Planning and Strategy

From Mission to Moves

Planning converts intention into commitments. The hierarchy runs downhill from identity to calendar:

• Mission — why the organization exists (its permanent job).
• Vision — what it intends to become (the destination photo).
• Objectives — measurable milestones; well-formed ones are SMART: specific, measurable, achievable, relevant, time-bound.
• Strategies — the routes chosen to reach them.
• Plans and budgets — routes translated into calendars and money.

SWOT is the standard situation scan: internal Strengths and Weaknesses (what we control), external Opportunities and Threats (what we don't). Its value is not the four boxes but the crossings: strengths aimed at opportunities (attack), weaknesses exposed to threats (defend or exit).

Porter's generic strategies answer the only question competition allows: why would customers pick us?

• Cost leadership — same value, lower cost, won by scale and discipline.
• Differentiation — distinct value worth a premium, won by brand, design, or technology.
• Focus — either weapon, aimed at a niche.

Porter's warning: firms refusing to choose end up stuck in the middle — outpriced by the cost leaders, outclassed by the differentiators.

Levels of planning mirror the hierarchy: corporate strategy picks which businesses; business strategy picks how to compete in each; functional strategies (marketing, operations, finance) execute. Time horizons shrink on the way down — strategic (years), tactical (quarters), operational (weeks).

The cascade: mission → objectives → strategy → plans — each level constrains the next.

The discipline's paradox, courtesy of Eisenhower: plans are often worthless, but planning is everything — the map ages instantly; the mapmaking trains the navigators.

The planning cascade

Tip: SWOT earns its keep only at the crossings: strengths aimed at opportunities (attack), weaknesses exposed to threats (defend or exit). Four filled boxes with no crossings is a wall poster, not an analysis.

The Experience Curve: Why the Leader's Costs Keep Falling

Behind cost leadership sits an empirical law discovered on factory floors and formalized by BCG: every doubling of cumulative output cuts unit cost by a roughly constant percentage — typically 15-25%.

$$c(Q) = c_1 \cdot Q^{-b}$$

where $Q$ is cumulative units ever produced (not this year's volume), and an '80% curve' means each doubling leaves costs at 80% of before: from the first-unit cost, unit 2 costs 80%, unit 4 costs 64%, unit 8 costs 51.2%.

Why it happens — a braid of mechanisms, not one: workers refine motions (learning proper), engineers redesign steps out of the process, products get redesigned for manufacturability, purchasing terms improve, and fixed know-how spreads over more units. None of it is automatic — the curve is a budget for improvement, harvested only by firms that manage for it.

The strategic consequences are brutal:

• First movers compound. The firm with twice your cumulative volume sits one full doubling ahead — permanently cheaper at every future moment if both ride the same curve.
• Share buys cost. Aggressive early pricing — even below current cost — can buy the volume that drives cost below price later. This is the logic of penetration pricing, of consoles sold at a loss, of every 'blitzscaling' pitch deck.
• The curve is a treadmill. Competitors ride it too; only relative cumulative volume confers advantage.

Where it breaks: experience gains attach to a technology. A disruptive process resets everyone's clock — the decades of experience in vacuum tubes bought nothing in transistors. Riding a curve superbly while the curve itself is being replaced is how dominant firms die with record efficiency.

Reading the numbers: on log-log axes the curve is a straight line of slope $-b$; on ordinary axes it is a steep early plunge flattening forever — the first doublings are cheap to reach (units 1→2→4), the late ones (1M→2M) take years, which is why cost advantages open fast in young markets and freeze in mature ones.

An 80% curve in numbers

Common pitfall: Plotting the curve against annual volume. The x-axis is cumulative output ever produced — a firm that made 10M units over a decade sits far down the curve even in a slow sales year, and a fast-growing newcomer doubles its cumulative count (and cuts costs) far more often.