James Dixon: Strategy as a Capability

The strategic planning process at many companies is often out of touch with the pace and realities of the market. James Dixon, a partner in Bain's Strategy practice, shares five key principles to ensure that planning is a strategic weapon and not a waste of time.

Read the transcript below.

JAMES DIXON: Imagine that you wanted to pull together a traditional five-year plan in 2010. Would you have predicted the explosion in mobile e-commerce? Or that China's GDP growth would decelerate by almost 40%? Or that Saudi Arabia would abandon OPEC and let oil prices plummet?

More importantly, would your strategic plan and your execution have been able to adapt and change with the times? We recently surveyed about 300 global execs and asked them to rate their strategic planning process. And while 60% of them rated their planning process effective, only 32% felt that it led to a strategy and an execution plan that was actually well-designed and executable and adaptable.

One of the problems is that the strategic planning process itself is annual in nature—PowerPoint slides, templates, endless budgetary debates—is often out of touch with the market reality and the pace that you need. We found that the best companies at this have turned their strategic planning process into a strategic capability. And while there's no one-size-fits-all for a strategic capability, we see that there are five key principles shared in common.

Your strategy planning and financial budgeting need to be tightly linked, but they're not the same thing. And many companies conflate them, and they allow the budget process to squeeze out the strategy process with all its bold ambition-setting and its strategic decisions.

The voice of the customer and the front line need to be at the center of the strategy. It's those customer-led insights that will lead to much better strategic decisions, and create a more inspiring mission for the organization.

Your resource allocation needs to be purposefully undemocratic. Do not take last year's budget and last year's strategy—like so many companies do—and add 10%. Every year, you need to zero-base it and really focus your resources on those most important critical battlegrounds.

Don't let the rotation of the Earth around the sun determine when you make your most important strategic decisions. You've got to break the stranglehold of the annual planning process, and, we suggest, move to a more issues-based running calendar. And then take those issues and those decisions when they need to get made, and change in the reallocation of your resources in light of those decisions on an ongoing basis. Don't wait for once a year.

We also find that the best teams really focus on the strategy first. They spend a lot of time making sure they get the strategy right, wrestle with those issues, and then they invest in a system and trust in a system to operationalize it and let it flow through the budget.

So stepping back, you should ask yourself, is your strategic planning process a competitive weapon? Or is it a waste of time? Is it something that's empowering your organization? Or is it something that the organization endures? And if you find it's not something that's helping the team have strategic discussions, think boldly, come up with innovative thoughts, then it's time for a change.

Read the related Bain Brief: Strategic Planning That Produces Real Strategy