Often, we come across some grim statistics: 70% of enterprises fail within their first three years. Of the survivors, about 50% have faltered by the fifth. Surprisingly, business failure rates are consistent regardless of the industry or market.
What drives failure?
What is not surprising, though, is why organizations fail; you can count all of them on the digits of your one hand: market access, in-existent or rigid business plans, funding, competition, governance.
What to do?
What then can you do to avoid your organization falling into this abyss? Strategic planning is a part of delivering that wholesome solution. A strategic plan can be simplified to mean “knowing the current state of your organization and where you want it to go.”
What is strategic planning?
Strategic planning is the process of developing and implementing a plan to achieve one or more specific goals. The goal may be to improve profitability, increase market share, or become more efficient. Strategic planning typically involves setting objectives, analyzing the competitive environment, and formulating a strategy for achieving the desired objectives.
Strategic planning for a common goal
Strategic planning is the process of determining the future path that an organization will take in order to achieve its goals. A key part of this process is deciding on action items and milestones so that there is a clear framework for success. While individual departments can have their own strategies, there needs to be a top-level strategic plan which outlines how everyone works together toward achieving the overall goal.
At its core, strategic planning requires the ability to look into the future and understand what challenges may lay ahead. This isn’t something that can be done alone; it requires collaboration between team members with diverse expertise. There are several key issues to consider when coming up with a strategic plan as a team.
1) Analytical vs. Creative Strategies
When crafting a strategic plan, the team needs to decide whether they are going to create a creative strategy or follow an analytical path.
Creative strategies work best when there is little information available about what lies ahead. They are more flexible in the short run but can become particularly cumbersome when there are many issues that need to be addressed. When using this strategy, it’s important for everyone on the team to feel free to offer new ideas without being discouraged by anyone else expressing doubt over their suggestion. If not all suggestions can be implemented, it’s essential for people with strong egos not to take offence at their idea being turned down. Creative strategies work well in situations where there is minimal direction from higher-ups so that teammates have freedom in making decisions.
Analytical strategies are more suitable for working with lots of information. This type of strategy works best when the team understands all of its goals and requirements, but can’t decide on a single action plan. All ideas need to be carefully considered before they can be accepted. When using this approach, it’s critical that everyone provides clear reasons why their proposals work while continuing to listen to others’ concerns about their idea.
2) Consensus vs. Authoritative Strategies
Another factor that the team has to take into account is whether they want to create a consensus-based or authoritative strategic plan. Consensus means everyone will agree upon only those issues where people feel strongly enough about their stance not to budge (if someone else makes an eloquent argument, its okay for them to change their mind). By contrast, an authoritative strategy works best when people don’t feel the need to participate in every decision and would rather follow someone else’s lead instead. This tactic is effective when there are many issues being discussed, but it only works if others have faith that the leader will make good choices.
3) Specific vs. General Strategies
An additional factor to consider is whether they want a specific or general strategy. Specific strategies outline each step in plain language so that everyone knows exactly what should be done. The advantage of this approach is that people are more likely to get things done correctly; however, there are downsides to being too specific about how things should be done because some steps can become irrelevant over time. General strategies are more appropriate when it isn’t known what needs to be done or where the path may lead. The benefit of this approach is that overly specific requirements can be changed as needed. However, this raises concerns about whether everyone will have a clear understanding of how their work contributes toward achieving the final objective.
4) Team vs. Individual Strategies
The team also has to decide between building a group strategy where people work together on common tasks or an individual one where each person focuses on their own area. There are advantages and disadvantages to both options; however, there needs to be consensus within the team about which way they should go. If there is disagreement, then management must make the decision for them.
Steps of Strategic Planning
- Define the business mission
Defining the business mission may appear to be a simple matter, but it actually requires thought and discussion before putting it in writing. A clearly written mission statement can clearly communicate a sense of purpose to employees, customers and other stakeholders. The mission is especially important for organizations that are just getting started.
- Analyse the environment
During this step, analysts attempt to assess which factors within their environment will have a positive or negative impact on their business plan. This step is best tackled with the help of co-workers, because each group will have specific insights into different areas of the business and its environment.
- Establish objectives
Setting objectives is a key step in the strategic planning process. Without clear, measurable and well-defined goals, your strategy will serve no purpose. More importantly, setting objectives will help you work out how to achieve your goals by creating milestones and benchmarks that can be used to measure performance.
- Identify opportunities
Identifying opportunities is important in developing a strategy, because the opportunities identify new business areas that can be a source of competitive advantage. Interviews will yield the best results and should be structured to clarify how the opportunity would meet customer’s needs, and how it would tie in with your company’s core competency.
- Conduct situation analysis
A situation analysis is the process of determining the internal and external factors that are favourable or unfavourable in achieving organizational objectives. In performing a situation analysis, your mission statement provides the foundation for identifying key issues. A competitor and customer analysis will reveal the most pressing issues facing your firm, helping you to understand your specific organizational settings.
- Formulate alternative strategies
Formulating alternative strategies is a crucial step in the strategic planning process that takes place after gathering the relevant information and analysing the current situation. Formulating alternative strategies involves brainstorming ways to move the company forward and accomplish its mission within the available resources and constraints.
- Select strategies and allocate resources
After formulating alternative strategies, the next step is to select strategies and allocate resources to implement them. This poses major organizational change problems because it involves different skills and readjustments of capabilities. Managers must plan the implementation require a top-down technology push and involve many people in the company, while others may start with a limited number of employees in order to encourage feedback and later use the results as part of a new marketing drive.
Benefits of strategic planning
The following five benefits of strategic planning can help you understand why your company should invest the time and resources necessary to develop great strategy:
- Focused direction – A clear path gives employees a sense of purpose and helps them prioritize their work tasks. It also makes it easier for management to make decisions when there is clarity about the organization’s objectives.
- Enhanced decision-making – Good planning leads to better decision-making since all possible outcomes have been considered ahead of time. This reduces the chances of costly mistakes.
- Improved execution – When everyone is on board with the plan and understands their role in achieving success, it leads to smoother operations and less wasted time and resources.
- Greater competitiveness – Well-executed plans give businesses a strategic edge over their competitors. This can result in increased market share and profitability.
- More successful innovation – In order for businesses to stay ahead of the competition, they must constantly be innovating. A good strategic plan will help you identify areas where innovation can bring the most value to your company and help you develop a roadmap for achieving your innovation goals.
Insufficient strategic planning can be very detrimental to your company as a whole, and in turn, you’re marketing plan as well. If you don’t have a clear idea of where your business is headed, how can you expect anyone else to? Plan strategically today because if you fail to plan, you plan to fail.