Strategic thinking v. strategic planning

I wrote this Blog post m 2010; I decided to republish it in this new website because understanding the difference between strategic thinking and strategic planning still vital for management.

Academia has derived a wide array of theories regarding the distinction between strategic thinking and strategic planning. In this blog I would like to highlight a few points that I believe make this distinction particularly significant in terms of the outcomes of a company’s management approach.

  • Strategic thinking is the process by which the management of a company looks to the positioning of its organisation in the industry, focusing on its competitors, clients, substitutes and suppliers. This essentially refers to how to implement a unique value proposition so as to differentiate the product or service that the company provides from that offered by other firms present in the same industry.

  • Strategic planning is a means to organise strategic thinking around the company’s most important issues. A formal planning process is a useful tool to keep a company focused on the steps involved in the implementation of its strategy, so that it is not merely being driven by the day to day pressures affecting the organisation; pressure exerted by shareholders, new proposals, vendors pushing for the introduction of new machines or new raw materials, investment bankers, etc.

My experience tells me that unfortunately too often strategic planning (as it is implemented within many organisations) fails to support strategic thinking; on the contrary, often it inhibits strategic thinking.

In many companies the annual strategic planning meeting focuses almost exclusively on the financial aspects of the company, such as budgeting and assessments of next year’s growth rate. The strategic issues the company should focus its attention on are rarely discussed; these issues may range from attempts to pursue innovation to, in extreme situations, the steps needed to ensure the company’s survival.

It is vitally important that management give greater consideration to the strategy component of the term strategic planning. In its current form, strategic planning is in fact nothing more than financial planning!

Does your strategic planning process address basic questions with regard to your competitive advantage? Or does if focus predominately on the financial aspects of your business?

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