Most businesses get to a stage where they realise that one or more of the following apply – that they:
- Are lacking in direction
- Lack specific challenging objectives
- Need a clear vision
- Need to move their business up a gear
- Have specific significant issues they wish to address
- Are not making enough profit
- Enthusiasm levels are not what they need to be
These key issues can be viewed as an opportunity or a threat. How a business addresses these points is a critical factor in its success.
The purpose of strategic planning is to set overall goals for your business and to develop a plan to achieve them. It involves stepping back from your day-to-day operations and asking where your business is headed and what its priorities should be. The process of strategic planning is about determining the direction in which you want to take your business. Effective strategy development requires you to shift your focus from the day-to-day concerns of your business and to consider your broader and longer-term options.
Simply put, strategic planning determines where an organization is going over the next 3 – 5 years or more, how it’s going to get there and how it’ll know if it got there or not.
Strategic planning provides you with the “big picture” of what you are doing and where you are going. Strategic planning gives you clarity about what you actually want to achieve and how to go about achieving it.
Key Elements of Strategic Planning
Where is your business now?
- Understanding as much about your business as possible
- How it operates internally?
- What are your core capabilities?
- Have you conducted an in-depth SWOT analysis?
- What drives its profitability?
- How does it compare against competitors?
- What capacity do you have?
- What can you do?
- Do exceptionally well?
- What problems are you addressing?
- How effective are you at selling?
- Have you surveyed customers for their feedback?
- Where can you innovate?
- How effective is leadership?
- Be realistic and critical
Where do you want to take it?
- Here you need to clarify your key objectives.
- Establish your mission, values and vision
- Which critical issues must you respond to?
- Where should you allocate your resources?
- Where do you see your business in two, three, five or ten years?
- What should your priorities be?
- What do you want to be the focus of your business and your source of competitive advantage over your rivals in the marketplace?
What do you need to do to get there?
- What goals and deadlines will you need to set for yourself and others in the business?
- What changes will you need to make – at the level of people capabilities and competencies, systems and ICT infrastructure, organisational culture, leadership, alignment and teamwork to deliver on your strategic objectives?
- What is the best way of implementing those changes?
- What changes to the structure and financing of your business will be required?
- Who will do what, when?
While the second question – “Where do you want to take it?” – is at the heart of the strategic planning process, it can really only be considered usefully in the context of the other two. You need to balance your vision for the business against the practical realities of your current position and changes, such as increased investment in capabilities, people, systems, and other resources. A strategic plan needs to be realistic and achievable.
Benefits of Strategic Planning
- Provides clearer focus for the organization
- Clearly defines the purpose of the organization
- Establishes realistic goals and objectives
- Communicates those goals and objectives to all
- Develops ownership of the plan
- Ensures more effective use is made of resources by focusing the resources on the key priorities
- Increases productivity through increased efficiency and effectiveness
It should be stressed that far more important than the strategic plan document is the strategic planning process itself. Remember – the best plan is one that actually gets implemented.
Strategic planning is not a prediction of the future.
It is not a business plan to help you raise funds.
It is not a cash-flow forecast.
Strategy Maps, Robert S. Kaplan and David P. Norton.
Strategic planning is about positioning your business as effectively as possible in the marketplace. So you absolutely need to make sure that you conduct a thorough analysis of both your business and your market.
Completing StrategyPal’s comprehensive Audit is a great place to start.
There is a range of strategic ‘models’ that you can use to help you structure your analysis here. SWOT (strengths, weaknesses, opportunities and threats) analysis is probably the best-known model. PESTEL (political, economic, social, technological, environmental and legal) and Five Forces analysis are two other widely-used models.
- Strengths – internal attributes of the business that can help achieve your goals (people, capabilities, systems, processes, climate for action and change …)
- Weaknesses – internal attributes of the business that could be obstructive to achieving your goals
- Opportunities – external factors that could be helpful in achieving your goals (marketplace, competition, economy, technology …)
- Threats – external factors that could be obstructive to achieving your goals
PESTEL divides the business environment into the following components:
- Political – e.g. changes to taxation, trading relationships or grant support for businesses
- Economic – e.g. interest rates, inflation and changes in consumer demand
- Social – e.g. demographic trends or changing lifestyle patterns
- Technological – e.g. the emergence of competing technologies, or productivity-improving technology for your business
- Environmental – e.g. changing expectations of customers, regulators and employees on sustainable development
- Legal – e.g. changes to employment law, or to the way your sector is regulated
PESTEL analysis is regularly used in conjunction with SWOT analysis to help identify opportunities and threats.
The Five Forces model aims to help businesses understand the drivers of competition in their markets. It identifies five key determinants of how operating in a given market is likely to be for a business. The model assesses:
- your customers’ bargaining power – the higher it is (perhaps because there is a small number of major buyers for your product or service) the more downward pressure on prices and revenue they will be able to exert
- your suppliers’ bargaining power – the ability of suppliers to push prices up (for instance if you rely on a single firm) can impact significantly on costs and profitability
- the threat of new competitors entering your market or industry – more businesses competing makes it more difficult to retain market share and maintain price levels
- the threat of customers switching to newer products and services – an example would be the threat posed by new emerging technologies, s.a. cloud computing and SaaS to the more traditional ‘software-as-a-product’
- the level of competition between businesses in the market – this depends on a wide range of factors, including the number and relative strength of the businesses and the cost to customers of switching between them
There is no specific blueprint on how to develop a strategic plan, but it will usually include the following elements:
- Analysis of internal drivers – corresponding to the strengths and weaknesses of a SWOT (strengths, weaknesses, opportunities and threats) analysis.
- Analysis of external drivers – this should cover factors such as market structure, demand levels and cost pressures, all of which correspond to the opportunities and threats element of a SWOT analysis.
- Clarity – a concise statement of where you see your business in two, three, five to ten years’ time.
- Key strategic themes / projects / objectives – these are the major objectives that need to be achieved in order for your vision for the business to be realised. These might include attracting a new type of customer or developing new products and services.
- Execution – establishing the key actions – with desired outcomes (KPI’s) and deadlines – that will need to be accomplished to attain your top level objectives.
- Resourcing – a summary of the implications your proposed strategy will have on your business’ resources. This will reflect financing requirements, as well as factors such as staffing levels, retraining and up-skilling ICT infrastructure.
StrategyPal provides all the tools you will need to successfully develop and execute your Strategic Plan.
You create your strategy by addressing these issues:
- In what niches will you compete?
- What customer value proposition will differentiate you in these niches?
- What key processes create the differentiation in the strategy?
- What are the human capital capabilities required by the strategy?
- What are the technology enablers of the strategy?
Strategy and Operations
And then there is the challenge of integrating strategy and operations. A visionary strategy that is not linked to operational and control processes cannot be implemented. Conversely, operational excellence may lower the cost base, drive quality, and generally improve performance, but without a strategy’s vision and guidance, a company is unlikely to enjoy sustainable success from its operational improvements alone.
Therefore you need to link strategy to operations.
The Execution Premium, Robert S. Kaplan and David P. Norton.