The Fall and Rise of Strategic Planning

by Henry Mintzberg

Harvard Business Review

Reprint 94107 Harvard Business Review

JANUARY-FEBRUARY 1994

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ROBERT H. HAYES BEYOND WORLD CLASS: 94104 AND GARY P. PISANO THE NEW MANUFACTURING STRATEGY

NANCY A. NICHOLS SCIENTIFIC MANAGEMENT AT MERCK: 94106 AN INTERVIEW WITH CFO JUDY LEWENT

REBECCA HENDERSON MANAGING INNOVATION IN THE INFORMATION AGE 94105

HENRY MINTZBERG THE FALL AND RISE OF STRATEGIC PLANNING 94107

F. GOUILLART AND F. STURDIVANT SPEND A DAY IN THE LIFE OF YOUR CUSTOMERS 94103

N. NOHRIA AND J.D. BERKLEY WHATEVER HAPPENED TO THE TAKE-CHARGE MANAGER? 94109

ROBERT C. POZEN INSTITUTIONAL INVESTORS: THE RELUCTANT ACTIVISTS 94111

HBR CASE STUDY CINDEE MOCK THE EXPECTANT EXECUTIVE AND THE 94108 AND ANDREA BRUNO ENDANGERD PROMOTION

PERSPECTIVES TAKING ACCOUNT OF STOCK OPTIONS 94110

IN QUESTION BERNARD AVISHAI WHAT IS BUSINESS’S SOCIAL COMPACT? 94102

WORLD VIEW HOSSEIN ASKARI IT’S TIME TO MAKE PEACE WITH IRAN 94101

FIRST PERSON RICARDO SEMLER WHY MY FORMER EMPLOYEES STILL WORK FOR ME 94112 Planners shouldn’t create strategies, but they can supply data, help managers think strategically, and program the vision.

by Henry Mintzberg

When strategic planning arrived on the scene in planning often spoils strategic thinking, causing the mid-1960s, corporate leaders embraced it as managers to confuse real vision with the manipula- “the one best way” to devise and implement strate- tion of numbers. And this confusion lies at the gies that would enhance the competitiveness of heart of the issue: the most successful strategies are each business unit. True to the scientific manage- visions, not plans. ment pioneered by Frederick Taylor, this one best Strategic planning, as it has been practiced, has way involved separating thinking from doing and really been strategic programming, the articulation creating a new function staffed by specialists: stra- and elaboration of strategies, or visions, that al- tegic planners. Planning systems were expected to ready exist. When companies understand the difference between planning and strategic thinking, they can get back to what Strategic planning isn’t strategic the strategy-making process should be: capturing what the manager thinking. One is analysis, learns from all sources (both the soft insights from his or her personal ex- and the other is synthesis. periences and the experiences of others throughout the organization and the hard data from market reproduce the best strategies as well as step-by-step search and the like) and then synthesizing that instructions for carrying out those strategies so that learning into a vision of the direction that the busi- the doers, the managers of businesses, could not get ness should pursue. them wrong. As we now know, planning has not ex- Henry Mintzberg is professor of management at McGill actly worked out that way. University in Montreal, Quebec, and visiting professor While certainly not dead, strategic planning has at INSEAD in Fontainebleau, France. This article, his long since fallen from its pedestal. But even now, fifth contribution to HBR, is adapted from his latest few people fully understand the reason: strategic book, The Rise and Fall of Strategic Planning (Free Press planning is not strategic thinking. Indeed, strategic and Prentice Hall International, 1994).

Organizations disenchanted with strategic plan- and articulating the anticipated consequences or re- ning should not get rid of their planners or conclude sults of each step. “I favour a set of analytical tech- that there is no need for programming. Rather, orga- niques for developing strategy,” Michael Porter, nizations should transform the conventional plan- probably the most widely read writer on strategy, wrote in the Economist.1 The label “strategic planning” has Planners should make their been applied to all kinds of activities, such as going off to an informal re- greatest contribution around the treat in the mountains to talk about strategy. But call that activity “plan- strategy-making process rather ning,” let conventional planners organize it, and watch how quickly than inside it. the event becomes formalized (mis- sion statements in the morning, as- sessment of corporate strengths and ning job. Planners should make their contribution weaknesses in the afternoon, strategies carefully around the strategy-making process rather than in- articulated by 5 P.M.). side it. They should supply the formal analyses or Strategic thinking, in contrast, is about synthesis. hard data that strategic thinking requires, as long as It involves intuition and creativity. The outcome they do it to broaden the consideration of issues of strategic thinking is an integrated perspective rather than to discover the one right answer. They of the enterprise, a not-too-precisely articulated should act as catalysts who support strategy mak- vision of direction, such as the vision of Jim Clark, ing by aiding and encouraging managers to think the founder of Silicon Graphics, that three-dimen- strategically. And, finally, they can be programmers sional visual computing is the way to make com- of a strategy, helping to specify the series of con- puters easier to use. crete steps needed to carry out the vision. Such strategies often cannot be developed on By redefining the planner’s job, companies will schedule and immaculately conceived. They must acknowledge the difference between planning and be free to appear at any time and at any place in the strategic thinking. Planning has always been about organization, typically through messy processes of analysis – about breaking down a goal or set of in- informal learning that must necessarily be carried tentions into steps, formalizing those steps so that out by people at various levels who are deeply in- they can be implemented almost automatically, volved with the specific issues at hand.

Call an informal retreat “planning,” let conventional planners organize it, and watch how quickly the event becomes formalized.

108 DRAWINGS BY GARISON WEILAND Formal planning, by its very analytical nature, Planners would have people believe that planning has been and always will be dependent on the fails when it does not receive the support it de- preservation and rearrangement of established cate- serves from top management or when it encounters gories – the existing levels of strategy (corporate, resistance to change in the organization. But surely business, functional), the established types of prod- no technique ever received more top management ucts (defined as “strategic business units”), overlaid support than strategic planning did in its heyday. on the current units of structure (divisions, depart- Strategic planning itself has discouraged the com- ments, etc.). But real strategic change requires not mitment of top managers and has tended to create merely rearranging the established categories, but the very climates its proponents have found so un- inventing new ones. congenial to its practice. Search all those strategic planning diagrams, all The problem is that planning represents a calcu- those interconnected boxes that supposedly give lating style of management, not a committing style. Managers with a committing style engage people in a journey. Real strategic change requires They lead in such a way that everyone on the journey helps shape its inventing new categories, not course. As a result, enthusiasm inevitably builds along the way. Those rearranging old ones. with a calculating style fix on a desti- nation and calculate what the group must do to get there, with no con- you strategies, and nowhere will you find a single cern for the members’ preferences. But calculated one that explains the creative act of synthesizing strategies have no value in and of themselves; to experiences into a novel strategy. Take the example paraphrase the words of sociologist Philip Selznick, of the Polaroid camera. One day in 1943, Edwin strategies take on value only as committed people Land’s three-year-old daughter asked why she could infuse them with energy.2 not immediately see the picture he had just taken No matter how much lip service has been paid to of her. Within an hour, this scientist conceived the the contrary, the very purpose of those who pro- camera that would transform his company. In other mote conventional strategic planning is to reduce words, Land’s vision was the synthesis of the in- the power of management over strategy making. sight evoked by his daughter’s question and his vast George Steiner declared, “If an organization is man- technical knowledge. aged by intuitive geniuses there is no need for for- Strategy making needs to function beyond the mal strategic planning. But how many organiza- boxes, to encourage the informal learning that produces new perspectives and new combinations. As the The goal of those who promote saying goes, life is larger than our categories. Planning’s failure to tran- planning is to reduce managers’ scend the categories explains why it has discouraged serious organiza- power over strategy making. tional change. This failure is why formal planning has promoted strategies that are extrapolated from the past or copied tions are so blessed? And, if they are, how many from others. Strategic planning has not only never times are intuitives correct in their judgments?”3 amounted to strategic thinking but has, in fact, Peter Lorange, who is equally prominent in the often impeded it. Once managers understand this, field, stated, “The CEO should typically not be… they can avoid other costly misadventures caused deeply involved” in the process, but rather be “the by applying formal technique, without judgment designer of [it] in a general sense.”4 How can we and intuition, to problem solving. expect top managers to be committed to a process that depicts them in this way, especially when The Pitfalls of Planning its failures to deliver on its promises have become so evident? If you ask conventional planners what went At lower levels in the hierarchy, the problem be- wrong, they will inevitably point to a series of pit- comes more severe because planning has often been falls for which they, of course, are not responsible. used to exercise blatant control over business man-

HARVARD BUSINESS REVIEW January-February 1994 109 STRATEGIC PLANNING agers. No wonder so many middle managers have their strategies in much more personalized and in- welcomed the overthrow of strategic planning. All tuitive ways. they wanted was a commitment to their own busi- The Fallacy of Detachment. In her book Institu- ness strategies without having to fight the planners tionalizing Innovation, Mariann Jelinek developed to get it! the interesting point that strategic planning is to the executive suite what Taylor’s work-study meth- The Fallacies of Strategic Planning ods were to the factory floor – a way to circum- vent human idiosyncrasies in order to systematize An expert has been defined as someone who behavior. “It is through administrative systems avoids the many pitfalls on his or her way to the that planning and policy are made possible, because grand fallacy. For strategic planning, the grand falla- the systems capture knowledge about the task.” cy is this: because analysis encompasses synthesis, Thus “true management by exception, and true strategic planning is strategy making. This fallacy policy direction are now possible, solely because itself rests on three fallacious assumptions: that management is no longer wholly immersed in the prediction is possible, that strategists can be de- details of the task itself.”6 tached from the subjects of their strategies, and, According to this viewpoint, if the system does above all, that the strategy-making process can be the thinking, then strategies must be detached formalized. from operations (or “tactics”), formulation from The Fallacy of Prediction. According to the implementation, thinkers from doers, and so strate- premises of strategic planning, the world is sup- gists from the objects of their strategies. posed to hold still while a plan is being developed The trick, of course, is to get the relevant infor- and then stay on the predicted course while that mation up there, so that senior managers on high plan is being implemented. How else to explain can be informed about the details down below those lockstep schedules that have strategies ap- without having to immerse themselves in them. pearing on the first of June, to be approved by the Planners’ favored solution has been “hard data,” board of directors on the fifteenth? One can just pic- quantitative aggregates of the detailed “facts” ture competitors waiting for the board’s approval, about the organization and its context, neatly pack- especially if they are Japanese and don’t believe in aged and regularly delivered. With such informa- such planning to begin with. tion, senior managers need never leave their execu- In 1965, Igor Ansoff wrote in his influential book tive suites or planners their staff offices. Together Corporate Strategy, “We shall refer to the period for they can formulate – work with their heads – so that which the firm is able to construct forecasts with the hands can get on with implementation. an accuracy of, say, plus or minus 20 percent as the All of this is dangerously fallacious. Innovation planning horizon of the firm.”5 What an extraordi- has never been institutionalized. Systems have never been able to reproduce the synthesis created by the genius entre- Where in the planning literature preneur or even the ordinary com- petent strategist, and they likely is there a shred of evidence that never will. Ironically, strategic planning has anyone has bothered to find out missed one of Taylor’s most important messages: work processes must how managers make strategies? be fully understood before they can be formally programmed. But where in the planning literature is there a nary statement! How in the world can any compa- shred of evidence that anyone has ever bothered to ny know the period for which it can forecast with a find out how it is that managers really do make given accuracy? strategies? Instead many practitioners and theorists The evidence, in fact, points to the contrary. have wrongly assumed that strategic planning, While certain repetitive patterns, such as seasons, strategic thinking, and strategy making are all syn- may be predictable, the forecasting of discontinu- onymous, at least in best practice. ities, such as a technological innovation or a price The problem with the hard data that are supposed increase, is virtually impossible. Of course, some to inform the senior manager is they can have a de- people sometimes “see” such things coming. That cidedly soft underbelly. Such data take time to is why we call them “visionaries.” But they create harden, which often makes them late. They tend to

110 HARVARD BUSINESS REVIEW January-February 1994 lack richness; for exam- Vision is unavailable ple, they often exclude to those who cannot the qualitative. And “see” with their own they tend to be overly eyes. Real strategists aggregated, missing im- get their hands dirty portant nuances. These digging for ideas, and are the reasons man- real strategies are built agers who rely on for- from the occasional malized information, nuggets they uncover. such as market-research These are not people reports or accounting who abstract them- statements in business selves from the daily and opinion polls in details; they are the government, tend to be ones who immerse detached in more ways themselves in them than one. Study after while being able to ab- study has shown that stract the strategic mes- the most effective man- sages from them. The agers rely on some of big picture is painted the softest forms of in- with little strokes. formation, including The Fallacy of For- gossip, hearsay, and var- malization. The failure ious other intangible of strategic planning is scraps of information. the failure of systems to My research and that Real strategists get their hands dirty digging for ideas, and do better than, or even of many others demon- real strategies are built from the nuggets they uncover. nearly as well as, hu- strates that strategy making is an immensely com- man beings. Formal systems, mechanical or other- plex process, which involves the most sophisticat- wise, have offered no improved means of dealing ed, subtle, and, at times, subconscious elements of with the information overload of human brains; in- human thinking. deed, they have often made matters worse. All the A strategy can be deliberate. It can realize the promises about artificial intelligence, expert sys- specific intentions of senior management, for ex- tems, and the like improving if not replacing hu- ample, to attack and conquer a new market. But a man intuition never materialized at the strategy strategy can also be emergent, meaning that a con- level. Formal systems could certainly process more vergent pattern has formed among the different ac- information, at least hard information. But they tions taken by the organization one at a time. could never internalize it, comprehend it, synthe- In other words, strategies can develop inadver- size it. In a literal sense, planning could not learn. tently, without the conscious intention of senior Formalization implies a rational sequence, from management, often through a process of learning. A analysis through administrative procedure to even- salesperson convinces a different kind of customer tual action. But strategy making as a learning pro- to try a product. Other salespeople follow up with cess can proceed in the other direction too. We their customers, and the next thing management think in order to act, to be sure, but we also act in knows, its products have penetrated a new market. order to think. We try things, and those experi- When it takes the form of fits and starts, discoveries ments that work converge gradually into viable pat- based on serendipitous events, and the recognition terns that become strategies. This is the very es- of unexpected patterns, learning inevitably plays a, sence of strategy making as a learning process. if not the, crucial role in the development of novel Formal procedures will never be able to forecast strategies. discontinuities, inform detached managers, or cre- Contrary to what traditional planning would ate novel strategies. Far from providing strategies, have us believe, deliberate strategies are not neces- planning could not proceed without their prior ex- sarily good, nor are emergent strategies necessarily istence. All this time, therefore, strategic planning bad. I believe that all viable strategies have emer- has been misnamed. It should have been called gent and deliberate qualities, since all must com- strategic programming, distinguished from other bine some degree of flexible learning with some de- useful things that planners can do, and promoted as gree of cerebral control. a process to formalize, when necessary, the conse-

HARVARD BUSINESS REVIEW January-February 1994 111 STRATEGIC PLANNING quences of strategies that have already been devel- clean them up. Package them neatly so that we can oped. In short, we should drop the label “strategic tell everyone about them and get things going.” In planning” altogether. more formal language, strategic programming involves three steps: codification, elaboration, and Planning, Plans, and Planners conversion of strategies. Codification means clarifying and expressing the Two important messages have been conveyed strategies in terms sufficiently clear to render them through all the difficulties encountered by strategic formally operational, so that their consequences planning. But only one of them has been widely ac- can be worked out in detail. This requires a good cepted in the planning community: business-unit deal of interpretation and careful attention to what managers must take full and effective charge of the might be lost in articulation: nuance, subtlety, strategy-making process. The lesson that has still qualification. A broad vision, like capturing the not been accepted is that managers will never be market for a new technology, is one thing, but a able to take charge through a formalized process. What then can be the roles for planning, for plans, and for Sometimes strategies must be planners in organizations? Planners and managers have dif- left as broad visions, not ferent advantages. Planners lack managers’ authority to make com- precisely articulated, to adapt mitments, and, more important, managers’ access to soft information to a changing environment. critical to strategy making. But because of their time pressures, managers tend to favor action over reflection and the specific plan – 35% market share, focusing on the oral over the written, which can cause them to high end – is quite another. overlook important analytical information. Strate- Elaboration means breaking down the codified gies cannot be created by analysis, but their devel- strategies into substrategies and ad hoc programs as opment can be helped by it. well as overall action plans specifying what must Planners, on the other hand, have the time and, be done to realize each strategy: build four new fac- most important, the inclination to analyze. They tories and hire 200 new workers, for example. have critical roles to play alongside line managers, And conversion means considering the effects of but not as conventionally conceived. They should the changes on the organization’s operations – ef- work in the spirit of what I like to call a “soft ana- fects on budgets and performance controls, for ex- lyst,” whose intent is to pose the right questions ample. Here a kind of great divide must be crossed rather than to find the right answers. That way, from the nonroutine world of strategies and pro- complex issues get opened up to thoughtful consid- grams to the routine world of budgets and objec- eration instead of being closed down prematurely tives. Objectives have to be restated and budgets by snap decisions. reworked, and policies and standard operating pro- Planning as Strategic Programming. Planning cedures reconsidered, to take into account the con- cannot generate strategies. But given viable strate- sequences of the specific changes. gies, it can program them; it can make them opera- One point must be emphasized. Strategic pro- tional. For one supermarket chain that a colleague gramming is not “the one best way” or even neces- and I studied, planning was the articulation, justifi- sarily a good way. Managers don’t always need to cation, and elaboration of the strategic vision that program their strategies formally. Sometimes they the company’s leader already had. Planning was not must leave their strategies flexible, as broad vi- deciding to expand into shopping centers, but expli- sions, to adapt to a changing environment. Only cating to what extent and when, with how many when an organization is sure of the relative stabili- stores, and on what schedule. ty of its environment and is in need of the tight co- An appropriate image for the planner might be ordination of a myriad of intricate operations (as is that person left behind in a meeting, together with typically the case of airlines with their needs for the chief executive, after everyone else has depart- complicated scheduling), does such strategic pro- ed. All of the strategic decisions that were made are gramming make sense. symbolically strewn about the table. The CEO Plans as Tools to Communicate and Control. turns to the planner and says, “There they all are; Why program strategy? The most obvious reason is

112 HARVARD BUSINESS REVIEW January-February 1994 for coordination, to ensure that everyone in the or- newly uncovered markets and understanding their ganization pulls in the same direction. Plans in the implied new products. form of programs – schedules, budgets, and so on – Planners as Analysts. In-depth examinations of can be prime media to communicate strategic in- what planners actually do suggests that the effec- tentions and to control the individual pursuit of tive ones spend a good deal of time not so much do- them, in so far, of course, as common direction is ing or even encouraging planning as carrying out considered to be more important than individual analyses of specific issues. Planners are obvious discretion. candidates for the job of studying the hard data and Plans can also be used to gain the tangible as well ensuring that managers consider the results in the as moral support of influential outsiders. Written strategy-making process. plans inform financiers, suppliers, government Much of this analysis will necessarily be quick agencies, and others about the intentions of the or- and dirty, that is, in the time frame and on the ad ganization so that these groups can help it achieve hoc basis required by managers. It may include in- its plans. dustry or competitive analyses as well as internal Planners as Strategy Finders. As noted, some of studies, including the use of computer models to the most important strategies in organizations analyze trends in the organization. emerge without the intention or sometimes even But some of the best models that planners can of- the awareness of top managers. Fully exploiting fer managers are simply alternative conceptual in- these strategies, though, often requires that they be terpretations of their world, such as a new way to recognized and then broadened in their impact, like view the organization’s distribution system. As taking a new use for a product accidentally discov- Arie de Geus, the one-time head of planning at Roy- ered by a salesperson and turning it into a major al Dutch/Shell, wrote in his HBR article “Planning new business. It is obviously the responsibility of as Learning” (March-April 1988), “The real purpose managers to discover and anoint these strategies. of effective planning is not to make plans but to But planners can assist managers in finding these change the...mental models that...decision makers fledgling strategies in their organizations’ activities carry in their heads.” or in those of competing organizations. Planners as Catalysts. The planning literature Planners can snoop around places they might not has long promoted the role of catalyst for the plan- normally visit to find patterns amid the noise of ner, but not as I will describe it here. It is not plan- failed experiments, seemingly random activities, ning that planners should be urging on their organi- and messy learning. They can discover new ways of zations so much as any form of behavior that can doing or perceiving things, for example, spotting lead to effective performance in a given situation.

An appropriate image for the planner is the person left behind in a meeting, together with the CEO, who helps package the strategic decisions that are symbolically strewn about the table.

HARVARD BUSINESS REVIEW January-February 1994 113 STRATEGIC PLANNING

Sometimes that may even mean criticizing formal been forced to waste so much time doing ill-con- planning itself. ceived strategic planning, may prefer to have very When they act as catalysts, planners do not enter few of either! the black box of strategy making; they ensure that the box is occupied with active line managers. In The Formalization Edge other words, they encourage managers to think about the future in creative ways. We human beings seem predisposed to formalize Such planners see their job as getting others to our behavior. But we must be careful not to go over question conventional wisdom and especially help- the formalization edge. No doubt we must formal- ing people out of conceptual ruts (which managers ize to do many of the things we wish to in modern with long experience in stable strategies are apt to society. That is why we have organizations. But the dig themselves into). To do their jobs, they may experiences of what has been labeled strategic plan- have to use provocation or shock tactics like raising ning teach us that there are limits. These limits difficult questions and challenging conventional must be understood, especially for complex and assumptions. creative activities like strategy making. Strategy making is not an isolated process. It does Left- and Right-Handed Planners not happen just because a meeting is held with that label. To the contrary, strategy making is a process Two very different kinds of people populate the interwoven with all that it takes to manage an orga- planning function. One is an analytic thinker, who nization. Systems do not think, and when they are is closer to the conventional image of the planner. used for more than the facilitation of human think- He or she is dedicated to bringing order to the orga- ing, they can prevent thinking. nization. Above all, this person programs intended Three decades of experience with strategic plan- strategies and sees to it that they are communicat- ning have taught us about the need to loosen up the ed clearly. He or she also carries out analytic stud- process of strategy making rather than trying to seal ies to ensure consideration of the necessary hard it off by arbitrary formalization. Through all the data and carefully scrutinizes strategies intended false starts and excessive rhetoric, we have learned for implementation. We might label him or her the what planning is not and what it cannot do. But right-handed planner. we have also learned what planning is and what it The second is less conventional but present can do, and perhaps of greater use, what planners nonetheless in many organizations. This planner is themselves can do beyond planning. We have also a creative thinker who seeks to open up the strate- learned how the literature of management can get gy-making process. As a “soft analyst,” this planner carried away and, more important, about the appro- is prepared to conduct more quick and dirty studies. priate place for analysis in organizations. He or she likes to find strategies in strange places The story of strategic planning, in other words, and to encourage others to think strategically. This has taught us not only about formal technique it- person is somewhat more inclined toward the in- self but also about how organizations function and tuitive processes identified with the brain’s right how managers do and don’t cope with that func- hemisphere. We might call him or her the left- tioning. Most significant, it has told us something handed planner. about how we think as human beings, and that we Many organizations need both types, and it is top sometimes stop thinking. management’s job to ensure that it has them in ap- References propriate proportions. Organizations need people to 1. Michael Porter, “The State of Strategic Thinking,” Economist, May 23, bring order to the messy world of management as 1987, p. 21. well as challenge the conventions that managers 2. Philip Selznick, Leadership in Administration: A Sociological Inter- and especially their organizations develop. Some pretation (New York: Harper & Row, 1957). organizations (those big, machine-like bureaucra- 3. George Steiner, Strategic Planning: What Every Manager Must Know (New York: Free Press, 1979), p. 9. cies concerned with mass production) may favor 4. Peter Lorange, “Roles of the CEO in Strategic Planning and Control the right-handed planners, while others (the loose, Processes,” in a seminar on The Role of General Management in Strategy flexible “adhocracies,” or project organizations) Formulation and Evaluation, cosponsored by E.S.S.E.C., E.I.A.S.M., and I.A.E. (Cergy, France: April 28-30, 1980), p. 2. may favor the left-handed ones. But both kinds of 5. H. Igor Ansoff, Corporate Strategy: An Analytic Approach to Business organization need both types of planners, if only to Policy for Growth and Expansion (New York: McGraw-Hill, 1965), p. 44. offset their natural tendencies. And, of course, 6. Mariann Jelinek, Institutionalizing Innovation: A Study of Organiza- some organizations, like those highly professional- tional Learning Systems (New York: Praeger, 1979), p. 139. ized hospitals and educational systems that have Reprint 94107

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