Chris Styles

When I speak with business leaders they often express a great deal of frustration with the present political process. A plethora of reviews and inquiries, but not much effective action.

Short-termism is a key problem. Press release of the day, poll of the week, and annual budgets appear to be driving the political agenda. The focus on the federal budget in particular has had an almost paralysing impact.

But budgets aren’t strategies. Budgets may have been used as the key planning tool in the 1950s and 60s, but this is 2015 and we need to think more strategically about the next 10-20 years in a rapidly changing landscape.

Catherine Livingstone, president of the Business Council of Australia, has called for a decoupling of the strategic conversation about reform on the one hand and the budget on the other.

She was quoted in The Australian, saying: “We don’t have a long-term plan. And even if we had a long-term plan, the process we have now for implementing it means we are using the budget as a tool it was never designed to be.”

Confusing a budget with a strategy is not uncommon (particularly in the public sector), but this practice leaves an organisation without direction.

Indeed, the only thing a budget in a vacuum provides is guidance on how much to spend on what, with a best guestimate of how much revenue will be coming in. Hardly a long-term strategic plan.

An organisation’s approach to strategy can be likened to the evolution of strategic planning itself.

In the 1950s/60s, budgeting was in fact the key tool used in planning. Environments – both external and internal – were viewed as relatively stable. Last year’s financial position, plus a linear extrapolation based on past years’ trends, were a good estimate for next year. The resulting numbers became the plan, and off we went.

The 1970s/80s saw greater environmental turbulence, both at the macro (for example, oil price shocks) and at the industry level. Focusing internally and preparing mechanistic budgets based on past trends proved unhelpful in this new world.

Instead, the idea of “fit” between the external environment and the organisation became the focus. Key questions were around which environments (such as, industries) were most favourable for the organisation, and what should the organisation do to succeed in those environments.

The management consulting industry came into its element and with tools such as the BCG matrix and Porter’s Five Forces. Global corporations from GE to airlines embraced the new strategy world with vigour.

In the 1990s we saw another shift. The idea that the environment was a given, and that an organisation should adapt to it, was challenged. If an organisation could acquire, harness and develop the right capabilities and assets it could influence the environment – indeed, disrupt it.

Dell challenged the staid PC market, Häagen-Dazs shook up a rather bland ice-cream market, and new tech firms created new markets.

More recently, strategists have focused on dynamic capabilities and strategic agility.

Strategy academics Yves Doz and Mikko Kosonen in their book, Fast Strategy (Wharton School Publishing, 2007), refer to three levers for strategic leadership under this new paradigm.

First, strategic sensitivity: seeing and framing opportunities in new insightful ways.

Second, resource fluidity: mobilising and redeploying resources rapidly and efficiently.

And finally, leadership unity: whereby senior management teams make tough collective decisions that they stick to and which get implemented.

What would the political and national landscape look like if the government were more Doz and Kosonen than “budget = strategy”?

Rather than budget night being full of surprises and announcements, it would likely spark debate about whether the allocation of taxpayers’ money reflected in the budget was consistent with, and supported, the government’s long-term strategy.

And elections would focus on debates around leadership teams, tough decisions and the ability of each side of politics to see and create new long-term opportunities for the nation.

A far cry from the expediency of short-term governments and the recent trend of revolving leadership.

Professor Chris Styles is the dean of UNSW BusinessSchool.