When it comes to running a company and taking care of a business, my experience has taught me that it is always beneficial to plan, plan and plan ahead! Having worked in business for 40+ years, I can honestly say that the more you plan, the better results you will see.
Of course, planning does not guarantee results. But it also means that you have a contingency exit in case what you had in mind did not work out. Any kind of business, large or small, requires management and involves risks—especially if there are stakeholders involved.
When you have a strategic plan in place, you will be able to minimise those risks and account for the worst case scenarios beforehand, even if they are only precautionary measures that likely will not be required if all goes well. In the following sections, I will take you through the important steps of strategic planning and how it can help you.
What Is Strategic Planning? An Overview
To put it simply, strategic planning is a management activity that organisations use to list their business priorities so that the most timely and important tasks can be handled at the right time. (1)
By having a common strategic plan, the organisation is also able to ensure that everybody is on the same page and is working towards a common goal. Even if you have a common goal in mind from the outside, the strategic plan is a way to lay out concrete steps so that the most efficient way of achieving that goal is utilised.
The thing to remember is that strategic planning is a key to the future. It is a forward plan that looks at progress and accounts for the organisation’s resources and efforts not only the next 3 months but for a 3-5 year time span.
The key element of strategic planning is the Strategic Plan itself which reflects input from all areas of the organisation. This is the document that when completed will be shared organisation wide. When the plan is put down on paper, it creates a checklist that everyone can follow and track their progress on.
What to Include?
Now that you know what a Strategic Plan is, let’s see what the Strategic Plan includes. The following is a list of things you should include in a Strategic Plan and may want to include in yours as well.
● Company Description
● Mission Statement
● Strategic Analysis
● Overview of Strategies
● Action Plan
● Budget and Operating Plans
● Detailed Monitoring and Evaluation Methods
● Executive Summary
This portion of the Strategic Plan document will have a description of your company and all that it stands for.
The next few sections will go into more details of what it is your company is setting out to achieve, but this portion should describe the culture of your organisation.
The mission statement is a detailed but concise explanation of what it is that your business hopes to achieve. Think of it as a statement of purpose.
Not only is this a good way for you to get to the heart of your objective. But if you put it down on paper for everyone to see, the employees will also be on the same page and will make business decisions that are in line with your mission statement.
This is also a good way to let external investors and clients know what you stand forin an easy to understand way.
The strategic analysis is one of the foundational steps for building a Strategic Plan. This step includes carrying out a research of your market and the environment that your business operates in. This is one of the most crucial steps of strategic planning since it is the step that will push you to gather all kinds of relevant information and data.
Overview of Strategies
Once you have carried out a strategic analysis, you should be able to come up with relevant strategies that help focus everyone on your business. This section of the strategic plan is, therefore, an overview of all those strategies.
Again, this step is important as you will be sharing the KPI’s so that everyone knows their role. If you find that the strategy does not work on paper, it is unlikely that it will work in practice. You can, therefore, save yourself the effort and move onto a strategy that has a greater chance of working.
The action plan is when things begin to become more strategic. The action plan is a way of putting together a set of strategies that will realise the organisation’s vision and meet the objectives the vision has in mind.
The action plan will, therefore, contain concrete steps that will facilitate the organisation’s business (or other) strategies in a way that the overall vision of the organisation is not compromised.
Budget and Operating Plans
Once the action plan is down on paper, you need to figure out how this plan will be paid for. Nothing will take off from that document unless you put in place a realistic budget. The budget and operating plans will take into account the resources you have at hand, and what departments in the organisation will be funding which part of the strategy.
The budget needs to be organised into compartments so that you know exactly where you are spending money and for what.
Detailed Monitoring and Evaluation Methods
This is the part of the strategic plan that evaluates whether the plan and the strategies are working at all. This is where you join the dots to see if the plan is aligning your mission and the organisation’s vision.
This is the point where you assess whether your plan is matching its objectives. Often, we create plans that are overly ambitious and on further examination discover that they are failing to meet their goals. jolted back into reality. I have seen this many times where energy is expended in a fruitless quest to achieve the impossible.
Put in place systems of checks and balances to see if the plan you have articulated is clear to everyone, whether it reads complete, and most importantly whether it is integrated with the vision of the organisation.
This is the last section of your strategic plan and is a summary of all that has been covered in the plan. This is an important part of the plan as it will allow people to have a broad overview, even if they have not read the whole document.
The Benefits of a Strategic Plan
So far I have tried to describe what a strategic plan entails, but let me also highlight what the main benefits of a strategic plan are: (2)
● Increase Productivity: The Strategic Plan can do this by guiding your employees along a shared vision. Everyone knows what they are required to do, therefore, increasing productivity.
● Give a Clear Idea of Your Strengths and Weaknesses: Through trial and error, you will be able to assess what your strengths and weaknesses are. Accordingly, you will also be able to make note of opportunities that are timely for the organisation.
● Develop Strategies: When you begin working on the plan, it gives more momentum to the process of developing strategies and finding one that works for you.
● Track Progress: When you have a concise plan in place, you will also be able to track progress by monitoring deliverables.
What a Strategic Plan Is Not
Having spoken of the benefits, let’s take a look at what a strategic plan is not or what you should not expect from a strategic plan: (3)
● Planning is not the same as a Strategy: Often planning is confused with having a strategy. However, the two are not the same. Planning is a set of wishes whereas strategy is a route map with KPI’s.
● Business Strategy: A detailed plan will help when you are establishing a business, so you can obtain funds, organise operations, etc. A Strategic Plan on the other hand kicks in once those initial stages have been taken care of.
● Avoiding the more difficult path: A Strategic Plan is a way for mitigating risks and being aware of the possible threats. However, a Strategic Plan should identify risks that maybe detrimental to the business. It should also allow you to make informed choices.
4 Useful Strategic Planning Frameworks
To avoid the pitfalls of strategic planning, in that you may have a plan that you cannot realise or that you begin planning with gusto but you realise it is unrealistic, the following are useful models you can follow:
A balanced scorecard is a strategy performance management tool that can be used by managers to keep track of the completion of activities by employees and to monitor the outcome from these actions.
A SWOT analysis is another good way of accessing information quickly. SWOT is an acronym for ‘Strengths, Weaknesses, Opportunities, and Threats’ and allows you to monitor progress over a period of time and at the same time keep an eye on areas of the business. While the first two are considered internal factors, the other two are seen to be external factors. All four together form considerations that you must take into account during the strategic planning process.
PEST is also an acronym for ‘Political, Economic, Sociocultural and Technological’. This model is a great way to look at the environment your organisation operates in and then accordingly determine what would be best for the company’s well-being. You may find that the PEST model is used in collaboration with the SWOT model.
Porter’s Five Forces
Porter’s Five Forces is a model named after its creators, Michael Porter. (4) The model examines five forces that may affect the health and profitability of an organisation. The five forces include:
● Threat of Entry: Is there a threat of other players entering the market easily? Or is it a niche market?
● Threat of Substitution: Will buyers be able to substitute your products easily?
● Customers and Their Bargaining Power: Can individual buyers dictate how your organisation should operate?
● Suppliers and Their Bargaining Power: Can larger retailers and suppliers dictate how your business operates? For instance, can they drive costs down by exerting pressure?
● Existing Competition: What is the state of competition with the other players who already exist in the market? Do they have a margin that can be covered by the launch of a new product?
The assessment of each of these forces will help you see what direction your organisation should go in and what threats you should be prepared for. By making note of all five of these forces, you will know in what areas to conduct your market research. The results of this research will also throw up your possible strengths and weaknesses, giving you a strong foundation to plan on further.
As has been described above, strategic planning is one of the most important aspects of running an organisation. With a Strategic Plan, you should be able to assess all the possible threats your business may face, the strengths you are working with and the weaknesses you need to improve upon.
The strategic planning processes and models that have been described above are only some of the ways in which you can go about creating your plan. There are several other such models that you may find more beneficial for your particular organisation. (5)
I hope that the information that has been provided to you above has been resourceful and will help you see the importance of strategic planning. I hope it also helps you see the value of a Strategic Plan and at the same time manages your expectation.