, , , , , , ,


I am hoping that through these series of articles it will be possible to give you the insights and confidence to analyze your business in a structured way and put together a simple, yet powerful strategic plan to drive your business forward over the next few years. I have borrowed heavily from a number of sources in terms of inspiration plus my own experience. Where possible I have acknowledged the source. I am happy to receive your input and suggestions to improve this tool as I want it to be practical and useful.

Strategic Plans – do we have them?

Strategic Plans have been written about, talked about and cursed for as long as the modern forms of business management have been around.

In reality, few businesses truly have a strategic plan and even when they do, most carry on in spite of the strategic plan – because often the plan is not strategic at all or it is not communicated to the rest of the business by the top management. Many so-called plans are really just a written summary of the oral traditions which circulate in the business.

In my experience, a finding a formalized strategic plan in a business is rare.

In a large number of businesses the plan is completely lacking and the business persists solely because of the insights of the manager or manager gained in the transition from start-up, to smaller, to larger. And these insights which guide the day to day business are ones seldom communicated but expected to be “understood”. They are largely the result of trial and error over many years and adapting the product or service offering to the changing needs of one or more market niches. The guiding insights may in fact be very strategic in approach but this only lasts as long as the key managerial elements or team remain the same.

Figure 1: Typical Company Life Cycle

Accounting and Finance seem to rule the roost in a large number of businesses because of the obvious importance of cashflow, the need to pay on time, the overall financing needs of the business, keeping the faceless credit department at the bank happy (and so on…). And … the strategic plan, sales & marketing plan, operations plans, etc., tend to be dictated to by the quirks of some legacy accounting system.

It should not be like this, however. The accounting and finance treatment should be one of the outcomes of the strategic plan.

In businesses where this is the case, it is symptomatic of management who are either preoccupied with some technical aspect of the daily business or they do not have the training or skills to create a truly strategic view of where the business could or should go. And so simply answering a few questions from the finance department and putting that into a “plan” is the easy way out.

Strategic Plans – why are they so difficult?

Why is it that we find that strategic planning is such a chore, often irrelevant, invented in hind-sight or a dreaded belated extra to the management process?

The answer lies in how we approach life in general and doing something is usually valued more highly than sitting around thinking and debating strategy and approach.

In owner-operated businesses which have grown steadily over the years, they are often run by a very technically competent person or trades person who built the business with sheer guts and determination – again, action and response, not thinking and strategy because time did not permit such luxuries – simply put, if you weren’t working on a job then you weren’t earning the dollars and so survival was not assured. So activity was the foundational strategy and old habits are hard to break because they worked so well in the past.

And in many of the larger corporate entities where we should know better, the board should be setting the direction and priorities but because many modern public and private boards have an overwhelming dose of “politically correct corporate governance we find that board members do not have detailed understanding of the fundamentals of the business, its markets, technology and processes.

And many of these “professional directors” are actually disinterested in taking responsibility for setting real strategy and direction and so become by default “tick the box” directors who are “risk averse” and either accept or reject whatever management dishes up to them. Often times too, they are on so many boards that it is physically and mentally impossible to put in a meaningful amount of time. But given the tremendous statutory liability, high potential for reputational risk, and relatively low pay, can we blame their risk and time avoidance?

However, one of the key reasons we don’t have true strategic plans is because the large majority of us in business are not trained in analysis, thinking and writing. Many of us gravitated towards the more technical end of the scale because we don’t feel that comfortable with structured planning,analysis, thinking and written presentation.

Simply put, we are outside of our comfort zone.

Strategic Planning – what is it?

Strategic planning is the formal consideration of an organization’s future course and typically deals with at least one of three key questions:

1. “What do we do?”
2. “For whom do we do it?”
3. “How do we excel – or “How can we beat or avoid competition?”

In many organizations, this is viewed as a process for determining where an organization is going over the next year or more -typically three to five years, although some extend their vision to 20 years. The shorter time frame is the more sensible strategy in a high-tech rapidly evolving industry and the longer time frame more sensible for a commodity based industry with high capital expenditure and long lead times – such as in mining or infrastructure.

In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. The resulting document is called the “strategic plan”.

It is also true that strategic planning may be a tool for effectively plotting the direction of a company; however, strategic planning itself cannot predict with any certainty exactly how the market will evolve and what issues will surface and what impact they will have on your plan your organizational strategy. Therefore, strategic innovation and tinkering with the “strategic plan” must be a cornerstone strategy for an organization to survive the turbulent business climate.

Strategic Plans – what are they?

Strategic plans are a concise and cogent articulation of the vision, direction, strategies, plans and tactics which companies determine are an appropriate way to obtain an acceptable return on investmentin services, products, technologies and markets they are engaged in or intend to engage in.

Strategic Planning is the managerial process of developing and maintaining a strategic fit between the organization’s objectives and resources and its changing market opportunities.

Figure 1a: Creating Strategic Fit.

Strategic plans should be short, simple and actionable over the agreed time frame. They do not need to be a literary masterpiece but they do need to be understood and a benchmark for judging success or failure, or perhaps the need to evolve and adapt.

Figure 2: The strategic planning hierarchy.

The strategic planning process is often depicted as a pyramid because the “vision” is the “top” level and the detail attached to it is small but is broad in focus and the “crow’s nest view” of the world and the business. As you move down the pyramid you have an increasing degree of focus and detail – multiple objectives, strategies tactics and plans.

Figure 3 below is another way to look at this – the top line does not change but the lines below multiply as much as is needed to complete the strategic plan.

Figure 3: The strategic planning process.

Creating a strategic plan is something which is going to take considerable time and thought and because of this, the temptation is to include every last detail to the point that you have created your own version of “War and Peace”! The strategic plan should contain all the key elements of the strategies and plans which are going to give direction to the various departments within the business.

The strategic plan should not contain the individual business department or business unit plans – these should be developed and written separately and again in a short, sharp and concise way so that they will be read and referred to often – not stored on the shelf or used to press plants because of their weightiness!

Figure 4: The business planning cycle.

Related articles by Zemanta