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Amanda CulverScholarly PaperEHRD 614 Dr. UptonApril 21, 2013Texas A&M UniversityAbstractStrategic planning is a management technique that has been criticized as dated and inflexible in recent years. In the field of strategic planning there are several schools of thought on how to effectively use planning in organizations. Within these perspectives seven common mistakes have been made consistently throughout the years that have caused strategic plans to lead organizations to failure. Furthermore, this paper discusses how poor strategic planning has been detrimental to the success of three organizations. Conversely, this paper investigates how an effective strategic plan can guide companies out of crisis and lay the framework for success in the marketplace. IntroductionStrategic planning has been used by organization management since the late 1960s, in this time several schools of thought have developed on how to use strategic planning most effectively CITATION Wil941 \l 1033 (Wilson, 1994). Mintzberg, Ahlstrand and Lampel (1998) describe ten different schools of thought, each with its own perspective on the best way to plan for organizational success. Just as each has its own perspective, each of the schools has their own limitations and consequences in planning. The first three of these schools were developed in the 60s and focused on “how strategies should be formulated” rather than how they actually are formed (Mintzberg et al., 1998, p.5). The next six schools focus on how strategies are made, and the processes that occur surrounding these formations. Finally, the last school, the configuration school, is a combination of the others. It seeks to integrate all elements of the previous schools of thought into separate stages of planning (Mintzberg et al., 1998). All of these schools are important in the history of strategic planning, and should be studied so that planners can utilize the lessons learned from the mistakes of the past when formulating strategies for the future.Strategic planning in organizations has four main functions: to set direction, focus efforts, define the organization and provide consistency (Mintzberg et al., 1998). While each of these functions has pros and cons, they are used as a foundation for developing a strategic plan within organizations. It is the goal of organizations to lay a foundation of strategic planning that will lead them to success in their marketplace. However, “the problem with this, of course, is that eventually situations change – environments destabilize, niches disappear, opportunities come up” (Mintzberg et al., 1998, p. 18). This paper investigates three companies who have been faced with this situational change, how they approached the change, and the resulting impact on the organization. First though, through literature review, this paper will investigate how several critical mistakes in strategic planning can be detrimental to organizations and conversely how utilizing proactive strategic planning tools is beneficial in guiding companies out of crises situations. Literature ReviewMistakes in Strategic PlanningWhen researching how strategic planning can benefit a company in crisis, it is important first to understand how failed strategic planning can lead a company to crisis. Strategic plans on their own will not benefit organizations; plans must be a collective process that incorporates all functions of the organizations in order to gain successful adaptation. Ian Wilson (1994) researched and wrote on the seven deadly sins of strategic planning, learning from these mistakes is essential for developing a plan that avoids repeating them in the future. The first is “the staff took over the process,” this was a common mistake in the early schools of strategic planning. As executives developed and handed down plans, they gave them to the staff to execute. Unfortunately, the staff does not have the same goals as the executives and without oversight from leadership the plan shifts, changes or all together disappears in the process. This leads to the second mistake which is “the process dominated the staff”. When executives hand down elaborate or extensive plans, with no training or inclusion of the staff, the plan is overwhelming and cannot be utilized by staff and therefore gets ignored or overlooked. This ignorance of the plan by the staff results in mistake number three “planning systems were virtually designed to produce no results”. As contradictory as it seems, when an executive team creates a strategic plan without developing a method to implement this plan it is doomed to fail. Plans must incorporate the entire organization, and formulate how it will be scaled to each level CITATION Wil941 \l 1033 (Wilson, 1994). Outside influences can lead to strategic planning mistakes also; the fourth mistake found by Wilson (1994) is “planning focused on the more exciting game of mergers, acquisitions and divestitures at the expense of core business development.” When companies focus more on new, high return investments they lose sign of their core business. This oversight can lead to the destruction of these ventures. It is important to focus on the stability of changes within an organization, and not just on rapid growth. The fifth and sixth mistakes of strategic planning are closely related “planning processes failed to develop true strategic choices” and “planning neglected the organizational and cultural requirements of strategy”. These mistakes are dangerous to the success of organizational planning. When creating a strategic plan it is necessary to consider the environment and culture of the organization. These elements will have either a positive or negative impact on the successful implementation of planning CITATION Wil941 \l 1033 (Wilson, 1994). The final mistake as discussed by Wilson (1994) is “single-point forecasting was an inappropriate basis for planning in an era of restructuring and uncertainty.” It is important for strategic plans to address the needs of the organizations, while providing for scenario planning in the future. This type of planning can protect and guide organizations when the environment becomes turbulent or unbalanced. Planning should not be rushed into, or chosen by default, it is important to develop a long term plan that can guide the organization in the future CITATION Wil941 \l 1033 (Wilson, 1994). Benefits of Strategic Planning“If you use [strategic planning] to plan for specific crises, you’re missing the point. The purpose of scenario planning is to broaden the array of possible futures that you’re contemplating” CITATION Sta02 \l 1033 (Stauffer, 2002). A future-minded organization will use strategic planning as scenario planning; to lay a foundation for their company’s future while also providing for guidance in crises situations. This type of planning isn’t only about threats, but also potential opportunities. Effective strategic planning provides the framework for possibilities. So, down the line, if a company isn’t satisfied with their current path they can use their strategic plan to switch paths. Stauffer (2002) writes “scenario planning’s power lies in what might appear to be its great weakness: unknown outcomes”. By imagining multiple situations that a company could face, and then planning potential paths to guide them in this situation, organizations return the power to themselves. Benefits to this “what will we do if this happens” thinking is that companies have a formulated plan to turn to, but also they are more sensitive in detecting potential situations as they arise CITATION Sta02 \l 1033 (Stauffer, 2002). An example, provided by Stauffer (2002), of how scenario planning can help organizations face a crisis, rather than crumble beneath it, is StarTrust Federal Credit Union. In 2000 StarTrust Federal Credit Union’s strategic planner encouraged the company to consider the ‘worst imaginable scenario’- the demise of their corporate sponsor Enron. This scenario seemed ridiculous to the leadership team, but they participated anyway. They created a plan to address the crisis with both their employees and their customers, to prevent panic and misguided information. A year later the impossible happened, even though it was a different situation than they had envisioned, StarTrust had a playbook ready for such a situation. The company didn’t thrive in the crisis, but they also didn’t disintegrate, and at the time of Stauffer’s (2002) writing were rebuilding after the catastrophe. 11 years later the company is still in business and reports “we are strong with approximately 5,000 members and $48 million in assets, offering exceptional member service and the most current financial services on the market today” CITATION Sta13 \l 1033 (StarTrust, 2013). Through mistakes or successes, it is clear that strategic planning is something that must focus on the future success of the company, address all aspects of the organization, and expect multiple outcomes along the way. Companies who are able to foresee various consequences to their plans, either from environmental or cultural influence, are better prepared to incorporate these challenges. Conversely, companies who ignore external influences and forge an inflexible path are not prepared when the plan falters, and have to decide whether to reevaluate or crumble from the challenge (Mintzberg et al., 1998). DiscussionIf an organization adopts states of being, then strategy making becomes a process of leaping from one state to another. In other words, transformation is inevitable consequence of configuration. There is a time for coherence and a time for change (Mintzberg et al., 1998). Companies should utilize strategic planning as a way to adapt and establish patterns that will prepare them for change; this is the basis of the configuration school of thought (Mintzberg et al., 1998). When organizations fail to do this, they are faced with a change that could destroy their company. This paper will explore how this situation occurred in three organizations, and the results.First to be examined is Kodak. Kodak is an American company founded in 1888, and best known for their photographic film products CITATION Kod12 \l 1033 (Kodak, 2012). Unfortunately, Kodak ignored the environmental influences of their product, and tried to focus on their primary income source – film. This lack of planning has led to the probable demise of the company. The second organization examined in this paper is Research in Motion. Research in Motion (RIM) hit the theoretical jackpot with their BlackBerry product line. Founded in 1984, RIM was able to forecast the needs of their business customers and spent many years as the staple for business cellular devices CITATION Bla13 \l 1033 (BlackBerry, 2013). However, the competition has grown and RIM has been slow to evolve. This paper investigates their current strategic plan and how they hope it will help them get back on top, if it is not too late. Finally, the third company is J.C. Penney Company Incorporated (JCP). JCP is a mid-range retail store that was founded in 1902 CITATION JCP13 \l 1033 (JCPenney, 2013). Surviving for over 100 years has required significant strategic planning, but their current plan has led to a drop in sales and potential fall-out from loyal customers. This paper examines how JCP has failed to include outside influences in their strategic plan, and examines whether their new plan will lead to success or failure. KodakKodak invented digital photography, however due to fear of outplacing its primary income source (film photography) they shelved the technology to continue to focus on their most stable corporate asset CITATION Mui12 \l 1033 (Mui, 2012). This choice addresses Wilson’s (1994) fourth mistake of strategic planning, too much focus on new ventures, but unfortunately they completely ignored digital business ventures. This is defiant of one of the essential premises of the strategic planning environmental school of thought, leadership must read and respond to elements in the environment and then ensure the organization is adapting properly (Mintzberg et al., 1998). Instead of responding to the changes in their customer environment, Kodak tried to avoid the inevitable. They chose instead to expand their business portfolio by investing in a chemical/pharmaceutical company and then a camera that utilized both film and digital. Both of these ventures failed and cost Kodak millions of dollars CITATION Mui12 \l 1033 (Mui, 2012). The technological revolution and increasing globalization presents major challenges to firms' ability to maintain their competitiveness. Some of the recent important strategic discontinuities encountered include the elimination of industry boundaries, fewer distinctions between industrial and service businesses, major advances in logistics, computer aided design and communication, and opening of global markets. Firms encounter these changes at the same time they are experiencing intense foreign competition in domestic markets CITATION Hit98 \l 1033 (Hitt, Keats, & DeMarie, 1998).As Kodak continued to ignore digital photography, their competitors moved forward with it. In 1981, Kodak commissioned a study to determine what the landscape was for the company and for digital photography. This study found that due to the high cost and low quality of digital photography it would be approximately 10 years before it was a potential threat to Kodak. Unfortunately, competitors used this time to enhance their technology and Kodak continued to ignore the situation and did little to prepare for the future impact CITATION Mui12 \l 1033 (Mui, 2012). As a result of this poor planning, Kodak is a prominent example of a company that was brought down by its own technological invention. The company was forced to file for Chapter 11 bankruptcy in early 2012. With this protection they developed a new financial plan, which included laying off a fifth of its workers, discontinuing retiree benefits, selling most of their patents and essentially leaving the film business. Their new strategic plan focuses on continuing their digital printing presses business CITATION Dan12 \l 1033 (Danerman, 2012). Hopefully, Kodak will learn from their mistakes and address the advances in digital printing with a plan for the future, and an idea of how to address crises as they encounter them. The technological revolution has reduced the amount of time that companies have to address and bring new products to consumers, Kodak must learn from is mistakes in order to avoid a repeat failure of their previous poor planning (Hitt et al., 1998). Research in MotionResearch in Motion spent two decades at the head of contemporary mobile technology. Its leaders would see a gap in consumer needs, and immediately use their products to fill it- from two-way paging to mobile email CITATION Fin13 \l 1033 (Fingas, 2013). However, focusing on their business and large-scale consumers left them in a reactionary position for addressing the needs of their individual consumers. Competitors, such as Apple, have introduced software and hardware upgrade options on a yearly basis; where RIM’s BlackBerry has remained relatively stagnant CITATION Sha12 \l 1033 (Shaughnessy, 2012). Nevertheless, there are times when an organization has to be changed in a serious, comprehensive, way. Then the trick for management is to figure out where it can intervene, what it can change and leave others to change, when, how fast, and in what sequence (Mintzberg et al., 1998). In 2012, RIM announced a shift in their leadership and a new strategic plan. Their current CEOs would step aside and allow for new leadership, and in the same year they would be launching a new operating system and a new line of smartphones. This announcement of change gave RIMs new plan their first external validity from the critics in their environment, investors and consumers, in years. This type of validity was an essential first step for RIM as “validity and consistency are two critical components of any systematic evaluation of a strategic planning process” CITATION Hen88 \l 1033 (Henderson & Sifonis, 1988). Research in Motion is a second tragic example of an organization ignoring the external influences in their strategic planning. Continuing to focus on their core business, and income source, has left RIM in a reactionary position and on the brink of becoming obsolete. However, RIM has made major changes to their leadership and is in a position to turn around their current downward momentum. At the time of this writing, RIM had just released the BlackBerry 10 within the last few weeks and financial analysts were expecting favorable results for the company and a return of many loyal customers CITATION Swa13 \l 1033 (Swartz, 2013). As the future unfolds, RIM should learn from their previous mistakes and “be prepared to rework and amend plans incrementally as implementation proceeds” CITATION Bre99 \l 1033 (Brews & Hunt, 1999).J.C. PenneySuppose that firms develop dedicated early warning systems, and that they have three states of alert. The first state, denoted green, represents business as usual. The second state, yellow, is characterized by increased vigilance by certain managers directly involved in sales or purchasing. The third state of alert, red, denotes a high- level attention on the part of managers, including meetings to decide what actions are called for CITATION Lam01 \l 1033 (Lampel & Shapira, 2001).Utilizing Lampel and Shapira’s warning system, J.C. Penney (JCP) is currently in the red zone alert level (2001). In a matter of 18 months their strategic plan has led them to disaster “it recently had one of the worst retail quarters in history with a staggering 32 percent drop in same store sales” CITATION Nis13 \l 1033 (Nisen, 2013) . JCP is currently in a high risk organizational state and in need of a drastic change in planning. As a corporation, JCP has been faltering for a while. The retail environment is full of competition, and while they have a loyal consumer base, JCP was losing ground in marketplace. In 2011, new CEO Ron Johnson envisioned a strategic plan that would “[scrap] JCPenney’s dubious pricing policies of marking up prices and then offering discounts...He proposed to offer more interesting products, from lines like Martha Stewart and Joe Fresh, at reasonable prices all the time” CITATION Den13 \l 1033 (Denning, 2013). This new plan hoped to bring a new type of consumer to JCP, who wanted consistent pricing and high end products. The goal was to change the aspects the organization has control over, product and pricing, in order to gain control over the competition CITATION Hit91 \l 1033 (Hitt & Tyler, 1991).Unfortunately, this plan was blind to the potential impact on the organization by completely revamping the store’s image. “The key to strategic management…is to sustain stability or at least adaptable strategic change most of the time, but periodically to recognize the need for transformation and be able to manage that disruptive process without destroying the organization” (Mintzberg et al., 1998). The biggest issue with JCP’s plan is that no small scale testing or piloting was done. The plan was marketed to the public, and then implemented in all stores without provisions for how the consumers or individual stores would react. The result was stores that did not embrace the new changes, and consumers who begain shopping at competitors out of frustration with the new design CITATION Den13 \l 1033 (Denning, 2013). Currently, JCP has recently removed Ron Johnson as CEO and has promised to reevaluate their strategic plan to bring back their loyal consumers CITATION Den13 \l 1033 (Denning, 2013). JCP is at an important fork in the road for their organizational success, they must decide how to continue to be innovative but also regain standing in the marketplace. The new leadership team “now face[s] the task of creating a balance between the stability necessary to allow development of strategic planning and decision processes and instability that allows continuous change and adaptation to a dynamic environment” (Hitt et al., 1998). During this high red alert period, only time will tell whether they can turn around the current momentum, and time is certainly of the essence for their success.SummaryKodak, Research in Motion, and J.C. Penney all have one thing in common, they repeated the seven deadly sins of strategic planning as discussed by Wilson (1994). Specifically, Kodak and RIM followed strategic plans that were designed to produce no results for too long. Both companies ignored the competive environtment, which left them exposed and vunerable. Futhermore, they neglected organizational and cultural needs in their strategy formation CITATION Wil941 \l 1033 (Wilson, 1994). In the end, these two companies adjusted late, but are now attempting to regain control of their success. J.C. Penney made different, but equally erroneous mistakes. By ignoring their core business model and using single point forecasting that did not allow for market testing or flexibility they continued a rapid decline in their marketplace holdings CITATION Wil941 \l 1033 (Wilson, 1994). At this point, JCP is at a critical stage to make either a successful transformation or continue their downward momentum. The new competitive landscape, driven by the technological revolution and significant globalization, is moving towards hypercompetition (rapidly escalating competition and strategic maneuvering), extreme emphases on price, quality and satisfaction of customer needs, and an increasing focus on innovation (both in technology and new products/services) (Hitt et al., 1998).For all three organizations discussed in this paper, a poor strategic plan, ignorant of their competitive environments, has led to the potential failure of the company. Each of these organizations is at different stages of this failure, and they have a narrow opportunity to recover through proper strategic and scenario planning that focuses on the future of the organization and includes scenarios for environmental influences. Through drastic changes to their executive leadership, with Kodak even filing for bankruptcy, these companies have set the stage for dramatic reformation. This restructuring gives the organizations the opportunity to respond directly to their competitive environments, and hopefully adapt to the “flexibility, speed and innovation” needed for organizational success (Hitt et al., 1998).ConclusionStrategic planning has been used by managers, human resource leaders and executive teams in organizations for over four decades. For organizations, strategic planning is different from other areas in management in that its sole “focus [is] on strategic choice: how to find it and where to find it, or else how to create it when it can’t be found, and then how to exploit it” (Mintzberg et al., 1998). While there are several schools of thought that can be followed in establishing a plan, this paper has discussed the influences that must be considered during planning. The environment with which the organization exists should not be ignored when developing a plan for the organizations future success. In scenarios where it is ignored, such as the three examples discussed here, the organization is forced to develop a reactionary plan in order to adapt and recover (Mintzberg, et al., 1998). The main functions of strategic planning, as discussed by Mintzberg et al. (1998), is to set direction, focus efforts, define the organization and provide consistency. These steps are essential to successful planning, but only if implemented effectively. To do this, management must learn from the repeated mistakes of others CITATION Wil941 \l 1033 (Wilson, 1994) while being open to systematic change in the organization (Hitt et al., 1998). Organizations which are open to change are able to plan for multiple scenarios in their future, and use that framework to react to external changes and influences. Without effective planning, organizations cling to dated plans that fail to guide the organization to alternative solutions CITATION Sta02 \l 1033 (Stauffer, 2002).Successful strategic planning in organizations can only occur through thorough research and adaptive planning. With over 40 years of history, many lessons have been learned along the way and it is imperative to consider these when planning for the future. Scenario planning gives organizations the opportunity to lay the framework for success in disaster situations, so that they are not crippled from surprises in the marketplace. In the end, strategic planning is a process involving change, adaption and transformation with the goal of guiding organizations toward a successful future (Mintzberg et al., 1998). References BIBLIOGRAPHY \l 1033 BlackBerry. (2013). BlackBerry. Retrieved from Company: , P., & Hunt, M. (1999). Learning to plan and planning to learn: resolving the planning school/learning school debate. Strategic Management Journal, 20(10), 889-913.Danerman, M. (2012, December 23). Kodak reinvention survival. Retrieved from USA Today: , S. (2013, April 9). J.C.Penney: was Ron Johnson's strategy wrong? Retrieved from Forbes: , J. (2013, January 28). RIM: a brief history from Budgie to Blackberry 10. Retrieved from Engadget: , J. C., & Sifonis, J. G. (1988). 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Why RIM's failure could be your failure too. Retrieved from Forbes: . (2013). About StarTrust Federal Credit Union. Retrieved from StartrustFCU: , D. (2002). Five reasons why you still need scenario planning. Harvard Management Update, 3-5.Swartz, J. (2013, March 28). BlackBerry CEO's optomistic view justified by results. Retrieved from USA Today: , I. (1994). Strategic plannings isn't dead - it changed. Long Range Planning, 27(4), 12-24. ................
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