Creating a strategic plan is a key component of planning for business growth. This White Paper covers a baker's dozen of crucial strategic planning issues:
- What is strategic planning?
- What makes a good strategic plan?
- Why is strategic planning important?
- The make-up of the strategic planning team
- The strategic planning process
- Asking the right questions during strategic planning
- Strategic vision and organisational values
- Formulating the mission statement
- Identifying strategic goals
- SWOT analysis
- Competitive analysis
- Implementing the strategic plan
- Monitoring the strategic plan
1. What is strategic planning?
No one can predict the future. But rather than sit back and wait for it to happen, effective CEOs anticipate what lies ahead. The orderly process needed to meet the challenges that inevitably follow is called strategic planning.
A strategic plan should not be confused with a business plan. A business plan sets short-term or mid-term goals and defines the steps necessary to achieve those goals. A strategic plan typically focuses on the mid-to-long-term goals of the business, and sets out the basic strategies for achieving them.
2. What makes a good strategic plan?
A good strategic plan:
- reflects the values of the organisation
- inspires change and modification in products or target markets
- clearly defines threshold criteria for achieving success.
No one strategic model fits all organisations, but the strategic planning process includes certain basic elements that all businesses can use. In this article we explore the vision, tactics and objectives of effective strategic plans and outline a set of underlying principles and management tools that will help you to create a truly valuable strategic plan.
3. Why is strategic planning important?
Strategic planning describes the status quo and the forces likely to change it in the immediate future. During the process, strategic planners:
- address questions of key importance
- offer a framework for future decision making
- uncover and clarify future opportunities and threats
- serve as a channel for internal communication
- set specific objectives for achievement
- create a basis for efficient performance measurement
- communicate goals to employees, investors and others
- focus attention on the company's long-term growth.
4. The make-up of the strategic planning team
For a larger company, the ideal size for a strategic planning team is nine or ten members, including an outside facilitator and an internal co-ordinator. A smaller company may need to draw on more outside help for strategic planning.
The role of the strategic planning facilitator
A strategic planning facilitator brings a fresh perspective, keeps the discussion on track and encourages all strategic planning team members to act as equals.
More important, an outside facilitator levels the playing field for the CEO and other strategic planning team members. In an atmosphere of informality, strategic planning team members can address any issue, up or down in the organisation, without fear of unjust reprisal.
The role of the CEO in the strategic planning team
The CEO sets the context for strategic planning and endorses results, but he or she should remain in the background so that other strategic planning team members' ideas can emerge. The CEO also serves as the strategic plan's "spiritual leader", providing energy and focus and holding people's feet to the fire. If the CEO doesn't have passion for the strategic plan, it will never happen.
Getting the right balance in the strategic planning team
To incorporate a balance of viewpoints, strategic planning team members should represent different segments of the company – not just vice presidents and divisional and departmental heads, but also operating, marketing and sales personnel who can bring balance when considering internal and external needs.
5. The strategic planning process
Strategic planning consists of an orderly sequence of activities, including the following:
- Planning to plan. The facilitator designs the sequence of steps that will be taken in the strategic planning process.
- Practising creative thinking. Strategic planning team members generate as many ideas as possible regarding the future direction of the business.
- Analysing the past and preparing for the future. Strategic planning team members take a critical, unbiased look at what has worked before and what hasn't. They:
-
- identify the best of your past business practices
- recommend dropping other practices that have led to costly errors
- challenge assumptions
- anticipate a future working environment.
- Combining and distilling. When enough ideas have been generated, the strategic planning team combines and focuses on those directly linked to the company's overall goals. Then, the strategic planning team:
-
- creates four to six long-term goals linked to the organisation's vision
- comes up with strategies to achieve these goals
- sets clear objectives for each strategy.
- Assigning responsibility. For each strategic objective, the team sets out specific action steps, appoints an individual to be accountable for them, and provides the resources needed to complete them.
Avoid becoming overly ambitious and overwhelming the company with the amount of work that needs to get done. By limiting your strategic transition areas to no more than three, you can create small wins and move forward with regular progress.
6. Asking the right questions during strategic planning
Strategic planning involves asking a lot of questions under three basic headings.
A. Where are we now?
- Who are our customers and what do they want?
- What are our organisation's core competencies?
- Who are our competitors and where do they pose a threat to us?
B. Where do we want to be tomorrow?
- What changes will be necessary to better serve our customers in the next three to five years?
- What driving forces – for example, new technology, ageing customer base – will shape the entire industry?
C. How do we get there?
- How will we need to improve our products and services?
- How will we break into new markets?
- What new technology will we need in order to survive?
- If a competitor moves into our market, how will we modify our product line and what marketing strategy will we use?
Other questions to consider during the strategic planning process
- Why do customers buy from us? Why do they buy from our competition?
- What is the customer's buying behaviour? Is it an impulse buy or a carefully weighed decision?
- What differentiates products in our market? What guides consumer choice?
- Are there ways to reduce the bargaining power of customers and suppliers?
- Can we increase barriers to existing competitors and potential new ones?
Finally, ask yourself this question:
- If I left the company today, how would I compete against it?
7. Strategic vision and organisational values
An organisation's vision should be a BHAG – a big, hairy, audacious goal. Visioning takes you out beyond the present. It represents the mountain-top of the strategic planning landscape.
An organisation's values serve as the underpinnings of its operations. They connect with customers, employees and other stakeholders. Articulating these values provides a foundation and a means of choosing among the inevitably competing priorities that spring up on a daily basis.
Values represent an organisation's DNA. They are issues over which people can get hired, fired, promoted or demoted, depending on whether they support or violate the values.
8. Formulating the mission statement
A mission statement describes what an organisation does, what markets it serves and what it seeks to accomplish in the future. It should be focused enough to provide direction, but broad enough to encourage growth and evolution based on changes in customer demands.
As a first step in formulating the mission statement, the strategic planning team should consider the question: "What is the company's reason for existing?" As answers emerge from the brainstorming process, they can be refined to express something for which the organisation can be held accountable.
Other guidelines for formulating the mission statement include:
- Maintain focus. Describe the essence of the business in words your employees and customers can remember you by. Avoid generalities. Vague or generic mission statements lack resonance and meaning.
- Hit the target. Focus on specific traits such as quality and customer service, and on target or niche markets.
- Make it visible. Post the mission statement where all can see it: on the conference wall, on promotional materials, even on product packaging.
9. Identifying strategic goals
Strategic planning identifies an organisation's goals and objectives.
- Goals relate to those areas in which the business must achieve success in order to grow and prosper.
- Objectives are more specific and short term. They should include target dates for completion, and name a person or persons responsible for taking action.
In general, objectives should be measurable, quantifiable and consistent. Conflicting objectives cause frustration and lack of focus. With solidly defined goals and objectives in place, an organisation can identify specific issues and operational problems. Then new strategies can be designed to ensure success in the future.
10. SWOT analysis
A SWOT (Strengths/Weaknesses/Opportunities/Threats) analysis is a tool for looking critically at the organisation.
- Strengths are those qualities – tangible and intangible – that enable an organisation to achieve its mission. These include human competencies, products, services and process capabilities.
- Weaknesses are those activities, services or other factors that block the organisation from fulfilling its mission.
- Opportunities present themselves through the environment in which a company operates. They may be generated by the appearance of new products, new trends in the marketplace or changes in the competition.
- Threats are external to the organisation. Unlike weaknesses, they cannot be controlled. In fact, they exploit a company's weaknesses and increase its vulnerability.
A clear picture of an organisation's strengths and weaknesses leads to a realistic understanding of the marketplace at large. A SWOT analysis enables strategic planners to make better-informed choices.
11. Competitive analysis
Conducting a competitive analysis involves taking the competitor's point of view. It consists of:
- developing a fact-based understanding of likely strategic changes your competitors might make in coming months
- identifying probable competitor responses to strategic changes you are considering
- forecasting each competitor's probable reaction to changes in the industry affecting your own business.
Don't restrict your strategic thinking to companies similar to your own. Consider firms not presently in the industry that could overcome entry barriers without incurring great expense, and those for whom competing in the industry makes sense from a corporate strategic viewpoint.
To design strategies for a competitive edge, look closely at your top three competitors. What are their strategies regarding customer service? Pricing? Quality? Operations? Resources? Personnel? If you find them lacking in any of these areas, there might be an opportunity for your business to fill the void.
12. Implementing the strategic plan
Implementation is the most difficult part of strategic planning. You will find more guidance in our White Paper "Implementing a Strategic Plan Successfully", but here is a summary of some "change structures" that will help you.
- Your role as CEO. Develop a "stump speech" around your strategic plan to promote its values, mission statement and actions. Use it to spread the word wherever possible.
- Day-to-day co-ordination. Enlist a support person to co-ordinate the basic strategic change programmes.
- Executive team. Have your management team keep a close eye on the top three priorities under each strategy in the plan. Ask for direct reports from the team on a regular basis.
- Strategy sponsorship teams. Organise top and middle managers into strategy teams (one team for each strategy). These people form cross-functional teams that become change agents for each strategy.
13. Monitoring the strategic plan
It is essential to monitor the progress of the strategic plan and measure the results.
- Conduct regular updates. Schedule progress reviews on a monthly or quarterly basis, depending on the level of activity and time frame of the strategic plan. Continue to examine the strategic plan's underlying assumptions, the continued validity of its objectives, and the influence of unanticipated events.
- Create a champion for every strategy and action. The champion doesn't necessarily have to complete the actions, but ensures that they get done.
- Stay committed. Every action must have a due date. Due dates can be pushed back, but don't let them go away.
- Conduct short-term reviews. Schedule strategic team "huddles" every 60 to 90 days to revisit the original strategic plan, determine whether objectives are being met, and implement new action steps as necessary.
- Expand skills. Expand employee skills through training, recruitment or acquisition to include new competencies required by the strategic plan.
- Establish milestones. Build into the strategic plan milestones that must be achieved within a specific time frame.
- Reward success. Find creative ways to motivate people and reward them for focusing on the strategy and vision.
And finally . . .
Above all, be flexible. Move ahead with the strategic plan as designed, but be prepared to let go and switch strategies as necessary.
No single strategic planning model is right for all organisations or circumstances. But a business that starts with a working strategic planning model that it has to modify periodically will be more successful than a business with no strategic plan at all.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
