aspects. Take the investment in a steel mill: from project initiation to the earliest possible results (beginning to produce finished steel) takes five years — then five years is the short-range of this decision. To recover the mill's investment with compound interest takes twenty years or more — then twenty years is the long-range of the decision. The long-range of a decision is the length of time that the original decision must remain valid to prove its correctness — including validity in markets, processes, technologies, and plant locations.

But to talk of short-range planning and long-range planning is meaningless. Some plans lead to present action — they are genuine plans, genuine strategic decisions. Some plans talk about future action — they are merely dreams, or even excuses for not thinking, not planning, not acting. The essence of planning is to make present decisions with knowledge of their futurity. It is futurity that determines the time span, not the time span that determines futurity.

What requires a long gestation period before yielding results must be started early. Therefore, long-range planning requires knowledge of futurity: "If we want to achieve something in the future, what must we do now? What cannot be done if we do not commit resources now?"

To repeat a familiar example: If we know that Douglas firs in the Pacific Northwest of the United States take ninety-nine years to grow to pulpwood size, then the only way to have pulpwood-size Douglas firs ninety-nine years hence is to plant them now. Someone may invent a growth hormone, but if we are in the paper business, we cannot count on this actually happening. If a paper mill uses Douglas fir as its raw material, its planning cannot be concerned merely with twenty years but must consider ninety-nine years.

There are other decisions where even five years would be absurdly long. If our business is buying distress merchandise in lots and auctioning it off, then next week's clearance sale is the long-range future. Anything more distant usually does not concern us. Thus, the nature of the business and its decisions determines the time span of planning.

The time span is neither fixed nor given. In the planning process, the decision regarding time is itself a risk-taking decision, and to a large extent determines the allocation of resources and efforts, and the risks to be taken. Postponing a decision is itself a risk-taking and often irreversible decision — this cannot be repeated too often. To a large extent, time decisions determine the character and nature of the business.

In sum, what is crucial in strategic planning: first, to work systematically and purposefully toward objectives; second, to plan starting with abandoning the past, and to make this abandonment part of the systematic effort to achieve future objectives; third, to seek new ways to attain objectives rather than assume that doing more of the same will suffice; and finally, to think through the time dimension and ask: "When must we start work to obtain results on time?"

03

Everything Must Be Converted into Work

Unless converted into specific work, the best planning remains merely good intentions. The test of a plan is whether management actually commits resources and takes action to achieve future results. Otherwise, there are only promises and hopes, not plans.

A plan must be tested by asking the manager: "Which of your best people have you now put to work on this?" If the manager replies (as most will): "I can't take my best people away from their present work now. Only after they finish what they are doing can I let them prepare for tomorrow" — this manager is actually admitting that he has no plan, and also showing that he indeed needs one, for the very purpose of planning is to reveal where scarce resources — and the best people are the scarcest resource — should be deployed.

Converting plans into work means not only that someone must be assigned responsibility, but also accountability, deadlines, and measurement of results — that is, feedback on both the work and the planning process itself.

In strategic planning, measurement raises some severe, especially conceptual, problems. Yet because what we measure and how we measure determine what we consider appropriate, and thus determine what we see and what we (and others) do, measurement is extremely important in the planning process. Particularly important is that we must try to build expectations into planning decisions (and have a fairly clear idea of what significant deviations in time and value mean), so that we know early whether these expectations can actually be realized. Otherwise, we cannot plan. Without feedback, there is no self-control method from actual events back to the planning process.

The manager cannot decide whether or not to make long-range, risk-taking decisions; making them is the manager's calling. The manager can only decide whether to make them responsibly or irresponsibly, whether to strive for a rational chance of success or to rely on pure guesswork. Because the decision process is essentially a rational process, and because the effectiveness of entrepreneurial decisions depends on their being understood and voluntarily supported by others, the more rational, organized, and knowledge-based rather than prophecy-based the decision method, the more responsible and likely to be effective it is. Yet the end result of the process is not knowledge but strategy. Its goal is immediate action.

Strategic planning does not substitute facts for judgment, nor science for the manager. It does not even diminish the importance and role of the manager's competence, courage, experience, intuition, and even hunch — just as biology and medicine do not diminish these qualities in the physician. Rather, systematic work on planning and the knowledge it supplies strengthen the manager's judgment, leadership, and vision.

Source: Lingjiao Gongfang (领教工坊) — Peter Drucker: Strategy Is Not Planning "What to Do in the Future"

Link: https://mp.weixin.qq.com/s/77WDyM9DejDaBmKDttUAiA