Strategic Intent vs. Strategic Planning

Hamel and Prahalad indicate in their 2005 article titled Strategic Intent that few western companies have been able to implement strategic intent in their organizations despite deploying considerable resources for corporate strategic planning. To consider why this might be true it is first necessary to look at the differences in methodologies. Strategic planning determines how to allocate the resources a company has to improve its profitability. Management looks at internal and external opportunities and risks and determines a course for the organization. Conversely, strategic intent is explained as “Companies that have risen to global leadership over the past 20 years invariably began with ambitions that were out of all proportion to their resources and capabilities. But they created an obsession with winning at all levels of the organization and then sustained that obsession over the 10- to 20-year quest for global leadership. We term this obsession “strategic intent.”” (Hamel, 2005). Further “… strategic intent is more than simply unfettered ambition. (Many companies possess an ambitious strategic intent yet fall short of their goals.) The concept also encompasses an active management process that includes focusing the organization’s attention on the essence of winning, motivating people by communicating the value of the target, leaving room for individual and team contributions, sustaining enthusiasm by providing new operational definitions as circumstances change, and using intent consistently to guide resource allocations.” (Hamel, 2005).

Most managers embrace the concept of winning over time that is one of the basic principles behind strategic intent, but managers of American companies get caught up in the short term strategic planning of their organizations. Hamel and Prahalad contend that “Strategic intent is stable over time. In battles for global leadership, one of the most critical tasks is to lengthen the organizations attention span. Strategic intent provides consistency to short-term action, while leaving room for reinterpretation as new opportunities emerge.” (Hamel, 2005). One key to the differences is the time horizon. Most American companies only look at short term strategic planning, concentrating on the next earnings report or profit statement, unlike international companies that tend to take a long term approach to business planning.

One possible reason for this difference is the way organizations look at their employees, including management and executive level positions. In America, employees are considered resources to be exploited and discarded when they are not needed. Companies expect employees to work long hours and sacrifice for the company with no job security beyond the next paycheck. Companies even go through bankruptcy proceedings to eliminate the pension and health benefits they previously promised employees. The employees in turn have no loyalty to the companies and are always working to maximize their bonuses because they have no guarantee of future employment. Employees, who invent new products, or means of improving productivity, often do not want to offer these ideas to their employers for little or no compensation and quit their jobs to start new businesses using their ideas to compete with their former employers.

In contrast many foreign corporations (for example the Japanese) believe in loyalty to the workers and treat their employees as partners in the business rather than as resources. Jobs are guaranteed and retirement benefits are secure. Employees are asked to participate in decision processes and are rewarded for ideas that help the company. Employees are provided training by the company and loyalty is expected in both directions. Profitability is measured for the long term and strategic intent can be implemented. Hamel and Prahalad go further by indicating “Reciprocal responsibility means shared gain and shared pain. In too many companies, the pain of revitalization falls almost exclusively on the employees least responsible for the enterprise’s decline. Too often, workers are asked to commit to corporate goals without any matching commitment from top management — be it employment security, gain sharing, or an ability to influence the direction of the business. This one-sided approach to regaining competitiveness keeps many companies from harnessing the intellectual horsepower of their employees.” (Hamel, 2005).

Using the analogy that Hamel and Prahalad present in their article indicating that strategic intent is like a marathon; one could also state that American companies strategic planning is like running a 100-yard dash. They just do it over and over again with each new quarter.

 Hamel, G., & Prahalad, C. K. (2005). Strategic intent. Harvard Business Review, 83(7–8).

Robert K Minniti, CPA, CFE, Cr.FA, CFF, MBA

www.minnitiaccounting.com

www.linkedin.com/in/robertminniti