Strategic planning helps marketers answer what to sell, who will buy it, and how to beat competitors in the marketplace. However, in today’s volatile and chaotic marketplace, some executives argue that it’s better to “fly by the seat of your pants” and skip forecasting. What happens when strategic planning is locked in the basement? Let’s look at two cases to find out.
It is tempting to confine “strategic planning” to the ivory tower of executive decision making. And taking into account that most CMOs don’t have a seat on the executive board; should marketers wash their hands of the topic? Not so fast, say the analysts at Gartner.
A report, “Top Ten Marketing Processes for 2008-2013“, clearly labels “strategic planning” as a concern of the marketing discipline.
Strategic planning involves taking into account the necessary systems, people, resources and processes needed to design and execute a future picture. And while it can be argued that today’s marketplace is simply too complex, interconnected, and unstable to plan and prepare for anything longer than a twelve month timeframe, the following cases show the importance of keeping the future firmly in front of you.
“The Smartest Guys in the Room” is a story about the rise and fall of Enron. The book details what happens when you take really smart individuals, and put them together in no-holds barred, survival of the fittest cauldron with loose rules and even looser ethics.
One of the more interesting quotes is from Jeff Skilling, the former CEO of Enron who said, “I think strategic planning is the antithesis of building a corporation.” Jeff really was one of the smartest guys in the room and he said many brilliant things during his tenure at Enron. However, this phrase wasn’t one of them.
Jeff believed in a “let the cream of the crop rise to the top” type of management style, where players would duke it out in a Darwinian/Machiavellian manner. If an initiative made sense, had the political backing of players in the firm, and promised to make oodles of money, it was usually funded. At Enron, strategic planning was locked in the basement. And we all know how the Enron story ended.
In “House of Cards“, William Cohan chronicles the rise and fall of Bear Stearns. In a similar “locker room” mentality to that of Enron, managers were very insular and most were Bear “lifers” (they started their careers at the firm).
In a culture that was free wheeling, excessive, and pretentious, there was little room for strategic planning. Cohan writes, “(At) Bear the historical view of the firm is that they don’t plan. They don’t have business plans. At one point they were proud the only thing that was planned was the executive dining room. Everything else was opportunistic.”
In fact, former CEO and Chairman Ace Greenberg said, “What our positions look like at the end of the day is long range planning as far as I am concerned.” At Bear, strategic planning wasn’t locked in the basement; it never existed in the first place.
In California’s San Joaquin Valley, the fog sometimes gets so thick that when driving you can only see 200-500 feet in front of your car. These pervasive hazes are dangerous to all drivers because they literally have no idea what’s ahead–drivers are lucky to see the tail lamps of the lead car! It could be open road ahead, or a fifty car pile-up. Limited visibility can be extremely dangerous.
We cannot hold the lack of strategic planning solely responsible for the downfall of Enron and Bear Stearns. There were too many other factors at play to draw this conclusion. However, it is also clear that when management has little visibility into upcoming adverse events (ex: credit crisis)–all heck can break loose, and possibly devolve into cataclysmic results.
Where is marketing’s responsibility in this?
Marketers should not only have a pulse on customer wants/needs but also sentiment. Customers are pretty smart–they often “sniff” trouble or sign of a potentially adverse event coming long before we can. Marketers need to understand what customers are saying and thinking. We need to discern what constitutes a critical mass and tipping point. We need to have the mechanisms in place (not just social media) to capture and act upon this feedback.
With our eyes wide open, and backed with historical and near real time data (quantitative and qualitative) analysis we should be able to help our companies navigate times of stress.
Marketers–don’t let your company become next case study for lack of strategic planning. We have a responsibility to our companies, customers and ourselves to let strategic planning out of the basement.
* A HBR article, Bringing Customers into the Boardroom argues, “In too many companies, marketing is poorly aligned with strategy.” Do you agree? If so, why do you think this is the case?
* Will involvement in strategic planning help get marketing back on the CEO’s agenda?
* Author Nassim Taleb says that humans tend to, “Focus on the minutiae instead of the large (unexpected and devastating) impact events.” If you agree with this statement, what is a potential solution?
Tags: adverse events, Bear Stearns, Black Swan, Enron, forecasting, Jeff Skilling, strategic marketing, strategic planning
Good post, Paul. I fail to see how any business, large or small, can operate without a business plan or a clear marketing strategy. Often, entrepreneurs start up businesses with an innovative product or service idea. They don’t always have a plan. As they grow, they usually find out they had better put a plan in place, because competition and fluctuations in the economy make it tough to navigate the business otherwise. This takes leadership on everybody’s part. That includes the CMO. It seems to me if CMOs take the lead and push for strategic planning and marketing alignment to the C suite (even if they don’t currently have a seat at the table), they would earn respect. Of course, in some companies the culture might be prohibitive for them to do that easily. It should still be done with tact and grace. After all, CMOs have also been placed in a leadership position, haven’t they? Otherwise, where is their sense of responsibility to the company’s progress and well-being?
Ted, thank you for taking the time to comment. Since most CMOs don’t have a seat at the executive table, it’s going to be very difficult to “take the lead and push strategic planning”. Ultimately, I am very interested in expanding marketing’s role to its rightful place and reducing it from being synonymous with the marketing communications function. Easier said than done, right? How can this best be accomplished within an organization?
Paul,
I agree with Ted’s lead–it is irresponsible for a strategic plan to be absent a marketing and a sales plan, complete with an objective, measurable goals, strategies and tactics. Furthermore, the plan should include past, present and future state analysis.
In my corporate experience with three large companies, it did not matter whether or not a department head sat on the Senior Executive Team. Every department was required to build a strategic plan, which determined its annual budget and each plan became part of the company’s overall plan.
In each of the three companies, the plans were reviewed quarterly and results reported back to all managers for either corrective action because the quarterly goals were not met, or an “atta boy/girl, you’re doing great.”
Plans not only create accountability, they invest every employee in the successes or failures of a business.
Hi Paul,
Given the speed with which things are happening and the current economic climate, marketers had better have an overall strategy in place. And yes, it should be aligned with a company’s overall strategy–if there is one. But in the absence of one, marketers need to develop their own. How can they allocate their marketing dollars effectively without one? Effective marketing encompasses having a big picture, long view that is tempered by constant monitoring of day-to-day feedback directly from customers and sales data to make adjustments to our plans and our messaging. Getting bogged down by minutiae is not helpful to the cause of marketers; if some are doing that, they need to recognize this proclivity and correct it. As with all things, marketers need to find balance, manage their time and resources wisely, and show leadership.
But strategy has to also be implemented, right? Analyzing information from daily customer interactions should be marketers’ focus especially when markets are increasingly uncertain and tumultuous. This is the best way to meaningfully connect with customers, and adapt their products and services to customer needs and wants. Inbound marketing as Lewis always says, is likewise very important. There are no shortcuts; real work must be done to raise the visibility of the company and its products/services to more potential customers. Yet, many marketers are still primarily focusing their diminishing advertising budgets and outbound marcom first. So I would say that strategy as well as execution and constant tweaking are necessary. Especially now.
Lewis, thank you for taking time from your busy day to comment.
Strategic planning isn’t sexy. It’s quite frankly usually a once a year exercise. But to your point, it’s irresponsible for companies to not have “marketing” input into a strategic plan regarding customers and competition.
Marketers have the ability to help predict the future based on capturing, interpreting and disseminating the warning signs. With a pulse on the customer, we also have the ability and knowledge to help architect and design the future for our companies. But we need to make sure our input is given and even better- solicited. It is my estimation that a credibility problem for marketing in the eyes of the CEO/CFO remains…
Claire, you bring up two compelling points for deeper introspection. First, you said that, “But in the absence of (a strategic plan), marketers need to develop their own. How can they allocate their marketing dollars effectively without one? You also said, “Many marketers are still primarily focusing their diminishing advertising budgets and outbound marcom first.”
Indeed so. How many marketing budgets are tactical first and strategic second? How many have a strategic three year plan coupled with their tactical one year plan? How many CMOs require their directors to perform justification for their marketing budgets instead of just assigning a number? And why, year over year, do marketing budgets usually shrink instead of increase? It is possible that marketers don’t understand their customers as well as they think they do? How do we get out of being defined as a “back end” or support function? Final question, how many companies require their marketers at year end to show results from the marketing budget?
We’re quickly running out of excuses…
Paul, while I agree on the message of your post, I think that Enron and Bear Stearns are not the best case to confirm the theory. My point is that both of them, as many other players in finance, played a dirty game to make as much money they can as fast as they can: so, in some way they had a clear strategy, not a marketing one, but a goal and a strategy for achieve it.
Maybe, a better case could be GM or Chrysler still producing and launching SUV when the world was looking for vehicles.
Gianandrea, thank you for your comments, you know that I always appreciate them.
While there may be better cases for showcasing the danger of little to no strategic planning, I believe that Enron and Bear fit the mold. While they may have been driven by greed, hubris and recklessness, I don’t believe either company was in the market just to make as much money as they can and then get out. Afterall, Bear had been in business for 84 years when it collapsed.
The lack of strategic planning may work under non-volatile conditions or on the run-up to a bubble bursting, but without a vision of the future firmly in front of you (and adjustments based on market conditions to ensure that vision), companies won’t last long. This is especially true in today’s global marketplace where those “1 in 100 year” adverse events seem to be happening every 3-5 years.
Or to paraphrase Marshall Goldsmith, what got you here isn’t going to take you forward.
Paul,
You are singing one of the tunes I am a broken record on over and over and over again. The crux of the matter is not just that the CMO doesn’t have a seat at the table – “annual” planning takes the place of “strategic” planning. And we all know how messed up annual planning is. The CMO could be the facilitator of annual planning and begin to turn that into a strategic process, if they have the stomach, the band width and the tenacity to want to sit in the center of the storm. One great stride, for example, would be for the CMO to facilitate agreement on an annual customer plan. How many did we lose, or gain and why? What part of the experience should we focus on, and what parts of the operation have a role in that…and THEN build the annual plan from there. Starts to smack of “strategic” customer management, right? That Harvard article is one that I referenced in my book, Chief Customer Officer,and gets to the second key point you mention, which is that managing customers as the asset of the business still hasn’t found it’s way to be elevated consistently as a board level topic. But it CAN be. This is new work, this “human duct tape” work that has to be layered on top of the current definition of CMO work. Some are doing it (finally) and finding that it elevates the work and helps to drive the strategic direction.
Jeanne
Jeanne, your comments are appreciated.
I realize that lament regarding the role of the CMO in strategic and board level discussions is a tired topic. It’s not sexy nor exciting. Unfortunately for the past five years (since the HBR article), the needle hasn’t moved in a positive direction for CMOs.
You made some compelling points in your comments and I especially liked when you said, “One great stride, for example, would be for the CMO to facilitate agreement on an annual customer plan.” This is a terrific idea and one that most certainly would have support and attention from the CEO.
Paul, thanks for your answer. “The lack of strategic planning may work under non-volatile conditions or on the run-up to a bubble bursting, but without a vision of the future firmly in front of you (and adjustments based on market conditions to ensure that vision), companies won’t last long. This is especially true in today’s global marketplace where those “1 in 100 year” adverse events seem to be happening every 3-5 years.”
How I cannot agree with this statement?
Anyway, the Bear we knew lately was not definitely the Bear as it was originally.
Gianandrea, thanks for adding to the discussion. As a follow up note, some companies that diverged from their core operating principles and business models area finding in this “Great Recession” that it’s time to get back to basics.
This is one example: http://www.ft.com/cms/s/0/85ea7f16-74c3-11de-8ad5-00144feabdc0.html
Strategic planning should include the every aspect of business. That is why people call it strategic.
What I find interesting is that using your gut ALONE to make decisions is celebrated so consistently.
Everyone wants to be the cowboy, the pioneering maverick who makes the call unhindered by data.
No one wants to be the number-crunching guy who read the marketing research report, consulted with operations, processed the analysis, and said here’s what we should do.
Even Jack Welch–at the helm of Six Sigma, analysis up the wazoo GE–wrote about how he preferred to do things “from the gut.”
Particularly as the economy shows some signs that it might be perking up a bit, we hear all this talk about marketers “hitting the reset button.” It’d be nice to think that in hitting the reset, an emphasis on developing a strategy on which to base decisions as a first step in the marketing process would replace some of these old fly-by-the-seat-of-your-pants habits.
Some good timing on your post, Paul
Kevin, I appreciate your comments and expertise.
There are many that argue that we live in uncertain times, with much volatility, and uncertainty. And while we most certainly cannot claim to know exactly what tomorrow will bring, we must prepare for outcomes with a strong probability via scenario planning. I am sure you’ll agree that Marketing should have an integral role in these discussions.
Paul in relation to
“Ultimately, I am very interested in expanding marketing’s role to its rightful place and reducing it from being synonymous with the marketing communications function. Easier said than done, right? How can this best be accomplished within an organization?”
One of the best ways to shine is to be the best at a certain aspect of the business. Maybe if the marketing team became the best at creating and the “Executing” on their portion of the strategic plan then management would say “hey these marketing people over here are really good at doing what they said they would do”.
We have a sort of manifesto in our company around that you can see it at http://bit.ly/M5Wj8
I’ve found most super senior people and board members pay the most attention to the people who are continuously executing.
Thanks, Ed Loessi
[...] However, in today’s volatile and chaotic marketplace, some executives argue that it’s better to “fly by the seat of your pants” and skip forecasting. What happens when strategic planning is locked in the basement? Let’s look at two cases to find out. read original column [...]
[...] Was your company prepared for the coming financial crisis that would happen later that year with Bear Stearns and Lehman Brothers collapsing? Even better, look further back to April 2, 2007 when New Century [...]
In today’s highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in
Strategic Planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.