Annual planning ≠ strategy

From a

McKinsey interview in 2007⁠

, Richard Rumelt talks about the importance of separating the process and resourcing planning elements of an organization from strategy work:

Now, lots of people think the solution to the strategic-planning problem is to inject more strategy into the annual process. But I disagree. I think the annual rolling resource budget should be separate from strategy work. So my basic recommendation is to do two things: avoid the label “strategic plan”—call those budgets “long-term resource plans”—and start a separate, nonannual, opportunity-driven process for strategy work.

That doesn’t mean that resource planning and strategy are in independent; they are two sides of the same coin. The point here is to not confuse one with the other.

While it’s important be to opportunity-driven, that doesn’t mean you wait for opportunities to knock on your front door. You need a systematic process for surveying the landscape, talking to your customers, analyzing competitors and changes in capitalization, reviewing new research, and objectively assessing your own capabilities.

Another good section is his take on positions:

Strategic thinking helps us take positions in a world that is confusing and uncertain. You can’t get rid of ambiguity and uncertainty—they are the flip side of opportunity. If you want certainty and clarity, wait for others to take a position and see how they do. Then you’ll know what works, but it will be too late to profit from the knowledge.

and the importance of the entrepreneur:

There is no substitute for entrepreneurial insight, but almost all innovation flows from the unexpected combination of two or more things, so companies need access to and, in some cases, control over the right knowledge and skill pools.

Rumelt’s take on the dynamic nature of strategy plans very well into Simon Wardley’s topographic intelligence. Rumelt:

If the terrain never changed, that would be the end of the story. High ground is always high, and low ground is always low. But in business, unlike geology, change happens in years rather than millennia.

From Wardley’s “

On Playing Chess⁠

”

Strategy is all about observing the landscape, understanding how it is changing and using what resources you have to maximise your chances of success.

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