The Real Value of Strategic Planning

Most companies invest a significant amount of time and effort in a formal, annual strategic planning process — but many executives see little benefit from the investment. One manager told us, “Our planning process is like a primitive tribal ritual — there is a lot of dancing, waving of feathers and beating of drums. No one is exactly sure why we do it, but there is an almost mystical hope that something good will come out of it.” Another said, “It’s like the old Communist system: We pretend to make strategy and they pretend to follow it.”

Management thinker Henry Mintzberg has gone so far as to label the phrase “strategic planning” an oxymoron.1 He notes that real strategy is made informally — in hallway conversations, in working groups, and in quiet moments of reflection on long plane flights — and rarely in the paneled conference rooms where formal planning meetings are held. Our own research on strategic planning supports Mintzberg’s observation: We found that few truly strategic decisions are made in the context of a formal process. But we also found that, when approached with the right goal in mind, formal planning need not be a waste of time and can, in fact, be a real source of competitive advantage. See “About the Research.”) Companies that achieved such success used strategic planning not to generate strategic plans but as a learning tool to create “prepared minds” within their management teams (to paraphrase Louis Pasteur).2