• jeffreypkiplinger

Should Smaller Companies Not Develop Strategic Plans?

Last week a LinkedIn connection forwarded an article from Ivey Business Journal (https://iveybusinessjournal.com/publication/strategic-flexibility-the-key-to-growth/). The authors draw from a lot of sources, including Michael Porter's work on strategy. The authors discuss a basic question: do small companies have an agility/adaptability advantage over large ones?

Small companies:

  • Have few embedded systems

  • Are often tightly governed by one or a very few owners

  • Have management that is close to operations, customers, and competitors

  • Have tight, rapid feedback loops

  • Can evolve and change rapidly

Large enterprises:

  • Are formalized and have institutionalized processes

  • Have value-based systems that have inertial momentum

  • Have developed and codified competitive strategies

  • Have defensible competitive positions

  • Do not pivot from strength

As small companies grow they have the muscle to address multiple and complex markets, and therefore strategy - to develop a unique positioning, based on defined market needs, that is defensible - becomes more important.

The implied question is "Does the agility and adaptability advantage of a small company mean that it should not develop a strategic plan?" Are small companies adaptable and agile precisely because they don't have a formalized plan that drives decision making, and are large companies bound to lose their agility precisely because of their powerful systems? The large company "inertia issue" (my phrase) comes up many times, in books like "Good to Great" (James Collins) and "The Innovator's Dilemma" (Clayton Christensen).

Of course it's possible to be hampered by your inertia, and like the Titanic slow to turn from the threat ahead. There are also cases where a smart pivot by a sharp owner can reposition a company to take advantage of a market change; we've seen some great examples during the present Covid-19 crisis. But I don't agree that a strategic plan hampers a company - unless the plan fails to anticipate change.

How do we plan to grow, create a system, work the plan, and still accommodate change? Three essential principles are:

  1. Frequent tracking and feedback on tactical effectiveness - not just an annual review of the strategic plan

  2. Empowering team leadership to question tactics and strategy - creating a culture that focuses on the company mission, not just on targets

  3. Creating a culture that admits difficult discussions and hard questions, and allows for change when called for.

Managing growth strategically isn't about having a plan or not having a plan, it's about developing a plan and process that admits the possibility of change. What's required to admit change is cultural, creating an environment in which everyone buys into their responsibility to the company's values, mission, purpose, and ultimately goals. Strategy is about how we get to goals within the constraints of values, mission, and purpose.

Both small and medium enterprises can fall victim to a failure to adapt at a critical moment. We could argue that agreement on whether change is necessary takes more discussion in a large group than in a company with sole control in one owner's hands, but the time to react could be fast - or too slow - in either case.

The one thing that's missing in this debate about planning vs. adaptability is the importance of mindset. With no plan, no matter how agile, you're just reacting. Those who plan, with a mechanism for change if required, are proactive.

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