What is the significance of strategic planning?

by Moira Alexander

Often, businesses start out with a fairly clear vision, and that vision can be accomplished in several ways: sometimes through some great streak of luck, but most likely with the help of a well-thought-out, realistic, and carefully designed strategic plan combined with intentional and focused actions. Strategic business planning provides the blueprint or roadmap that should guide all activities in an effort to achieve the business vision and deal with the questions of how it should compete. In this article we discuss what strategic planning is, why its important, the high-level strategic planning process and steps.

What is strategic planning?

Strategic planning is when the leadership team in an organization outlines its mission and vision along with its mid-to long-term goals and objectives.  There are many questions that should be addressed, but generally, a business will need to answer two key questions at the very least:

  1. Which industry should it be in?
  2. And how should it compete

Conducting business without a strategic plan is akin to getting in a car, driving blindfolded, and hoping to reach the desired destination without running off the road. Barring that great luck that I previously mentioned or a solid plan, it is almost impossible to reach the desired destination without the result being multiple incidents or a complete disaster.

The strategic planning process in business: Five key steps

 These are five steps that are generally involved in the strategic planning process that most organizations follow.

  1. The vision for an organization is defined. 
  2. The current state of the organization is identified and documented as a baseline.
  3. The organization’s priorities and objectives are outlined.
  4. Responsibilities are determined and assigned.
  5. After any required projects/work is completed, the results are measured using any identified metrics.

Every business needs to have strategic goals that drive decision-making and business initiatives. Absent these, the likely outcome is an exercise in squandered company-wide time, effort, and resources. Businesses simply can’t expect to achieve goals without investing what may seem like copious amounts of up-front work and resources to identify and plan for desired results. With business strategy also comes the identification of other necessary strategic planning components such as internal processes, policies, and procedures; roles and responsibilities; schedules; resources; and so forth. But putting the strategic planning process in place and just jumping in with both feet is insufficient. It takes thoughtfulness.

A strategic business plan is a guide and can, at any time, be impacted by various internal or external factors, and as a result, a plan may need to be modified. That said, it makes no practical sense to change a business plan each time a change occurs unless it impacts the business goals in a marked or fundamental way. In the new business world, change is all around us, almost every minute of the day.

Change can come in many forms

Suffice to say, change can come from factors internally and externally to the business, a few are stakeholder expectations, human resources, environment, leadership, organizational structure, policies and processes, and regulations. To deepen the scope, the economy, industry, technology, and demographics, all work to make change a constant.

Stakeholder expectations can ebb and flow at the drop of a hat. From “internal stakeholders” in multiple departments to external clients, their needs will change depending on their own internal and external criteria, which can create a chicken-or-the-egg scenario. Stakeholders must be involved during the strategic planning process

Things can become murky when trying to assess if a change has occurred as a result of stakeholder needs or if changes in of themselves are actually the trigger to the need for subsequent change in stakeholder needs. One thing is for sure: stakeholder expectations must remain the focus when it comes to business strategy. After all, the primary reason for a business’s existence is to serve the needs of a customer through a product or service offering. If the focus shifts away from customer or stakeholder needs, any business activities are likely to create customer dissatisfaction, and ultimately this will end in disappointment for the business as well. At the end of the day, customers will waste little time in showing their lost faith in a product or service by replacing it with another; it’s much easier to keep an existing customer happy than to try to attract and gain a new customer.

Human resources have an enormous impact on all business activities in one way or another. “More to the point, employees with their tacit knowledge, skills, and abilities, in part, represents the capabilities of what the company can do to meet its customer needs. Like energy, if harnessed, it can create a source for sustainable and enduring competitive advantage,” said Sullivan Alexander, MBA, CPA, CITP. While the saying “People are our most important asset” may be a heavily worn, beaten-up, and overplayed phrase in the business world, the reality of this truth remains unchanged. Just like external stakeholders, employees must also be involved in your strategic planning process.

No employer out there can afford to negate the needs of its people without suffering the consequences in some form, whether recognizable or not. Employees, regardless of their position, are smarter than a company’s leadership may give them credit for.

Employees, as a rule, are aware of the business culture, values, and management mindset through policies, practices, and behaviors. From the day that an employee is hired, his or her contributions will change to match the value he or she perceives from the actions of the leadership team. This relationship is somewhat like parents to children, whereby the management must serve as an example to the employees at all times through not only words but also, more noticeably, through their actions.

The environment, whether internal or external, can inflict significant pain on any business. Environmental factors in and of themselves can change with frequency, creating monumental amounts of uncertainty at every level and for everyone, to varying degrees. The key is striving to monitor and manage these factors to mitigate the risk of negative impact wherever and whenever possible. The national and global economy, technology, demographics, and industry environment play a role in creating uncertainty and a source of constant change.

Environmental factors can vary greatly depending on industry, location, service, or product. Internal factors are typically within the control of a business, as many of the factors are likely determined by the executive team. External factors, such as laws and legal and legislative changes, aren’t within the control of the company, and these make day-to-day operations extremely trying at times because of issues of varying complexity.

Leadership teams or individual leaders can have a sizable impact on strategic direction, whether through changes in management style, beliefs, attitudes, and interests or simply through physical changes to the leadership pool. As mentioned previously, people, especially members of management, significantly impact how well a business performs.

Individual performance and attitude play out through customer relations and retention, company reputation, service levels, and ultimately the bottom line. The good news is that management has the largest amount of control over how and how much this impacts resourcing, timelines, products or services, customer relations, policies, and procedures, technologies, and profits.

strategic planning process strategic planning process strategic planning process strategic plan strategic plan strategic plans senior leadership strategy development planning process strategic planners benefits of strategic planning strategic planning template organizational goals mission statement mission and vision statements strategic planning cycles key stakeholders strategy formulation company's resources organization's goals strategic challenges strategic plan document strategic vision strategy implementation strategic planner strategy execution business leaders strategy mapping strategy formation key performance indicators senior management company growth strategy defines strategy map planning is a process internal environment annual budgets monitor progress allocate resources track progress vision statement financial plan operational plans plan's success same direction vision statements external environment strategic issues long term strategy goal setting organization's strengths swot analysis changing environment clear communication helps managers changing circumstances common direction driving force effective strategic plan many tools opportunities and threats key stakeholders key stakeholders mission statement organizational goals benefits of strategic planning planning process planning process planning process strategic plan strategic plan strategic planning process strategic planning process strategic planning process strategy development senior leadership senior leadership strategic management strategic management strategic plans decision making plan may five years term goals information needed long term effective strategic next year end result several years short term strategic planning can help actions needed short term goals new opportunities strategic planning starts company name strategic management

Organizational structure is often a key factor that impacts business strategy; whenever new leadership enters or any previous leaders exit, the change can possibly bring about fundamental changes in philosophies and vision. Depending on the nature, size, industry, location, goals, or culture of the organization, differing structures may be in order. An organization’s structure should reflect its business model, culture, vision, strategy, and size. It will impact agility and competitiveness.

Smaller businesses may not require a rigid or complex hierarchy like those created in large organizations. Organizations aimed at less formality and greater flexibility and transparency might opt for a flatter organizational chart to allow ideas to flow more readily throughout the chain of command. A flatter chain of command can often provide a mechanism for lower-level staff to bring forth great ideas with less interference and thus give executives the opportunity to more quickly identify areas and problems that get in the way of meeting goals.

Policies and processes are always impacted as a result of organizational, managerial, environmental, stakeholder, and other changes. This, in turn, creates changes in other areas of the business. All businesses—regardless of industry, location, or offering—need to have policies and processes in place to get things done.

How formal those policies are will be determined by various factors. Formal processes should exist regardless of the company’s size, as it allows for increased efficiency, assuming that the processes in of themselves make sense for the business. As businesses grow, so should process efficiencies increase. Managing process changes through change management is key to ensuring all factors have been accounted for.

Regulatory and legislated changes are typically in constant flux these days. Although they are designed to influence the ways in which businesses operate, they often can instead create additional uncertainty and increased workload while imposing changes that affect business strategy. As this is one area where businesses have little or no control, it can be menacing. That said, the one thing that businesses do have control over is how to stay on top of these changes and how to holistically plan and implement changes within the confines of such parameters. Keeping on top of how these regulatory and legislative changes impact the business has the potential to make all the difference when it comes to strategic agility.

If not carefully monitored, legal and regulatory changes can quickly turn into a nightmare and put businesses in an unenviable position.

Cash-flow limitations and large or untimely fluctuations have the potential to drastically curtail and mute even the best thought-out, identified, and executed strategic plans.

This can turn out to be possibly one of the most invasive areas facing businesses, especially start-ups and smaller businesses. That’s not to say it doesn’t impact many large organizations from time to time. Having sufficient financial resources to conduct day-to-day operations is vital because it is the lifeblood of business for success.

Companies may have sufficient resources for running the business day in and day out but without contingencies for unforeseen capital or operating expenses. These unforeseen costs can easily cripple any business. Continuous cash-flow planning and management can help to alleviate some of the stress in situations like this. The long and short of it is cash-flow considerations dovetail in with the business strategy because it is a resource that supports what the business is capable of doing.

Competition can have the most detrimental effect on any business. Due to extensive outsourcing, high competition, and e-commerce, many business models and strategic plans have been overhauled. Oversaturated markets have also resulted in a consolidation within various industries, which has forced businesses to rethink their plans and reinvent themselves. Additionally, these opportunities for businesses to reinvent themselves are continually shrinking due to rising global competition, legal and regulatory limitations, and tax and reporting implications and requirements. Factors such as e-commerce and social media serve as a mechanism for creating an even playing field globally by creating increased competition as many companies choose to operate within it, in addition to offering and utilizing services in the cloud.

Products or services can often change as well due to a highly competitive global environment. Service and product-delivery models are constantly impacted, which forces businesses to become more agile and efficient in order to maintain market share. This is one area where companies are under increasing pressure to transform themselves or their products and services in order to avoid becoming stagnant.

As mentioned above, businesses with physical storefronts are increasingly at risk due to e-commerce; off-the-shelf software has become a thing of the past because of software-as-a-service (SaaS) models and even many technology-based vendors are at risk due to the new as-a-service cloud-based offerings by other vendors. Virtual reality is no longer a futuristic concept; it is the new reality of today’s business-operating platform.

Change can also come in a myriad of other forms. Merely acknowledging these changes is not sufficient for providing for successful business results.

In today’s competitive setting, knowing how to successfully navigate changes and barriers and develop appropriate and effective processes that properly manage such change is a must. It’s practically impossible for organizations to make sound strategic decisions and fully achieve objectives when deprived of strong change-management strategies. This is especially true in the world of project, program, and portfolio management, where obstacles and ambiguity are inevitable at every turn.

Consider strategy to be the heart of the business; it is vital to the operations, and without it, the rest of the business functions are unnecessary. The functioning of the other parts should support the heart and keep it alive.

All content: Copyright 2018 by CIO.com—IDG Enterprise Inc., 492 Old Connecticut Path, Framingham, MA. 01701.

Similar Content:

You may also like