It's Strategic, Isn't

Quick Summary: Strategic plans need to be based on some simple, objective, and consistent criteria.

Abstract:

Rarely is there only one alternative to the allocation of resources or strategies that can be pursued.  Establishing clear criteria to weigh alternatives is important to avoid emotional entanglements.  A common justification involves the claim that an alternative is strategic with no objective criteria to back up the claim.  It is easy to make the claim, but can be hard to counter it with no facts to discuss.  Think of the “it’s strategic” claim as a red flag that requires careful scrutiny before its acceptance as a viable alternative.  

There are only a few things in the business world that are consistent.  One of them is that you can bet that when someone justifies a plan by saying “It’s strategic”; it is not!  The “It’s strategic” claim is intended to be the ultimate justification, just like holding a cross in front of a vampire is the perfect defense.  Generally, the “It’s strategic” claim is an emotional response when the plan or issue cannot be justified by any logical criteria.

The most common situations when the claim is used is:

  • Justifying giveaway or very low pricing to a customer
  • Agreeing to a product or service modification that has little chance of becoming part of the mainstream offering
  • “Getting even” with a competitor by “taking away” business for them
  • Justifying a pet project or pursuing an “opportunity” that does not align with the company’s long-term plans

 The acid test that needs to be applied to every situation is very straightforward.  The plan in question must meet at least one of the following five criteria:

  1. It must increase profitable revenue
  2. It must increase market share
  3. It must reduce costs
  4. It must markedly reduce an impediment to one of the three items listed above
  5. It must compare favorably to other alternatives

Obviously, simultaneously meeting several of the listed factors is desirable.  When considering the alternatives, the element of time must also be considered.  This is especially true for the cost reduction justification.  In most cases, cost reduction involves initially incurring costs (dollars, efforts, or obsolete inventory) that will only be offset over a longer term.

In all likelihood, if the “It’s strategic” argument is being used, it is a result of the plan being directly opposite to one or more of the five criteria mentioned above.  Expect opposition from the person that suggests the “It’s strategic” justification.  Logic is not persuasive and may fall on deaf ears.  Good luck!

Article Number : 5.060207   

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