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Wednesday, June 21, 2006

Strategic Planning and the Learning Organization

Harvard Business review's excerpt of "The Origin of Wealth, Eric D. Beinhocker" reveals a radical new of economics as a highly dynamic and evolving system with implications for companies and organizations everywhere.

His assertions?

  • Rather than thinking of strategy as a single plan built on predictions of the future, we should think of strategy as a portfolio of experiments, a population of competing Business Plans that evolves over time.

There are some general lessons that can be learned from a portfolio-of-experiments approach to strategy.

  1. Management needs to create a context for strategy. Constructing a portfolio of experiments requires a collective understanding of the current situation and shared aspirations among the management team.
  2. Management needs a process for differentiating Business Plans that results in a portfolio of diverse Plans.
  3. The organization needs to create a selection environment that mirrors the environment in the market. Fourth and finally, processes need to be established that enable the amplification of successful Business Plans and the elimination of unsuccessful Plans.

This shift in perspective implies a major redesign of the strategic planning process:

  • First, the process should be focused on structuring in-depth discussion and debate among principal decision makers.
  • Second, the process must be fueled by facts and analysis
  • Third, there must be other forums clearly designated for decision making.

BOTTOMLINE: "If the strategy process becomes overburdened with near-term decisions on budgets, setting targets, and allocating capital, then learning goes out the window. The decision-making forums should be linked to, but separate from, the strategic learning process. Again, the focus of the strategy forum should be setting context to inform the design and management of the portfolio of experiments."

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