Dynamic Strategic Planning: Achieving Strategic Flexibility through Formalization

Article excerpt

In this article, we present findings on strategic thinking and decision making that result from a series of interviews with executives from six firms in the forest products industry. Drawing from these interviews, the executives suggest that much of their firms' financial success or lack thereof is derived from their form of strategic planning. Firms which are the most financially successful use a dynamic strategic planning process that combines key elements from both formalized and ad-hoc strategic planning through the addition of strategic flex-points. Poorly-performing firms often adopt a reactive approach to opportunities or threats compared to their more successful competitors and are unable or unwilling to change.

The competitive landscape for many industries has dramatically changed, forcing managers to reconsider not only the content of their strategic plans, but also the processes they use to develop and implement those plans. The five hundred billion dollar global forest products industry is a good example of this change. This once highly fragmented and relatively stable industry which employs approximately 10 million people worldwide has undergone a competitive transformation (Hansen, Dibrell, & Down, 2006; Sande, 2002). The forest products industry is now characterized as being highly competitive with enormous market pressures generated by the mounting number of global forest product competitors through the opening of US and other world markets; the consolidating efforts of the industry by the largest forest products firms; the increasing downstream market presence of retail category killers; and the emerging substitute products of concrete, plastic, and steel. In essence, this once very stable industry has dramatically changed with increased competitive pressure.

Many managers did not see this approaching competitive storm on the horizon, because many of these managers relied on a reactive planning process with a limited emphasis on long term strategic vision. These managers focused on the day-to-day operations of producing a commodity-like product at the lowest cost for consumption in the general marketplace (Sande, 2002). Managers from these firms have been forced by marketplace necessity to reevaluate their industry positions and broaden their strategic planning perspectives.

From a strategic planning perspective, there are two fundamentally opposing strategic planning process views: the "deliberate" view (Ansoff, 1991) and the "emergent" view (Mintzberg, 1990, 1991, 1994a, 1994b). A deliberate strategy is a strategy that was intended (planned) and subsequently realized. An emergent strategy is a strategy that was realized but never intended (either because no strategies were planned or those that were planned were not implemented). The deliberate approach to strategic planning might be described as top-down, rigid, mechanistic, and efficient in contrast to a description of an emergent process that is informal, flexible and empowering.

The emergent planning style is based on a more organic, reactive, learn-as-you-go approach with broad strategic objectives and means of accomplishing those objectives (Mintzberg & McHugh, 1985). The emergent strategy is criticized for being too reactive to external threats and opportunities (Hendry, 2000). It is important to acknowledge that the realized strategies of most companies will be some combination of emergent and deliberate. Even as Mintzberg advocates a shift away from deliberate toward emergent strategies, he concedes that "in practice, of course, all strategy making walks on two feet, one deliberate, the other emergent" (Mintzberg &r McHugh, 1985: 163).

There is a paucity of research exploring the optimal combination and support systems associated with deliberate and emergent strategic planning approaches, and how this optimal strategic planning approach translates into greater firm financial performance. Hence, the purpose of our article is two-fold. …