Configuration and reconfiguration - planning for uncertainty?

Abstract

This paper addresses the issue of planning in new small firms. The literature indicates that planning is problematic. First, in spite of an assumption that planning is a "good thing", the extent of planning activity in small firms appears limited. Secondly, the benefits accruing to those who plan are equivocal, even ambiguous. Whilst planning may be associated with improved performance the direction of causality is unclear. Finally, other reasons cited as planning benefits for large established firms may even work to disadvantage the small firm by imposing a strategic rigidity. Analysis of the literature suggests that models of planning and strategy for larger firms may be unsuited to small firms, especially new small firms. This is because planning is intended to be the precursor to strategic actions and strategy is about managing the interface of the internal resources of the firm and the external environment. The business environment in which new small firms, in particular, operate is likely to be uncertain. This presents the research questions for this study: Do new small firms operate in an uncertain environment? If so what are the implications for small firm planning? A case study is presented and analysed to address these questions. It is clear that this firm operates in conditions of uncertainty which is increased by the internal changes created by the development of the firm as it strives to fit into its environment. As new threats or opportunities emerged a planning approach with a very limited time horizon was adopted. This process was premised upon knowledge of and attitude towards, existing resources and aspirations. It was highly iterative as the firm first configured to fit the expected environment, then reconfigured to adapt to the experiences of the uncertainty. This configuration and reconfiguration means that formalised, prescriptive, long term planning of objectives, strategy and implementation is unrealistic for new small firms.