The term “strategy” is often misused and misunderstood in management practice, due to the lack of consensus in its definition among both academics and practitioners. While strategic management has been a widespread practice worldwide for many decades, its inclusion in the Business School syllabus at Addis Ababa University’s MBA program in the early 2000s marked its introduction in Ethiopia.

Interestingly, in Ethiopia, the public sector has taken the lead in adopting strategic management practices, surpassing the private sector. This shift can be attributed to the exposure of the then Ethiopian People’s Revolutionary Democratic Front (EPDRF) political leadership to Open University MBA and other leadership development programs in the mid and late 1990s.

In contrast to many other countries where the private sector typically drives innovation and management knowledge, Ethiopia’s public sector has led in adopting strategic management practices. Across the globe, companies have utilized strategic management principles to set goals, make decisions, and allocate resources for long-term success.

As business environments and technologies evolve, the practice of strategic management also adapts and develops. Following its widespread adoption in the Ethiopian public sector, financial institutions, ‘large’ private companies, and some not-for-profit organizations have incorporated strategic management into their management systems.

As a strong advocate and practitioner in the field, I have observed the mixed approach and outcomes of strategic planning practices in Ethiopia over the last two decades.

In the late 1990s and early 2000s, the design process lacked rigour in approach, tools, and frameworks used. However, in later years, with the appreciation and support of the board of directors and senior management in some sectors of the economy, a change in strategic approach and engagement of experienced consultants outside the organizations have shown significant contributions for improvements in the growth and profitability of some institutions. Notable institutions that have significantly benefited from best practice approaches to strategy design and implementation over the last 20 years include Ethiopian Airlines and some private banks.

The big question that lingers in the minds of many strategy consultants is why most private companies in Ethiopia fail to embrace this beneficial strategic management system for business growth and profitability.

The answer may vary based on the experiences and observations of business leaders and strategy consultants. In my observations, the key challenges include short-term and long-term anomalies, excess demand, supply constraints in many sectors of the Ethiopian economy, exigencies of day-to-day operations, and priority on quick wins, inadequate financial and human resources, and uncertainty and dynamism of the external environment.

The short-term and long-term anomaly in implementing strategic initiatives refers to the challenges that Ethiopian private companies face when trying to balance immediate results with long-term goals. This dichotomy has created tensions and conflicts in decision-making and resource allocation, leading to a focus on short-term gains at the expense of long-term institutional sustainability and growth.

Many companies in various sectors of the Ethiopian economy lack critical input to produce sufficient output to meet the growing market demand. While it is intuitive for business owners and management to focus on resolving input constraints that hamper production and revenue growth, this focus on resolving supply issues can significantly forfeit long-term growth opportunities.

Setting aside peculiar challenges of the external environment, companies at different maturity levels have different priorities when it comes to long-term planning and short-term challenges. See the figure below.

Stages of Organizational Maturity

In the initial phase of a business, known as the existence stage, the main challenges involve acquiring customers and delivering contradicting products or services. The owner, often the sole force behind the company, handles all tasks, supervises subordinates, and provides energy, direction, and capital. Formal systems and planning are minimal, and the primary strategy is survival.

As businesses progress to the survival stage, they are viable with enough satisfied customers. The main challenge is balancing revenues and expenses. The organization is simple, with centralized decision-making under the owner. Systems development and formal planning are minimal. The primary goal is survival and the owner remains synonymous with the business.

Upon reaching the success stage, business owners must decide between expanding the company based on its achievements or maintaining stability for profitability, serving as a foundation for other activities. The crucial issue is whether to use the business for growth (success-growth substage) or as support for owners disengaging from the company, partially or entirely (success-disengagement substage).

In the take-off stage, characterized as the fourth stage, businesses encounter challenges associated with rapid growth and financing. The companies become decentralized and divisionalised, typically in sales or production. This period is pivotal; success depends on the owner's ability to manage growth. If successful, the business can become substantial; if not, it may be sold at a profit or face challenges such as running out of cash.

Finally, in the resource maturity stage, a company focuses on consolidating financial gains from rapid growth and retaining small-size advantages like flexibility and an entrepreneurial spirit. The company is now well-established, possessing size, resources, and talent. Maintaining its entrepreneurial spirit is key to remaining a strong market force; otherwise, it risks entering a stage of ossification marked by a lack of innovation and risk avoidance, often observed in large corporations facing environmental changes.

Another notable local challenge for implementing a strategic management system is the lack of stiff competition in many sectors of the Ethiopian economy. The absence of stiff competition and the existence of excess unsatisfied demand in the local market have allowed traditional businesses to survive and even thrive by engaging in low-value adding and using unsophisticated business models.

In addition, some businesses that have designed good strategies with the help of consultants fail to allocate enough financial and human resources to implement strategies. Strategy implementation requires significant resources to achieve the set objectives; however, it is difficult to convince owners and leaders of struggling institutions to allocate substantial long-term capital at the expense of short-term operational exigencies and quick wins.

The uncertainty and dynamism of the environment also have a significant impact on shifting the strategic priorities of companies. For many years, the growth of local demand and the shortage of foreign currency to import basic inputs have had a bearing on companies that set a long-term growth strategy. It is expected that in a highly unpredictable environment, businesses enter survival mode by avoiding useful initiatives that extend many years for execution.

In conclusion, while the academic debate on the merits and demerits of the strategic planning process continues, I am firmly convinced that mid-size and larger Ethiopian businesses engaged in promising sectors of the economy can significantly benefit from developing a strategic approach that considers both short term and long-term priorities. This may involve setting clear and measurable short-term goals that align with long-term objectives, ensuring that resources are allocated to both immediate needs and future growth, and creating a culture that values both short-term wins and long-term vision. Ultimately, the successful implementation of strategic initiatives requires a delicate balance between short-term and long-term considerations.