Scenario Planning (Cont.) Limitation Of Traditional Approach To Developing Strategy

. The traditional approach to developing strategy is based on 2 crucial assumptions:

i. that each organisation is better suited to doing some things than others or doing what you doing well and are best able to compete in, such as providing a differentiated, superior product/service

ii. that there are finite resources available, such as money, time, etc for allocation

. According to Jeffrey Pfeffer et al (2006), the empirical evidence shows a weak link between the activity of strategy planning and organisational performance.

. Increasingly, the world is becoming more uncertain and complex with accelerating discontinuous change. This has highlighted the deficiencies of the traditional approach to developing strategies to handle the future. The traditional approach follows 1 of 2 alternatives:

- rational approach, ie finding the best strategy through a process of rational analysis

- emergent approach, ie developing the best strategy over time through small, incremental changes

. Implicit in the traditional approach to strategy is the assumption that by applying a set of powerful analytical techniques, people can predict the future of any business accurately enough to allow them to choose a clear strategic direction. This is satisfactory in a stable business environment, but it breaks down when the environment is so uncertain that no amount of good analysis will allow prediction of the future.

. An important distinction between scenario planning and strategic planning is that the former begins with the future and works backwards, while the latter is more likely to start with now and look at where you want to be.

. However, organisations find it difficult to change strategy for many reasons. One of the reasons is that managers hone their management capabilities by tackling problems over and over again. Changing strategy is not usually a task which managers address regularly. Once an organisation has found a strategy that works, it wants to use it, not change it. Members of the management team are usually unable to see the need to change direction when the strategy that made the organisation successful has become obsolete.

. It has been claimed that both people and organisations do not respond to reality but to their perception of reality. This perception acts as a filter, and as a result we tend to see what we want to see, and tend to dismiss what we are not looking for. By changing filters, we can see the world differently. Scenario planning can do this by broadening, deepening and expanding filters so that we can be more sensitive to forces that shape our business environment and thinking. Scenario planning helps us to develop alternative images.

. Managers face 2 particularly vexing challenges in developing and implementing competitive strategies:

i. to ensure that the strategy is not a reflection of the biases (and ignorances) of the past

ii. the need for strategy to mirror the realities of the organisation's environment and for resource allocation to be aligned with the strategy.


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