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Make better strategy decisons

According to a new survey,"stop making plans; start making decisions"by management consulting firm Marakon Associates, and the Economist Intelligence Unit (EIU), companies following the traditional planning model - which is annual and focused on individual business units - make an average of only 2.5 major strategic decisions (those with the potential to increase annual company profits by 10% or more) a year.

"Because traditional planning obstructs good decision-making, executives routinely sidestep the process and determine their company's strategy and future haphazardly, without rigorous analysis or productive debate," say Marakon's Michael Mankins and Richard Steele, who co-authored the research.

"To significantly improve performance, many should make their strategy development process continuous and issues-focused so they can make more, better and faster decisions."

The survey was based on interviews with 156 senior executives at large companies worldwide, all with sales of $1 billion or more. Four out of 10 of these companies had revenues over $10 billion.

Another startling insight from the survey, whose findings are summarised in the January 2006 issue of Harvard Business Review, is that only one in 10 (11 per cent) of senior executives believe strongly that strategic planning is worth the effort and only 13 per cent feel that top managers are effectively engaged in all aspects of strategy development at their companies.

They also describe five practices that companies can follow to improve their strategic decision-making, such as focusing top management time on a limited number of key issues or themes and structuring strategy reviews to produce real decisions.

Still today, the biggest challenge is communicating strategy to the people that have to implement it on a daily basis - front line employees.

We have found that businesses using internal web 2.0 and social software applications to collaborate and share information are developing new, and better strategies. These are mind-boggling strategies. Ones that were unimaginable before. Business social software applications provided new information flows about customer support that helps managers make better strategy decisions.

See Porter's 5 forces analysis for a basic starting point to evaluate strategy.

porter on strategy