Written by Tim Allen, CPA
Does my company really need to get involved with formal strategic planning? This question seems to conjure up many thoughts and opinions. To many, the process is a waste of time. To some, a strategic plan is that feel good document they devise at their annual executive retreats that may or may not be acted upon. To others, the strategic plan is a critical roadmap that drives company performance, direction and competitive edge. In general, a strategic plan is a set of choices that determine what a company will invest in to meet customer needs and succeed in the market.
The strategic plan serves as the blueprint for your company's future growth and direction. So, does your company need to get involved in strategic planning? The answer is probably yes!
So, what is strategy? One strategist defines strategy as the determination of what you are not going to do! A more formalized definition might look like: An integrated and aligned set of strategic initiatives and tactics all working together to create unique customer value and thereby unique customer perception. Strategy is what you do that generates value and makes you hard for others to imitate. Every good strategy contains two parts: "The What" and "The How". What are you promising your customers and how are you going to deliver upon that promise. How are you going to stand out from your competition and create demand for your product or service?
To create a sound strategic plan that drives your company's growth for the next three to five years, the strategic planning process should at a minimum cover the following areas:
- Looking at the current reality of both your business and industry.
- Identifying the factors driving future demand.
- Defining your company's measurable objectives.
- Understanding your company's strategic assets and liabilities.
- Determining your customer promise and competitive advantage.
- Devising strategic initiatives and tactics to achieve your objectives and deliver upon your customer promise.
- Developing a solid execution plan.
Let's look at what the review of your current reality would involve. The areas that need to be considered include:
- Determining your company's key performance metrics and knowing if you are ahead or behind.
- This may include new sales growth goals, gross margin targets or cash flow performance.
- Determining where business performance is worrisome.
- This can include the effect of losing a key customer, poor brand recognition or lack of qualified employees.
- Assessing where you are strong.
- Your areas of strength may include superior growth opportunities, outstanding market reputation or first-rate management team.
- Identifying trends in your industry.
- Is there a shift in customer expectations? Are there new regulatory requirements that may affect your product or service offering?
- Appraising your competitive position.
- This is a look at how worried you are about what a customer, supplier, competitor, new entrant or technology can do to you (i.e. how much power do they have over you). The strategic plan seeks to address areas where you are weak and improve upon them. The plan also looks to take advantage of areas of strength to propel the company forward.
Understanding your current reality is just one aspect of the strategic planning process. As previously stated, the process should also cover steps two through six listed above in order to create a sound strategic growth plan. We will explore these other steps in more depth in future articles.
It is also worth noting that your strategic planning team should include a representative cross-section of key employees from the various departments. This not only brings many new ideas to the table but also helps to get employee buy-in throughout the company, which is critical when it comes time to execute the plan.
Lastly, without proper execution the best-written, well-conceived strategic plan has little chance of success. At a minimum, a proper execution plan includes:
- Appointig a Chief Strategy Officer (CSO) at the beginning of the process. This is typically not the CEO.
- 30-day action plan immediately following the initial strategic planning session to get the process jump started.
- Assigning specific timelines for projects and team member accountability.
- Strong, consistent communication amongst the strategic team members and employees on a quarterly, monthly, weekly and daily basis is crucial.
- Employees must be aligned and engaged in the process (i.e. "What's in it for me").
- Relentless follow up and ability to adapt the plan to a changing environment.
- Revising and updating the plan as required. The Strategic Plan should be a living, flexible document.
Poor execution has been the demise of many great strategic plans. Don't let that happen to yours. It can become both discouraging and demoralizing to the organization when strategic plans aren't executed properly.
This article was just a glimpse into the strategic planning process. We will further explore the process in future articles and at our complimentary October 4th and 5th seminars on strategic planning. Please look for an invitation to the October seminars.