The Sedative of Certainty: When Strategic Plans Become Strategic Fantasies.

One can identify a certain, identifiable air in the boardroom at the time when a five-year strategic plan is presented in the end. The atmosphere is filled with a hint of accomplished intellect. The pitch presentation is smooth, the financial forecasts always have a shape of a hockey stick with the first two years, and the SWOT analysis is thoroughly defensive. Within that closed hermetically sealed environment, the logic is impeccable. Capital gets deployed, projects are approved and the executive team is relieved in unison. They have surveyed the land; they have brought nature to task.

Six months later, the plan is gathering dust on a SharePoint server, and the organization is frantically reacting to a competitor’s price cut or a supply chain disruption that the plan failed to mention.

This is the moment a strategic plan is revealed to be a strategic fantasy. It is a phenomenon that plagues organizations ranging from agile startups to monolithic conglomerates. The failure is rarely one of intelligence or effort; rather, it is a fundamental misunderstanding of what strategy is supposed to do. We confuse the comfort of a plan with the messy reality of execution, often retreating into a "paper reality" where market forces behave politely and customers act exactly as our focus groups predicted.

The Genealogy of a Fantasy

To understand why plans fail, we have to look at how they are born. In many organizations, strategic planning has become a ritualistic performance rather than an exercise in critical thinking. It is often an annual ceremony derived from the previous year’s budget, rather than a zero-based assessment of the current environment.

The primary culprit is the Illusion of Linearity. Non-linear systems are difficult to human cognition, but markets are complex adaptive systems, with feedback and volatility and chaos. When we set down to write a strategic plan we are tempted to enforce a linear story on this mess: When we do X, Y will occur, which will give us Z profit.

This "if-then" causality works in a mechanical system like an assembly line but it dissolves in a marketplace. A strategic fantasy assumes that the organization is the protagonist of the story and the market is merely the setting. In reality, the market is an ecosystem of other active agents, competitors, regulators, fickle consumers who are rewriting the script in real-time. A plan that does not account for the counter-moves of the enemy is not a strategy; it is a wish list.

The Ivory Tower and the "Priesthood" of Strategy

A structural driver of strategic fantasy is the separation of the "thinkers" from the "doers." In huge corporations, strategy can be the province of some particular caste Chief Strategy Officer, high-priced external consultants, and corporate development staffs. Such persons are usually very brilliant and pattern identifiers, though, they usually do not have visceral, physical information about the business operations.

They build up the Grand Design in nothingness. They deal in aggregates and averages, smoothing over the granular friction that defines actual business operations.

Consider a retail chain that plans to improve margin by optimizing inventory turnover. On the slide deck, the math works perfectly. At the store, however, the decreased back-room inventory results in bare shelves in the event of sudden rush periods, which are frustrating to customers and infuriate store managers who are unable to work. The calculation did not succeed due to the incorrectness of the math, but rather due to the fact that friction of physical reality was not taken into account.

The feedback loop is broken when the planners are not part of the results of their plans. This creates a "Strategy-Reality Gap." When the plan is bound to fail, the response of the board room is usually to lay blame on poor execution. This is an unsafe mistake diagnosis. When a strategy cannot be implemented flawlessly to work out, then it is not a good strategy. The strong strategy should be resilient enough to withstand human fallacies, system crashes and the reality.

The Politics of Optimism

Perhaps the most insidious element turning plans into fantasies is the internal political economy of the corporation. Organizations, by nature, are hierarchies where information filters upward. As that information ascends, it is sanitized.

Bad news is fatal to a mid-level manager’s career, while optimism is rewarded. Therefore, the data that reaches the executive suite the raw material for the strategic plan is often skewed. Sales forecasts are padded to ensure bonuses are met (or sandbagged to ensure targets are beatable), and risks are downplayed to get projects approved.

This leads to Strategic Confirmation Bias. Executives have a vision of their desired destination of the company and the organization willingly (as consciously or unconsciously) filters data to align with that vision. When the CEO is infatuated with the idea of entering the Asian market, the strategic planning team will almost surely come up with a deck showing how huge the TAM (Total Addressable Market) in Asia is, and hide the subtle information regarding regulatory obstacles or the local competitive presence in the market.

The plan is made into a document that is meant to support the intuition of the leadership not criticize it. It becomes a mirror, reflecting what the leaders want to see, rather than a window into the actual landscape.

The Complexity Trap

Complexity is a widely held conception that equates to rigor. A two-hundred pages strategic document with complicated matrix and seventy-five separate KPIs is thorough. It is an indication that the authors do their homework.

However, in strategy, complexity is often a mask for a lack of focus. A strategy that tries to do everything is effectively a strategy of nothing. When a plan lists 15 "strategic pillars," it has abdicated the hard work of choice. Strategy is, at its core, the art of sacrifice. It is about deciding what not to do so that resources can be concentrated on the few actions that truly move the needle.

This is the so-called kitchen sink approach to strategic fantasies. They should strive to be innovative, optimize and expand and consolidate at the same time. They fail to recognize the fact that there are limited resources, not only in terms of capital, but also in terms of cognitive capacity and organizational energy. Whenever an organization attempts to pursue more than one front at the same time it attains mediocrity in all of them. The delusion is the fact that the power of will can break the laws of physics and resource limitations.

The Static Document in a Dynamic World

The medium itself contributes to the message’s failure. The standard strategic plan is a document - a PDF or a printed binder. It is just a reflection of the world at some point in time. However, as soon as the document is concluded, it starts to rot.

We live in a period of hyper-competition and change of technology. What would have been created as a five-year plan in 2019 would have been virtually useless in the global events of 2020. Nevertheless, it is a fact that the Strategic Plan is still regarded as a holy book by many organizations that must be followed, but not as a work hypothesis.

This rigidity creates Strategic Inertia. Managers continue pouring resources into initiatives that the market has already invalidated because "it’s in the plan." The strategy turns into a suicide deal. The fantasy is the belief that it is a virtue to continue with the plan even when the terrain is changed.

The Strategic Pivot: Stepping Forward into Reality.

What is the way of transitioning between strategic fantasy and strategic reality? It demands a paradigm change on the way we look at the art of planning.

Strategy is not a Script, but a Hypothesis.

We need to forget about strategies as predictive scripts but consider them as scientific hypotheses. Hypothesis: We think that doing X will bring about Y, does not mean it is an order that should be adhered to without question. Such an attitude changes the perspective of compliance to learning. If the data from the market contradicts the hypothesis, the strategy must be updated immediately, not at the next annual offsite.

2. The Pre-Mortem

According to psychologist Gary Klein, one method is the so-called pre-mortem. When developing a plan, the team should presuppose that the plan is a failure that is going to be catastrophic in 2 years. Then they reverse engineer to establish the cause of its failure. This practice is a burst of the bubble of optimism and makes the team face the ugly side of the issue the reaction of the competitors, gaps in internal capabilities, regulatory changes that the team had already neglected. It puts in a shot of pessimism which makes the plan immune to fantasy.

3. Intent over Instruction

A good lesson here can be learnt in military history. This was the famous statement of the Prussian field marshal Helmuth von Moltke the Elder, who said that no plan is capable of survival after coming into contact with the enemy. His remedy was Auftragstaktik, or "Mission Command." Communicating the intent of the mission and desired end-state instead of the detailed, rigid orders, the commanders left the how to the officers on the ground who could see the situation best.

This in business terms translates to the setting of the strategic guardrails and end goal but leaving the frontline to maneuver through the challenges. It recognizes that the map in the boardroom is of low quality whereas the worldview is that of the frontline is of high quality.

4. Coherence instead of Comprehensive.

In his classic book on the subject of good and bad strategy, Richard Rumelt, contends that a kernel of strategy exists: a clear diagnosis of the problem, a leading policy to address it, and a pattern of consistent actions. An effective plan is clear, crisp and to the point. It cuts through the noise. It is an attempt not to answer all problems but to answer the critical problem. The leaders should be bold enough to de-fluff, to de-buzzword, to de-nice-to-have so as to get down to the bare bones of what ought to be done.

The Courage of Insight

Finally, the act of entering fantasy and leaving it to the real world is an issue of bravery. Admitting that we cannot foretell the future takes some heart. To say no to good things in order to concentrate on great ones is a very bold thing to do. And it takes guts to inform the CEO that their pet project is premised on a fallacy.

An actual strategic plan is not a glitzy paper that would leave everyone feeling secure. It is generally an awkward document. It acknowledges risks. It accepts trade-offs. It accepts that there is a possibility of failure. But therein its power does reside. A strategy fantasy lulls us to sleep; a reality strategy jolts us back to wakefulness and realism and sets us to battle.

It is not to have a perfect plan, but rather an organization that is ready. The shelf binder is presupposed; the mutual understanding and nimbleness of individuals is all. When ceasing to write about fantasies, but developing capabilities, we cease to play at business and begin to do it.