Corporate planning

Corporate planning, diversification, deliberate strategy and environmental scanning (Igor Ansoff)

Igor Ansoff was the founding father of corporate planning. His involvement in strategic

management extends over several decades. Ansoff is a key figure in the school of strategy which extols a more logical approach and more deliberate approach to strategy

Major innovations:

Ansoff was famous for several things, notably:

• Establishing corporate planning as a formal management process.
• Popularising SWOT analysis
• Providing the Ansoff grid (Product/ Market grid) which helps to understand the level of risk involved in diversification strategies.
• Developing the idea of environmental scanning - and detecting weak signals - of disruptive environmental change
• Repositioning 'strategic planning' as 'strategic management' i.e. as part of a continuing process rather than a once-a-year (or less frequent) planning process.
• Debating with Henry Mintzberg on the advantages of deliberate strategies as versus emergent strategies.
• Gap analysis - looks at where the company is currently positioned and what it needs to achieve strategically to reach its goals.

Establishing corporate planning as a formal management process

SWOT Analysis

Ansoff's magnus opus 'Corporate Planning' emphasized the need to break down the strategy formulation process into a series of steps, distinguishing the following in particular:

• External analysis - understand market opportunities and threats
• Internal analysis - understand strengths and weaknesses
• Choice and or alternative
• Implementation

This model is by far (maybe with some refinements) is still used by MANY strategy consulting firms.

Whilst it is unclear what the precise origins of SWOT analysis were, it is very clear that Ansoff's popularization of this techniques not only made it the most commonly used strategic analysis technique but also an essential marketing analysis technique.

Ansoff Grid

The Ansoff Grid: this grid is one of the early strategy grid. Its virtue is its simplicity: it compares business development against existing versus new products against existing versus new markets; the main theory if stated clearly is that 'development into both new products and new markets simultaneously increases risk substantially and disproportionately'

Whilst being a cautionary warning, the extensive research on relative success of diversification indicates, that diversification of this kind does not necessarily reduce performance - provided that the company is exploiting its core competencies.

Repositioning 'strategic planning' as 'strategic management'

Ansoff took the innovative step of redefining 'strategic planning' as 'strategic management' in order to signify that:

Strategy is not something that one does simply to fall within an annual planning cycle, but as a continuous ongoing process.

Strategy is not just about responding to environmental change, but should involve creating a more favourable, competitive environment.

Environmental scanning

Ansoff emphasized the need to keep an on-going track of environmental change. In particular he emphasized the need to be sensitive to 'weak signals' in the environment, for example, signals that you are entering a new economic/ competitive era.

Often Ansoff's weak signals are anything but weak - September 11 was a strong signal that all businesses should be prepared for international disruption to its business network.

Gap Analysis

Gap analysis is one of the most fundamental but yet forgotten techniques of strategic management. The three variables to consider are:

1. Future performance given a 'do nothing' state of business.
2. Future performance given current plans.
3. Future objectives (Hamel and Prahalad - 'Strategy and Stretch')

The central issue to focus on here is that new (breakthrough) strategies should be created to fill the gap whilst gap analysis is an essential feature of any robust strategic plan it does have some drawbacks. The disadvantages of gap analysis are that:

• It can provoke panic to find things to throw into the gap - unless managers have a grounding in how to be strategically creative and how to appraise these potential breakthroughs.
• It can limit managers aspirations - to those objectives dictated by medium term financial objectives, rather than by the 'art of the possible'

Strategy and learning (Chris Argyris)

Argyris highlighted the importance of learning in teams - and of its anti-thesis, defensive behaviour. Chris found that the cleverer the team was, the more difficult it became to maintain openness to learning, and to avoid becoming defensive.

He described the process involved here as 'double loop learning'. Whilst single loop learning involved doing existing things better. 'double loop' learning meant doing existing things in new ways or inventing new things. Effectively, double loop learning involves reframing problems and sopping outside of existing mindsets.

The concept of double loop learning does sound technical. Argyris language is sometimes difficult to understand - this may be to make his ideas more profound! Unfortunately this has led to his work not being well recognized for its true value.

Argyris also pointed out that when managers are more intelligent they are typically more averse to making mistakes. Where they do make errors they may well deny them, or react defensively. Argyris calls this type of error 'self sealing' so that once the error is made they are covered up.

Argyris concern with strategy and learning places him close to Senge - who wrote about learning organizations. Argyris is more of the process school where he provides details on cognitive and political forces that shape emergent and incremental strategies.

Global competition (Christopher Bartlett and Samantha Ghoshal)