What is the Right Strategy for Refreshing Your Strategy?
October 19, 2020
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Supply chains have reimagined almost every plan, source, make, deliver, service process with digital business transformation and COVID-19. But, have you thought about how your strategic planning processes should change as well?
’Tis the season to update strategic plans. The fall is the most common time for executive-level alignment on strategy updates going into budgeting for the next year. Besides planning sessions happening virtually — with noisy children, pets and workers in the background — this year feels a bit different. Many supply chains froze strategic actions during the most intense periods of COVID-19 and are now questioning how previous plans need to change for whatever comes next.
I believe that the more powerful question is not how does your strategy need to change, but rather, how should the process you use to create strategy change?
The next few quarters and years will remain very uncertain. No strategic plan you make today can effectively anticipate what things will look like next year. The main problem with annual strategy is it depends on assumptions remaining static and certain. Strategy reviewed only once a year is slow to react to changes and likely to become obsolete or irrelevant before implementation even begins. This was a challenge prior to COVID-19. Nearly 90% of CEOs surveyed in supply-chain-intensive industries identify that the pace of strategic change their business must pursue has increased over the past decade.1 In a Gartner survey of supply chain leaders, 76% felt that supply chain disruptions have increased over the last three years.2
Don’t Stop Long-term Strategic Planning
If we cannot trust our choices today to match the environment of the future, it makes it tempting to throw up our hands and say, “Why even do a long-term strategy?” There are two reasons:
You need to mobilize employees. Employees need a long-term direction. They are motivated by knowing what the organization is trying to accomplish and understanding how they contribute.3 It takes time to get thousands of people moving toward the same goal. You need something that stays consistent over time. Schneider Electric has used the Tailored Supply Chain vision for its strategy for almost a decade and it has taken it to No. 4 on the Gartner Global Top 25 and the No. 1 supply chain in Europe. Amazon’s vision of providing whatever customers want online has been consistent since the 1990s.
Competitive advantage. I find it simplest to boil down the point of supply chain strategy to creating a competitive advantage. Gartner has researched what helps supply chains thrive during times of disruption. We call this being “fit” versus “fragile.” Fit supply chains translate high-impact events into improved performance and competitive position, while fragile supply chains fall behind. When facing a disruption, fit supply chains prioritize decisions based on the long term and maintain investments for the long term.4
Help Your Strategy Planning Process Sense Shifts and Respond Faster
Employee alignment and advantage are two ways strategic planning needs to stay the same, even as uncertainty and fluid requirements increase. But, how does your strategic process need to change?
First, seek strategy best practices. In a recent survey, we asked supply chains how many of 13 strategy best practices they did. Only 1% of respondents did all of them and no single best practice was done by more than half of the respondents.4 Given the upheaval specifically related to COVID-19, there are two best practices to start now —update strategy continually to handle a faster pace of change and use scenario planning to plan amid uncertainty.
To balance the need for a steady direction to mobilize resources to change with the need to react to more fluid environments, leaders are starting to do strategy at two speeds. The traditional calendar based update with a three-year-plus long-term view and annual refresh combined with an emergent, continual strategy. Today, 15% of supply chains are now pursuing both strategic planning approaches.5 COVID-19 should accelerate this practice. Emergent strategy is activated based on the evolving context. As assumptions, disruptions and context changes occur, the portions of the strategy impact will be adjusted. This can be made more continual by increasing the frequency of partial strategy reviews to quarterly or monitoring for events that should trigger reviews.
While a well-known strategic planning tool, only 35% of supply chains use scenario planning during strategy exercises. COVID-19 should accelerate this practice. Use scenario planning to secure the best immediate outcome while preparing a range of suitable action plans to enact depending on how the situation unfolds. This reduces the time it takes to respond to emerging risks and opportunities.
When COVID-19 hit, we did not just update the content of our demand plans, we made our planning process more frequent so as the situation evolved, we could sense and respond better and faster. Many supply chains plan to keep this more frequent pace. We need to do the same with strategic planning. Yes, update the content of your strategy, but adopt strategic planning best practices to make strategic planning processes future-fit.
Senior Director Analyst,
Gartner Supply Chain
1 2019 CEO Survey: Growth Focus Maintained, Efficiency Focus Reemerges for CSCOs
2 Improving Decision Making in the Face of Disruptions
3 Survey Analysis: What Motivates Supply Chain Employees
4 Gartner’s Supply Chain Disruption Management and Impact Survey, 2020
5 Creating Supply Chain Strategy at the Speed of Business Change Amid Uncertainty