From the
1950s till now, long range planning, also called strategic planning, has been serving
as a prescription for growth. The concept has become so ingrained in organizational
psyche that potential managers and leaders are expected to acquire, develop and
demonstrate skills for crafting and executing strategy over a long career span.
Superimposed on this is the ability to visualize a future and channel the
strategies towards realizing this future. This has percolated to individual
domains too with the responsibilities and competencies for operational
management and strategic management becoming differentiated. In terms of
understanding managerial and leadership processes, the distinction has become,
over the years, rather sharp. The long term is seen to require strategic and
planning approach while the short term only tactical and execution approach.
Extending the philosophy a bit, it is believed that if one has a good long term
plan and executes as per that in the short term, the job is done.
This
approach, good for most parts, has a few unanticipated consequences. Firstly,
the separation of execution in the short term and planning for the long term
weakens the feedback and course correction loop. Secondly, the differentiation
of long range planning as an annual, fixed period exercise and short range
execution as a daily routine actually disconnects the perspectives. Thirdly,
the differential approach makes the young professionals, scientists,
technicians, who constitute the young talent base with fresh thinking and new
knowledge, mechanical and controlled in thinking. As a result of these
deficiencies, the intellectual and leadership wealth of the organization tends
to get sub-optimized. Merging the paradigm of planning, long range and
strategic, with the paradigm of execution, short term and tactical, is a
challenge; the differences of approaches and skill sets between the two paradigms
would still need to be maintained for orderly planning and execution. This blog
post tries to separate the fiction from facts between the two paradigms and
explores ways to optimize the wealth of talent through three optimized organizational
processes.
Definitional
optimization
The
differences between what constitutes the long term versus the short term or the
strategic versus tactical, or even planning versus execution are relative. Even
in a steady state industrial and economic environment, technology shrinks or
extends these definitions significantly. With regulatory changes and
environmental volatility superimposed, the irrelevance of the long term plan to
the short term and the relevance of the short term to the long term become
highly pronounced. Let us take the example of the Indian airlines industry. The
top national carriers (except possibly IndiGo) have posted a combined loss of
USD 1.7 billion (Rs 10,201 crore) in 2013-14 and are expected to post another
huge loss of USD 1.4 billion (Rs 8,408 crore) in 2014-15. In fact, the
cumulative losses of the industry over the last seven years have hit a
staggering USD 10.6 billion (Rs 63,633 crore)! It is estimated that the ailing
firms require an immediate capital infusion of USD 1.6 billion (Rs 9,610 crore)
just to stabilize operations. No wonder
that the long range plans of all the ailing (and possibly non-ailing) firms are
anchored under external capital infusion on one hand and cost reduction with
operational efficiency on the other.
Even before
the ink could dry on the plans, news is out that AirAsia has launched its
operations and Tata-Singapore Airlines would launch its operations in October
2014. Tougher still, six new airlines have also been given approval to fly by
the new Government. Stable oil prices become volatile with every geo-political
crisis. Rupee value becomes unpredictable every equity cycle. On the positive
side, a resurgent India could see the development of at least 25 new
international airports and 75 new domestic airports, and a helpful Government
may just provide a relief in terms of tax burden. Clearly, the airlines industry cannot rest on
long range planning of conventional mode; it would need to make a long range
plan possibly once in a quarter or each time there is a material change. This
is a perfect example of the short term being more relevant than the long term
and the long term getting secured with the short term. Many other industries
are witnessing the need to merge short term and long range approaches rather
than separate them.
Talent
optimization
Today’s
talent is commonly judged on a variety of skills; technical skills and
communication skills, hard skills and soft skills, conceptual skills and
analytical skills, to name a few. More important than all of these, which will
be present in one measure or the other, are two sets of skills or competencies
which are hard to get. The first is the ability to see a firm’s value chain on
an end to end basis, and appreciate the impact of the value chain on one’s
role, and vice versa. The second is the ability to understand the relationship
between short run performance and long run plans of a firm. Typically, it is
felt that these two skills of critical thinking get developed with experience
in an individual. If this were to be true, the tendency to separate short term
delivery and long term planning under two sets of talent pools (for example,
front level executives and senior level managers, respectively) would only deny
further the opportunity for frontline executives to acquire the two critical
skills. In addition, the separation of (only) doing as the (sole)
responsibility of front line executives and (only) planning as the (sole) responsibility
of senior managers serves to delay the development of such critical skill in
young professionals.
At the firm
level, opportunity to promote the ability to perceive end to end thinking and
think of short term and long term simultaneously helps organizations develop
the intellectual capital of a firm better and make the firm more competitive. A
marketing executive who is trained to understand the design connectivity will
be able to relate customer feedback to potential for product improvement. In
fact, without end to end thinking approach, the executive may even fail to
observe a whole sweep of market triggers. Similarly, the executive who
understands how easy or difficult it is to remove costs of a component would
understand if a particular product design has reached the end of life, or there
is potential to extend the product life cycle with a next generation of
product. In addition to the above tangible benefits, the nurturing of
creativity that takes place results in an overall creative organization. This
requires that senior managers and leaders make it a point to integrate the short
run execution and long run planning processes, and to promote value chain
thinking.
Technological
optimization
Technological
change is profound but essentially continues to be incremental. Optimizing
rather than accelerating technology holds the key to ensuring that short run
product plans stay on for a longer term in a company’s life horizon. When the
progress of product design in an industry, be it automobile or computer, is
reviewed over a long period, say over two decades, one would be puzzled that the
changes that looked major improvements each time look merely incremental over a
longer time span. As an example, minimization of bezels in a phone or tablet to
provide greater display size within the
same form factor is not a rocket science discovery but it took close to ten
years and an LG G3 to take it to perfection (and Apple is yet to get that)!
With the rapidly growing popularity of ‘selfies’ it again is not breakthrough
thinking to incorporate high performance front cameras (equal in capability to
rear cameras) in smart phones, yet only one or two phone models go beyond 2 MP
front cameras!
Like with
the other two thought processes discussed earlier, technological optimization
is a matter of mindset. It requires a mindset to think of all technological
features in a totalistic manner and get the best of the technology package.
This requires that every member of design school understands the limits to
which each sub-technology can be pushed and how such frontier-testing
technologies can synergize themselves in combination. A light weight gearbox
and a fuel-efficient engine, cannot, for example, be effective on a chassis
with high tare weight. A light weight suitcase need not skimp on multiple sub-folders
just to drive down total carried weight. Managers and leaders must go all out
to give out the best technology package each time rather than hold back
available knowledge for future use. Delayed deployment of technologies could,
in fact, be counter-productive. ‘Develop now - deploy later’ has never been,
and will never be, a winning proposition in techno-commercial thinking; in
fact, it has proved to be counterproductive as being ‘too little - too late’.
One horizon,
one domain
A review of
the above three thought processes which correspond to certain organizational
processes reveals that the various differentiations we have, namely short term
versus long term, strategic versus tactical, planning versus execution, firm-level
versus unit-level, executive versus leader – are all certain convenient
methodologies to manage division of responsibilities and accountabilities as
well as hierarchical differences in an organization and not necessarily the
most optimizing processes. Given the range of external and internal factors
(“factors”), and their unpredictability, firms need to have one horizon for
planning whose time span is limited by the first material change in any of the
factors, and one domain whose relevance is defined by firm level
competitiveness accruing through individualization and collectivization of all
the organizational functions or units. Young executives and mature leaders must
embrace the ‘one horizon - one domain’ concept so that intellectual capital in
the firm is built up for competitiveness and growth.
Posted by Dr
CB Rao on August 3, 2014
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