Following up on my post about OODA, I thought I'd expand a little on the reason for strategic planning and some specific methods I've used in the past to facilitate planning.
One of the important lessons that Colonel Boyd derived from his study of military history was the importance of decentralized decision-making and field-level initiative. As the military has applied Boyd's concepts on the modern battlefield, this lesson has been further reinforced. Quoting from the Boyd Wikipedia entry:
"... [T]he most effective organizations have a highly decentralized chain of command that utilizes objective-driven orders, or directive control, rather than method-driven orders in order to harness the mental capacity and creative abilities of individual commanders at each level."
This only works if you have (1) creative, intelligent commanders (or managers in business); and (2) a strategic framework that establishes common objectives and helps establish a context for orientation, the second "O" in OODA. This orientation context is vitally important -- I like to call it a "shared hallucination" of the company's place and purpose. Managers need the flexibility to make quick decisions, but unless those decisions are consistent with the overall strategy of the organization, the results can be haphazard and uncoordinated.
Clear, simple articulation of corporate strategy is crucial. I have primarily used two tools to help me do this: a recursive goal-objective-strategy-metrics approach to writing the annual plan, and a threat map.
In my recursive goal-objective-strategy-metrics approach, the CEO establishes the top-level plan. This plan is comprised of a single, overall goal for the company (a thing to be accomplished, not a mission statement), some key objectives that support the goal, the strategies necessary to achieve the goal and satisfy the objectives, and some metrics by which success can be measured. This top-level plan should fit on a single page.
The recursive aspect of this approach is that each of the strategies from this top-level plan becomes a goal for the next level plan. So if one of the top-level strategies is "Finish the product before Christmas," the VP of production gets this as her goal and will develop objectives, strategies and metrics to reach it. This can get pushed down even further into the organization, so departmental managers get an annual goal and articulate their objectives, strategies and metrics.
The beauty of this approach is that it rolls perfectly back up into the master plan. If you want to know why the art department is outsourcing to China, for example, you can see that it satisfies their goal of delivering all art assets in September for $1MM, which serves the higher goal of shipping for Christmas on budget, which serves the top-level objective of reaching cash flow break-even by the end of Q1. And if one of the lower-level strategies fails, if China outsourcing can't deliver by September, you can change it to something else consistent with the overall goal. And that change propagates up and down the chain.
In practice, I only used this tool at the top-level and one level down, as a way to coordinate strategy at the VP level. But it worked to keep everyone on the same page. Actually, the process of writing and critiquing the plan as a team was more important than the resulting document, because the process surfaced tensions, fostered debate, and led to a better plan.
The other strategic planning tool I really like is the threat map. The way I create a threat map is to put my business in the center of a series of three concentric circles. The first circle closest to the center represents the immediate, near-term competitive threats, the next circle represents the medium-term threats that might arise in certain circumstances, and the outer circle represents the long-term threats.
Radiating out from the center I draw several axes, representing the things that will make the company successful (or its key vulnerabilities). I then place the competitive companies and market trends on the map, in the temporal bands, near the axis along which they are attacking my company. In addition to clarifying competitive threats, this was actually a great way to see opportunities, set priorities, and think about candidates for alliance, business development, and acquisition.
For example, in the case of JAMDAT, we had three axes: intellectual property, distribution, and game quality/innovation. On our map, we identified EA early on as a medium-term threat to us via intellectual property, so we sought to license the most dangerous of their properties from them, effectively neutralizing their threat and co-opting their advantage against us for several years.
Another example: we identified content aggregators as threats to our direct distribution relationships with carriers. In response, we carefully avoided using them as an alternative to the lengthy carrier sales process, even at the cost of immediate and incremental revenue, so we wouldn't inadvertently strengthen the aggregators' collective market position against us. This is a perfect application of strategy to value creation; the default response of the sales team would have been to simply maximize revenue, but that would have diminished our long-term competitive advantage.
Ultimately, the threat map and the annual plan are just tools. Without intelligence, creative thinking, and decisiveness in execution, the best laid plans are worthless. These tools can help direct a good team, but they can just as easily reveal weak organizational design and bad hires. Caveat emptor.