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EDITORIAL

Paradigm Revolution
By Lewis]. Perelman
HE WORLD OF corporate strategy is in upheaval. A new paradigm is overturning traditional notions not only of the practice of strategic planning, but of the very meaning of "strategy." It will revolutionize the structure of corporate organizations, as well as the roles and effectiveness of managers. On the way out are annual strategic planning rituals, professional planning staffs, portfolio management, and strategy marrices. Academic concepts of strategy are biting the dust, and fast disappearing is the notion of return on equity as a principal measure of performance. Also on the endangered list is the fragmentation of strategy into such discrete categories as marketing, operations, distribution, pricing, mergers/acquisitions, human resources, public relations, and government affairs. The old school of corporate strategy is being replaced by a revolutionary paradigm-one that is softer, in the sense of being more complex, nonlinear, holistic, humanistic, and political. in the soft model, strategy becomes a characteristic of managerial performance rather than a dictum that gets bound into notebooks and gathers dust on the shelf. The spotlight is now on day-to-day executive decisions made by responsible line managers rather than on academic exercises performed by staff or consultants. The new model realizesthat the modem corporation must pursue multiple objectives, not simply maximum ROE, and that it must serve the interests of stakeholders besides those who own

November Planning Review

1983

shares of corporate stock. And, rather than generating a collection of ad hoc strategies for each business unit and corporate office, the emerging approach emphasizes "strategy for strategy"-the process of choosing, integrating, coordinating, and revising strategies, which leads to a coherent srrategic thrust for the corporation as a whole. This transformation of thinking about strategy will have a big impact on the role of corporate planning staff and consultants. Peter Drucker has long held that staff positions should be few in number and mainly temporary assignments for line managers, not full-time professional slots. His view is increasingly echoed by contemporary management experts. Kenichi Ohmae criticizes the separation of brain from muscle in the typical American corporation, and its Soviet style of planning. Tom Peters and Bob Waterman, in their best-selling In Search of Excellence, assert that long-range planning is either irrelevant or downright hostile to superior corporate performance. In his watershed article last year in Fortune on the disrepute of strategy consultants, Walter Kiechellll observed that "some corporations are apparently coming to believe what the wisest among them have always suspected: an operating manager is his own best strategist." As a result a number of companies, including such pioneers of formal planning systems as General Electric, have drastically cut planning staffs. Continued on page 42

Lewis J. Perelman is president of Strategic Performance Services, a amsulting firm in Alexandria, Virginia.

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EDITORIAL,
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This is not merelya temporary austeritymeasure, but a long-term reform of management systems. Thus, Business Week recently reported: "Many corporate leaders maintain that they intend to 'hold the line' on rehiring managers-especially for staff and middle-managementpositions." And they anticipate "a fundamental shift in the management skillsin demand," with headhunters reporting "little interest in strategic planners and other staff specialists. " In practice, the advanceof the new paradigmcan be detected on three major fronts. First, the ritual of the annual planning cycle is giving way to a real-time, continual issues-management process, based on enhanced business intelligence, more flexibleand user-friendlydecision-supportsystems, and assignment of responsibility to line managers to anticipate and resolve strategic problems before they blossom into crises. Second, there is growing attention on the managementof the symbolic and qualitative dimensions of the "corporate culture," to create a climate of quality, flexibility, and innovation. And third, corporations are beginning to recognize that strategic performance depends heavily on individual managers' strategic thinking -a range of skills not necessarily developed by formal schoolingor substituted for by a computer. As a result, the ttaditional job of planner is disappearing. MIS departments have been introducingdecision-supportsystemsthat are automating most of the analyticalwork done by planners and deliveringit directly to the line manager'sdesktop. Human Resources departments are becoming the key players in corporate strategy by managingthe corporate culture, and by developinglineexecutives who are capable of strategic thinking, and who can function compatibly with advanced computer/ communicationstechnology.Meanwhile,the public relations, shareholder relations, and government affairs people are taking charge of the issues-managementprocessthat will increasinglysupplant the annual planning ritual. Some planners will survive this transformation, but only those with strong skills in one or more of these emerging fields. 0

November Planning Review

1983