Strategic Planning: Friend or Foe?

Misti Walker
Strategic Planning: Friend or Foe? 1

In 1993, Henry Mintzberg, widely recognized in the field of strategic management

, published The Pitfalls of Strategic Planning, in which he shares the inherent
and realized shortcomings of strategic planning. Three years later, in 1996, Mic
hael Porter published one of several articles on the topic, entitled What is Str
ategy? Both men are widely respected in the field and while some of their ideas
are in congruence, many are at odds. In this paper, I will discuss the similarit
ies and differences among their views of strategic management.
Benefits of Planning Strategic planning has been in the business literature sinc
e the 1960s and, as Mintzberg points out, has enjoyed popularity at times when th
e marketplace was relatively stable, or experiencing continuous growth.
After all, planning is simply extrapolating past results, or an educated guess,
if you will. Planning is not strongly suited to instability or rapid changes in
the marketplace, he maintains. However, planning scholars have deemed every gene
ration since WWII to be the most turbulent. Yet, this fact has not affected the
popularity of strategic planning. Mintzberg contends that turbulence is the buzz
word used by planners to describe environmental changes that even the best laid
plans cannot effectively deal with. In essence, although plans are ill prepared
to tackle big changes in the marketplace, they are precisely what companies clin
g to in uncertain times.
Companies continue to plan for several reasons, such as to increase confidence,
guide employees, boost productivity, attain capital, and to acquiesce external s
hareholders.
This view directly conflicts with Porters competitive strategy theory wherein he
claims that a unique positioning strategy is necessary for a firms sustainability
. While Porter agrees that operational effectiveness (OE) is also needed for sus
tainability, he 2

rejects the notion that it is sufficient by itself. For a company to prosper, it

must have a unique strategic position coupled with superior OE. In the absence
of competitive strategy, firms must compete with one another on OE. While this s
trategy may work in the short term, eventually it will lead to competitive conve
rgence and stagnant profits.
Strategy Defined?
Porter and Mintzberg diverge on the topic of strategy.
While Porter sees strategy as an analytical process,
Mintzberg views it as a visionary or learning process.
In fact, Mintzberg contends that all three processes - that is, visionary, plann
ing, and learning must work in harmony for a business to be effective.
Mintzberg is emphatic that planning alone will only set a company back because s
trategies begin to emerge through these processes. and to force a business to de
velop a plan before its time leads to a loss of productivity and can ultimately
endanger the emerging strategy.
Porter, on the other hand, believes that strategic positions come from three sou
rces and often overlap.
The first source is variety-based positioning because it is based on the variety
of goods or services offered by the firm.
The second type of positioning is called needs-based positioning, or an attempt
to meet all or most of one groups needs.
The third positioning, access-based positioning, focuses on the means by which c
ustomers are served. This can be geographical or any method by which a firm acce
sses customers.
Mintzberg created the 10 schools of thought framework to aid in the confusion su
rrounding the field of strategic management.
Porter belongs to the positioning school, an analytical school of thought with b
eginnings in the military. Mintzberg belongs to the learning school of thought w
here it is believed that strategies emerge as part of the

learning process. This school of thought found its basis in education and learni
ng theory. Both schools of thought have important aspects to take away and key i
deas are summarized below.
As companies near what Porter calls the productivity frontier, incremental impro
vements in processes can no longer sustain competitive advantage.
As rivals quickly adopt best practices in the industry, homogeneity occurs. To c
ombat this trend, companies must identify their strategy - that is companies mus
t decide what to do and what not to do.
Porter suggests that trade-offs are necessary to maintain a sustainable strategi
c position. Simply put, by making trade-offs, companies decide to compete in cer
tain areas and not to compete in others. Consider the alternative, by trying to
be all things to all consumers, companies risk losing their unique position and,
ultimately, customers. Why? When a company has distinguished itself as a low co
st provider, for instance, it has chosen not to compete on quality. In other wor
ds, some strategies are complementary while others detract from one another. Ano
ther point about trade-offs is that the longer a company competes in any given i
ndustry, the more necessary tradeoffs are to maintaining competitive edge. This
is true because as the external environment goes through changes over time, new
opportunities will emerge within the industry. Industry incumbents will face tra
de-offs, such as whether to continue with the current strategy or shift focus in
response to the changes. The failure to choose eventually erodes a companys co
mpetitive advantage and causes flat returns. Both men agree that incumbent firms
in mature industries are at a disadvantage because as changes occur, newcomers
will have an easier time exploiting opportunities because they face no trade-off
s and do not have to deal with rich histories or complex business realignments.
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Examples Kodak, in the late 1990s, represented an excellent example of active ine
rtia. Kodak was a technologically innovative company that made the bulk of its p
rofits from film. With the proliferation and commoditization of digital technolo
gy, Kodak began to see its cash cow crumble. While Kodak was at the front of the
digital revolution, it was unable or unwilling to change course, perhaps not re
ady to admit to the slow death of its number one business. Because Kodak did not
respond rapidly or effectively to changes in the environment, it forfeited much
of the early digital camera sales to Asian competitors. As a result, by the tim
e Kodak entered the digital camera arena, profit margins had been squeezed by ea
rly competitors. The mistake made by Kodak was an unwillingness to choose. Becau
se film had been such a success in the past, the leaders of the company didnt wan
t to make the hard choice to go exclusively digital. Instead, the company combin
ed its digital division with the film division, in an attempt to introduce its d
igital line faster and more efficiently. However, these two strategies were not
complementary and success in one area most likely would mean failure in the othe
r. Another factor working against Kodak at the time was its rich hierarchical cu
lture left over from Mr. Kodaks time at the company. This way of doing business w
as a huge impediment to the company when it most needed to be flexible and innov
ative in order to adapt to changing market conditions. Threats to Strategy While
it may seem that market forces pose the greatest threat to a firms strategy, Por
ter asserts that more commonly it is internal struggles that pose the greatest r
isk to strategies. Specifically, (a) sound strategy is undermined by a misguided
view of competition, by organizational failures, and especially by the desire to
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grow (Porter, 1996). Take Kodak for instance. Technological advances threatened i
ts livelihood, but instead of capitalizing on the changes, Kodak simply wanted t
o wait for the digital trend to run its course. It is easy to see why the compan
y wanted to continue along the same course. That course was familiar, comfortabl
e and, at one time, very successful. This is the effect that Donald Sull calls a
ctive inertia, or contentment with the status quo (Sull, 1999). Successful compa
nies are more prone to this because past policies and practices have contributed
to their success, making it more difficult for these companies to face trade-of
fs. Porter suggests that for this very reason, companies should have a clear str
ategic position that changes only once a decade or so. The tool to use to respon
d to market changes, Porter contends, is the operational agenda, as it should be
dynamic, flexible, and constantly striving for best practices. Fittingly, even
companies with good strategies will suffer if operational effectiveness is not u
p to par.
Mintzberg states that companies infatuated with planning are, indeed, flirting w
ith dangerous behaviors in the workplace. The first of these behaviors is an ave
rsion to risk. The Kodak example highlights the fact that even industry leaders
must embrace risk and change, at times. This is because the marketplace is dynam
ic and influenced by many external forces. In the Kodak example, technological a
dvances wreaked havoc on the companys strategy. Kodak could have stemmed the loss
es if it would have embraced the new opportunity early on. Sull, Porter, and Min
tzberg all agree that industry leaders have the most to lose and are the least c
apable of responding to change. The second behavior that Mintzberg warns against
is conflict among planners and those for whom they plan. He argues that coordin
ation and planning are forms of
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control and that when a company engages in control, it risks drowning the sponta
neity and innovation of its employees. Recommendations While there are pitfalls
to strategic planning, the benefits strongly outweigh the risks. To minimize ris
k while obtaining the most value from a strategy, a company should adhere to the
se guidelines: Determine competitive positioning strategy Align all business act
ivities to support that strategy Employ a leader that is willing to say no Do no
t be afraid of calculated risk Practice continuity across all business functions
Works Cited
Hamm, Steve, Symonds, W. C. (2006). Mistakes Made on the Road to Innovation. . B
usinessweek, http://www.businessweek.com/magazine/content/06_48/b4011421.htm. Su
ll, Donald (1999). Why Good Companies Go Bad. Harvard Business Review, 77(4), 42
-50. Mintzberg, Henry (1993). The Rise and Fall of Strategic Planning. Macmillan
, Inc. 7

Porter, Michael (1996). What is Strategy? Harvard Business Review.

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