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How to Create a Strategic Plan
Looking for a way to take your company in a new and profitable direction? It starts with strategic planning. Keep reading to learn what a strategic plan is, why you need it and how you can strategically create one.
What Is a Strategic Plan?
When it comes to business and finance, strategic planning will help you allocate your resources, energy and assets. When implemented, a strategic plan will begin to move your operations in a more profitable direction. The primary goal of the plan is to ensure you and any other stakeholders are on the same page and striving to reach the same goal.
Creating a strategic plan requires a disciplined effort. Once you put the plan into action, it will influence the segment of customers that you target, how you serve those customers and the experience those customers have.
Assess the Current Infrastructure and Operations
The first step in creating a strategic plan is to carefully assess your existing infrastructure and operations. You can do this through a SWOT analysis, which is an analysis of the company’s strengths, weaknesses, opportunities and threats. The goal here is to pinpoint the resources that you use to carry out your day-to-day operations, to look at your monthly revenue patterns, to list any company challenges related to the customer experience and, most importantly, to look at your marketing methods and ways to improve the overall customer experience.
Creation of Mission Statement and Objectives
The next step is to create a mission statement. You may already have one, but it’s important to note your mission at the top of the strategic plan document you create. This ensures everyone is focused on the same goal. Your mission statement should cover why you started the company and what you intend to accomplish through the products and services that you offer.
In addition to the mission statement, make sure to outline both short- and long-term objectives. List the objectives according to their priority and designate certain managers or employees to be responsible for each one. Also, jot down the resources that will be used to achieve each objective.
Now that you know what you’re trying to achieve and who is responsible for each goal, it’s time to deploy the plan and measure its progress. A weekly meeting is extremely important for all managers and stakeholders provide feedback. Your goal is to determine if the company is headed in the right direction. If not, you’ll need to revise the strategic plan accordingly.
Strategic Plans Are Ongoing
Once your strategic plan helps you achieve several objectives, it’s smart to regroup and set new objectives. As your company grows, you can set new goals to ensure the company keeps moving forward. You can share the success of your strategic plan with potential investors as a way to tap into new capital funding.
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6 Features of Strategic Planning
- Kosta Nicolaou
- July 20, 2021
There is no doubt strategic planning is a major part of our future. Successful businesses are spending more time on strategic planning than ever before. Planning is required in order to effectively respond and adapt to a fast changing market place that is becoming more complex with each day that passes.
Strategic planning allows a business to understand its day to day outputs and most importantly its future pathway. This is done by being focused on outcomes whilst thinking about risks and opportunities that could either impact a business or help it grow.
Strategic planning allows us to focus our energy and resources on the most important and high priority opportunities whilst addressing our weaknesses and threats.
Most importantly strategic planning allows us to align our business’s internal activities from top to bottom. Financial resources with non financial resources. Short term plans with long term plans. And business outcomes with staff outcomes.
There is no right or wrong option when it comes to selecting a strategic planning model for your business. The best results are seen when the nature of your business, your mission, and your core values align with your business model. Strategic planning models available include:
- Bottom Up, where design is done at lower levels and merged up to the upper level
- Top Down, where design is done at the upper level and broken down through the business
- Interactive, which brings together bottom up and top down methods
- Dual Level, where designe is done at both upper and lower levels following by a review at the upper level to create alignment
Below are some of the key features of strategic planning.
1. Provides Clarity & Focus
A strategic plan is vital to present a business’s vision. It shows how a business places priority on activities that will take place to achieve its vision. Like a compass, it provides clarity on which road we should take to achieve the best outcome.
Strategic planning is a process that allows us to analyse and respond to the things occurring inside and outside of business. Done properly planning can set up a business for success. It supports the definition of goals, key results, actions, and measures that provide direction and clarity. It assists a business to understand its purpose as well as see into its future.
Strategic planning typically involves a structured step by step approach and for improved decision making that impacts our business success. Effective strategic planning allows us to focus our business on the most important actions whilst fending off unwanted distractions.
2. Aligns People and Business
A strategic plan provides a basis for change that allows staff to assess the resources they require to achieve a positive result. Staff should be involved in planning to ensure a strategy is aligned with day to day activities. The result is that staff are able to make more informed decisions that support the business in achieving its goals.
A direct link exists between strategic planning and a businesses’ outcomes. Results directly depend on how each staff performs. Furthermore, planning activities and measuring outputs usually result in staff performing at a higher level. Effective strategic planning:
- Firstly motivates, rewards and educates staff by tying in skills with assigned activities
- Secondly allows us to be more productive by focussing on the most important activities
- Thirdly allows us to identify and respond to unplanned results
- Next allows for the trouble shooting of issues by supporting a regular review cycle
- Further provides support for the delivery of key initiatives
- Moreover aligns staff with business outcomes
A strategic plan should look at the skills, abilities, and concerns of staff. Capabilities should be aligned with assigned activities to ensure staff members are set up for success.
3. Supports Continuous Improvement
Strategic planning allows us to create future success and provides the means to adapt and respond to change. This is an ongoing process that supports improved decision making and is required to achieve positive business outcomes. As a result, a strategy should be monitored through a set of measures and adjusted as needed. When setting up measures we should:
- Firstly define those that show whether a result is good or bad
- Secondly create a baseline and target for a measure
- Thirdly define how often we should report against a measure
- Then record results against a measure
- Compare current results with previous results
- Moreover make changes to measures as required
A strategic plan should not be a set and forget. An effective delivery process gives life to a strategic plan whilst the plan itself provides a basis for improved decision making. Maintaining a regular review is critical to success. A review allows us to identify and manage new opportunities, issues and risks and keeps our plan on track.
Strategic planning can support a ‘Plan, Do, Check, Act’ cycle for delivery of improvements:
- Firstly, Plan – analyse and create improvement objectives and planned actions. Define resources required to deliver improved outcomes
- Seconly, Do – assign people and dates to improvement actions.
- Thirdly, Check – setup a a review which allows regular check points to assess that improvements activities are producing positive outcomes. Moreover measures can be used to provide a clear and quantified measure of good and bad results
- Finally, Act – if an improvement activity has delivered an expected outcome actions are able to be repeated to reinforce the success.
- Where an improvement activity has not delivered an expected outcome changes may need to be made and the cycle run again
4. Enables Growth
As technology has advanced so have businesses expanded globally, resulting in increased competion. Businesses are gaining an advantage by using technology to predict the future. This has resulted in the delivery of products and services around the world faster and more cheaply than ever before.
Strategic planning allows us to scan the market, understand where to play and how to win. It is used to identify and seize opportunities and anticipate threats that need to be managed.
A strategic plan developed using robust a process allows us to operate more efficiently and focuss on activities which will produce the best results. It will lead us to better outcomes and directly influence confidence in our business. Outside parties will only invest in our business when we can show continued performance and present a clear picture for the future.
5. Responds to Opportunity and Threat
A well designed strategy will dictate how your business responds to opportunity and threat. A strategic plan will help us set priority to opportunities that will produce the best results whilst helping us manage threats to our business. A strategic plan provides a lens into our future state and sets control over our destiny.
Issues and risk will impact every strategy. Our ability to quickly identify and manage these will directly impact us achieving our goals.
6. Follows a Structured Process
Whilst different methods are available to create a strategic plan (OKR, MBO, SMART), which have subtle differences, they mostly follow a consistent pattern which includes:
- Firstly, set a mission, vision, values and goals and outcomes
- Secondly, run a scan to determine opportunities and threats
- Thirdly, design a strategy, which matches strengths with opportunities whilst addressing weaknesses to external threats
- Next, deliver the strategy, which requires us to set a budget, define resources, develop procedures and deliver actions required to achieve our goals
- Moreover evaluate and control, which involves a regular reviews and adjustment as new information becomes known
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Strategic Planning | Definition, Features, Components, Importance & Limitations
What is Strategic Planning ?
Definition of strategic planning.
Components of Strategic Planning
- Internal analysis of the company
- Analysis of firm's industry
- Analysis of external environment (PEST analysis)
- Define parameters to be measured.
- Define target values for those parameters.
- Perform measurements.
- Compare measured results with the pre defined standard.
- Make necessary changes.
Features of Strategic Planning
Importance of Strategic Planning
Limitations of strategic planning.
- Outsourcing Strategy
- Expansion Strategy
- Combination Strategy
- Grand Strategy
- Retrenchment Strategy
- Stability Strategy
- Strategic Evaluation
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Features Of Strategic Planning
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What is Strategic Plan? Definition, Features, Process, and Importance
What is Strategic Plan?
The strategic plan is a long-term plan that aims for better formulation and implementation strategy to achieve organizational goals and sustainable competitive advantage.
It specifies where an organization will go in the future, how it will get there, and how it will know whether it has there or not. A strategic plan is usually focused on the entire organization. As a result, it differs from a business plan in that it is frequently associated with a specific product, service, or program.
The effectiveness of an organization’s strategic plans is influenced by its leadership , culture, competency, size, and expertise of planners. A strategic plan typically lasts for more than five years. Strategic management emphasizes making strategic plans to better implement strategies.
Its goal is to adapt to the environment while also gaining a competitive advantage. It also has a section on resource allocation. It lays out the organization’s long-term approach and includes the creation of a vision, mission, objectives, and strategy .
The importance of top-level management in the success of a strategic plan cannot be underestimated. To earn lower-level employees’ support and dedication, top-level management should involve them in the strategic planning process. With correct revisions to company and operating plans, a strategic plan is created. This aids in the coordination of an organization’s various departments.
Usually, a comprehensive strategic plan contains the following:
- A clear statement of strategic intent covering the vision, mission, business definition, goals, and objectives.
- Results of environmental appraisal, major opportunities, and threats, and critical success factors.
- Results of organizational appraisal, major strengths and weaknesses, and core competencies.
- Strategies are chosen and the assumptions under which those strategies would be relevant.
- Contingent strategies to be used under different conditions.
- Strategic budget for the purpose of resource allocation for implementing strategies and the schedule for implementation.
- Proposed organizational structure and the major organizational systems for strategy implementation including the top functionaries and their roles and responsibility.
- Functional strategies and the mode of their implementation.
- Measures to be used to evaluate performance and assess the success of strategy implementation.
Characteristics of Strategic Plan
The strategic plan is a long-term action that determines the scope and direction of an organization. The following are some of the notable characteristics or features of the strategic plan.
It is a long-term plan. It normally covers a period of over five years. It provides long-term direction to an organization.
Based on Environmental Analysis
Strategic plans involve the development of the vision, mission, objectives, and strategies of an organization. It is prepared on the basis of environmental analysis.
It always aims at establishing strategic fit i.e. fit between strength and opportunity through a proper plan. Strategic fit leads an organization towards the way of competitive advantage.
Involvement of Top Management
Since it is related to the long-term growth and development of an organization, the involvement of top-level management is a must. Top-level management has to play a dominant role in the formulation and implementation of the strategy. Hence, the competency and commitment of the top-level management directly affect the effectiveness of the strategic plan.
Set of Priority
It sets the priority of an organization in terms of the product and market. However, the priority may change with the change in the business conditions.
A Means Only
A strategic plan is a means of achieving organizational objectives. However, it is not an end itself.
Steps in the Process of Strategic Plan
How to make a strategic plan? Strategic plans provide a long-term road map for the organization. It must be prepared systematically and scientifically.
The following are the most commonly used steps in the strategic planning process. They are:
Define Vision and Mission
In the first step of the strategic planning process plan, vision, and mission of the organization are developed.
Vision : The expected picture of the future is called vision. It demonstrates what an organization’s ultimate goal is. As a result, a vision statement helps to determine a company’s desired future.
A vision statement, in other words, signals the direction of where an organization wants to go in the future. It reflects a company’s ideals and goals. It aims to win the hearts and minds of both employees and stakeholders. It should be short and sweet, making it simple to remember.
Mission : In terms of consumers, employees, suppliers, and the community, a mission statement defines a company. It reflects all aspects of the company, including product range and nature, cost, performance, service, market position, growth potential, technology utilization, and relationships with customers, employees, suppliers, competitors, and the community.
It also aids in the clarification of the company’s scope and objectives.
In the second step of the strategic planning process, an analysis of the business environment is done. It helps to collect information on the nature and trends of the environment.
Analysis of Internal Environment : It involves the analysis of resources, organizational policy, organizational structure, and objectives to assess the relative strength and weakness of the business.
Analysis of External Environment : The task and distant environments make up a company’s external environment. Customers, suppliers, shareholders, and trade unions make up the task environment, which is generally near to the firm.
A remote environment, similarly, is made up of political, legal, economic, socio-cultural, technological, environmental, and global elements. A company’s external environment is beyond its control. Business opportunities and threats are influenced by the external environment.
Determine Long-Term Goal
The long-term goal is decided in the third step of the strategic plan. A long-term goal is a business’s desired outcome over a long period of time. A company’s whole operation is focused on reaching a long-term goal.
To be most effective, the goal should be explicit, measurable, acceptable, realistic, time-bound, and flexible.
This is the last step of the strategic planning process. It involves selecting a particular strategy from among various strategies . A strategy is a long-term action plan formulated for achieving a competitive advantage. It defines a business and leads to sustainable growth and development. The strategy follows the vision, mission, and long-term goal.
Importance of Strategic Plan
Why a strategic plan is important? It is a means to achieve organizational long-term goals and objectives. The major importance of strategic planning can be mentioned below:
To realize the desired goals and objectives an organization should be strategically fit. Strategic fit by definition is the ideal balance between the opportunities of the organization and the resources it has. To achieve desired goals they must be linked in a proper manner. Strategic plans ensure strategic fit so they offer more likely to achieve the organizational goals.
It is obvious that strategic plans are directed to achieve a competitive advantage. By definition, it is the gain a company gets over its competing companies. To get a competitive edge a company should strive to offer goods and services which is ideal to competitors and also attract and are acceptable to customers.
Strategic plans provide enough insights to the organization about the market competition, condition, competitors’ strategy, price, product quality, and consumers’ tastes, and preferences. In addition, it also gives an idea to the firm about how to best perform in the competitive environment.
To go to the final destination an organization should have a clear direction to achieve goals as the vision statement looks like. A strategic plan helps the company to define a positive and clear direction in which the company should walk and also sets clear goals following the vision and mission statements that aid in achieving the ultimate goals of the organization.
A strategic plan provides a necessary foundation for a business to expand, take necessary steps, evaluate its steps, recompense its personnel, and set boundaries for effective decision-making.
Organizational Effectiveness and Efficiency
With the right and understandable plan and strategy, a manager becomes able to communicate with employees in an understandable way. When employee teams understand the tasks they are asked to do they do it in the most efficient and effective way.
In addition, the strategic plans are along with the employee’s competencies and organizational goals which eventually add up to the enhanced performance, productivity, overall efficiency, and effectiveness.
Hence a strategic plan is typically more than five years of plan to achieve organizational strategic goals and objectives. It is determined by the top manager hence while determining the manager should take into account all relevant considerations and also participate subordinate employees in order to come up with the most fit actionable strategic plan.
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6 Elements of Effective Strategic Planning
While the business operations framework is a continuous cycle in which each stage informs the next, developing a strategic plan is the best place to start.
During the strategic planning process, an organization performs three steps:
- Builds or modifies the foundational strategic vision and mission
- Commits to goals that drive overall health
- Develops a long-term plan to achieve the goals
A strong strategic plan positions the organization for success and clearly defines it at every level.
A common mistake we see businesses make is starting tactical initiative execution without first communicating and aligning on the goal. Skipping these important steps can leave your organization without direction.
Read ahead to learn more about the six vital elements of strategic planning: vision , mission , objectives , strategy , approach , and tactics .
1. Define your vision
An organization’s vision statement is an aspirational description of what it wants to achieve in the future..
A vision statement serves as a clear guide for choosing current and future courses of action — a definition of where you want your organization to be in the long term. It sets the tone and provides a North Star on the horizon.
One example of a company with a strong vision statement is Warby Parker, the online prescription glasses retailer founded in 2010 that is now worth an estimated $3 billion.
Warby Parker’s vision statement has two parts: “We believe that buying glasses should be easy and fun. It should leave you happy and good-looking, with money in your pocket. We also believe that everyone has a right to see.”
With just three sentences, the vision statement tells you exactly what the company aims to achieve. Namely, to make the process for buying prescription glasses and sunglasses fun and straightforward (unlike the traditional method). The vision also aims for customers to have fashionable frames, but at a lower cost than existing options.
The last sentence of the vision statement adds in a purpose statement (aka why the company exists): “We also believe that everyone has a right to see.” Since the beginning, Warby Parker has touted its “Buy a Pair, Give a Pair” program that donates glasses to people who can’t otherwise afford them. According to the CEO, this purpose is what motivates employees to join and stay with the company. Not all leaders include a social impact focus in their company’s vision and purpose statement, but it’s becoming increasingly popular with the growing buying power of Millennial and Gen Z consumers.
A powerful vision statement helps company employees focus their work in the right direction — and a strong vision statement will do the same for your organization.
2. Create your mission
While your vision is an organization-wide goal, your mission how you plan to achieve the vision..
Without a mission, your organization lacks the why and how. If everyone in your organization has their own interpretation of the vision, it can lead to conflicting strategies and initiatives.
For Warby Parker, there are many possible routes to achieve the company vision that states “buying glasses should be easy and fun. It should leave you happy and good-looking, with money in your pocket.”
The company’s mission statement is: “By circumventing traditional channels, designing glasses in-house, and engaging with customers directly, we’re able to provide higher-quality, better-looking prescription eyewear at a fraction of the going price.”
After the founding team realized early on that one large company dominated the eyewear industry with inflated prices, they decided to find a way to lower prices and increase quality, while also turning a profit. The resulting actions included bringing many traditionally outsourced services in-house, such as design and consumer marketing/sales.
3. Set your objectives
Objectives are specific results that a person or system aims to achieve within a time frame..
Defining success early lets you know if you are on the path to achieve your mission and vision. Clearly articulating your objectives creates goal posts by which your organization can measure its overall health and the impact of strategic initiatives.
In general, good objectives should be clear, measurable and be supported by multiple strategic initiatives across the organization.
While Warby Parker isn’t a public company and is not legally required to release annual financial statements, the organization does voluntary release an annual impact report. The report provides a window into the company’s strategic objectives with the inclusion of priority issues relevant to both stakeholders and the company. For the most recent 2019 report , the top issues cited are the Buy a Pair, Give a Pair program, customer experience, innovation, product safety, and responsible sourcing.
For the Buy a Pair, Give a Pair program, Warby Parker’s relevant objective might be aimed at growing the program, while the innovation priority may be tied to the objective of innovating to meet the strategic vision and mission. The issue of responsible sourcing could lead to an objective of using all recycled packaging or becoming carbon neutral. While the listed issues are presented through an impact lens, they also have a financial purpose.
4. Develop your strategy
Your strategy is a long-term plan that enables you to achieve your organization’s objectives..
An effective strategy brings together vision and execution. Strategies are much more specific than an organization’s vision, mission, and objectives. They are typically only shared within an organization and ideally built around an organization’s needs and market context. Strategies should map long-term plans to objectives and actionable steps, foster innovative thinking, as well as anticipate and mitigate potential pitfalls.
Strategic plans often look out 3-5 years, and there may be a separate plan for each individual objective within the organization. In the Warby Parker annual impact report, we have insight into the strategy for each of the objectives identified above. We’ll highlight potential strategies for two areas: the Buy a Pair, Give a Pair program and innovation.
By the end of 2019 Warby Parker had distributed seven million pairs of glasses to 23 countries through the Buy a Pair, Give a Pair Program and will be likely focus on expanding those numbers in 2021 and beyond. According to the impact report, 2.5 billion people around the world lack access to affordable glasses to learn and work. In order to make a positive impact, Warby Parker needed to develop strategies to continue chipping away at that need, as well as meet company objectives, mission and vision. An example strategy for this program could be expanding the US-based Pupils Project, which gives school children access to free vision services and glasses. In the 2019-2020 school year, Warby Parker expanded the program from New York City and Baltimore to Philadelphia, providing vision services to an estimated 25,000 students in the School District of Philadelphia.
In addition, Warby Parker has traditionally been focused on eyewear and reimagining the customer experience for glasses wearers, so naturally the company’s leadership identified an innovation opportunity to add daily contact lenses in November 2019, which was likely the result of a multi-year strategic plan. Like Warby Parker’s eyeglasses process, the company allows a trial period for contact wearers, who can request 6 days of contacts in their prescription before committing to a full 90-day supply.
5. Outline your approach
An approach provides a methodology for executing your strategy..
The approach is a framework for answering key questions that will later determine tactics. Plus, it guides an organization on how to execute the strategic plan.
Within our Warby Parker example, each strategic plan included an approach that guided the leadership team in their analysis and plan execution. While we won’t cover each decision the company made in 2019, we’d like to focus on two big ones: the Pupils Project expansion and the launch of the contact lens brand Scout.
When it came to expanding the Pupils Project, the Warby Parker leadership team needed an approach for addressing each key decision for the program. There were likely more decisions than we can cover in one whitepaper, but will focus on two: whether to partner with existing non-profits or create its own program and how to make the greatest impact with the funds available.
Leading up to the decision points, like whether to expand the Pupils Program to Philadelphia, the leadership’s approach probably included a consideration of whether to develop the program infrastructure and manage it internally or partner with existing non-profits. The approach also likely included a cost-benefit analysis of that question, evaluating the financial ROI and social impact of each option. The company ultimately choose to work with two local Philadelphia nonprofits.
Another key decision requiring a strong approach within the Pupils Program was how to have the greatest impact with the funds available. The company needed an approach that would help them answer and inform key decisions. Those decisions could have included an analysis of whether to contribute the glasses directly or make a cash equivalent donation to the nonprofits, how to identify schools for the project (for example considering the greatest overall need or the number of glasses Warby Parker can provide), as well as who should manage the logistics of the screenings and eyeglasses deliveries.
On the innovation side, Warby Parker needed a quality approach to ensure the contact lens brand launch (called Scout) was aligned with the existing mission, vision, objectives and strategies. In order to create a contact lens that was high quality, affordable, and with lower waste packaging, the company needed a multi-pronged approach. Two crucial areas of planning for the Scout contact lenses were undoubtedly the design of the product and choosing the right manufacturer.
Because contact lenses were completely new to the company, Warby Parker needed to either design them in house or hire an outside design team that would meet the high standards the leadership outlined in the 2019 impact report , “On top of creating a great shopping experience for our customers, we have high expectations for what a daily contact lens should be—high quality, moist, breathable, comfortable, innovative, and affordable. It’s a lot to ask of one product, but we were relentless in our search for a contact lens that checked all of those boxes.”
While the company does not say in the report which route it chose for design, the leadership likely did a cost benefit analysis of designing it in-house vs. working with an outside design company or freelance designers. The key considerations were likely the cost to design, the strategic importance of certain attributes (like breathability, moisture content, shape), the cost to manufacture, and the sustainability considerations.
In terms of the approach to find the right manufacturer, Warby Parker needed to find a partner that met the company’s quality, cost, and environmental standards. The sustainability standards included finding packaging with significant less waste and incorporating recycled materials from the manufacturing process. The company’s approach to finding a manufacturer probably included research and a ranking of multiple companies with the above criteria in mind, then doing a comparison across the top choices and additional due diligence before choosing a partner.
Through these examples, you can see how an approach ladders up to strategies, outcomes and eventually the company’s mission.
6. Get down to tactics
Tactics are focused initiatives, projects, or programs that allow organizations to execute a strategic plan..
Tactics are the key to execution. They are the actions you take to make it all happen.
Within each decision Warby Parker made, the company used different tactics to move it from an idea to actual product or program. While each decision could have dozens of tactics, we’ve highlighted one or two examples for each.
For the Pupils Project at Warby Parker, the decision for how to have the largest impact possible required several tactics or initiatives to make that happen. The company choose to have the nonprofit partners run the screenings while Warby Parker provided the glasses and had the students choose their styles from 40 options in a truck show. One necessary tactic was bringing together the design and logistics teams to narrow down the style options that would be appealing to kids, cost effective, and easy to produce in large numbers.
Another important tactic was likely determining how to produce and deliver the glasses to the students, whether the glasses should deliver to their homes or the schools, and how to ensure the glasses fit correctly after they arrived. The Pupils Project’s overall goal is for children to have glasses to enable their ability to learn, and in order to do that, they need to actually use the glasses for the long-term, so it’s important to have styles that appeal to children, as well as well-fitting frames.
In terms of tactics for the Scout contact lens launch, once the company made the decision on a design team, the project leaders determined tactics to make the contacts idea a reality. The designers had specific research guidelines to find material and construction that fit the criteria of “high quality, moist, breathable, comfortable, innovative, and affordable.” The final product is made with a material that resists drying and constructed using new technology to increase eye comfort during wear.
The company design team also created flat pack packaging that is more hygienic, uses less raw materials, and takes up less space compared to traditional contact lens packaging. Even the placement of the contact (upside down) was intentional to reduce the chance of contamination from dirt or bacteria when the wearer puts them in their eye. Each of these items were likely framed as tactics and initiatives used to create the Scout lenses. Each was directly related to Warby Parker’s approach to the decision, the overall strategy, and aligned with the larger mission and vision.
On the surface, each tactic might not seem connected, but as you dig deeper, you’ll find that effective tactics should always tie back to the strategy, objectives, mission, and vision of the company.
This is the second in a 5-part blog series defining Spur Reply’s unique perspective on the often overlooked, but incredibly valuable world of business operations.
Part 1: Overall business operations
Part 2: this blog focuses on strategic planning, part 3: operations design, part 4: initiative execution, part 5: business intelligence.
The 5 Key Elements of Strategic Planning
All great strategies have goals, actions, and metrics. No matter the strategy’s scope and complexity or even the company’s size, great strategies include these elements. So, successful strategic planning accounts for all three.
\When a strategic planning process incorporates these elements, strategies become simple and guide decisions. If you want to kick start your strategy development, use this strategic planning template that thousands of organizations apply at the start of their strategy formulation.
Effective strategic planning elements overview:
- Defining your Vision
- Crafting your Values
- Determining desired Outcomes
- Declaring explicit Accountability
- Establishing leading KPIs
4 critical components of a strategic plan:
- Where do I want to take my business? The destination
- Where are we right now? The starting point
- How will we get there? The journey
- How will I know if I'm succeeding? The checkpoints
Everyone reading the strategic plan should be able to answer these questions. This includes employees, business partners, investors, or other stakeholders.
5 Key Elements of Strategic Planning
1. defining your vision.
Start by defining your organization’s vision (its destination). In the words of Thibault Mesqui, Managing Director at Heineken in the state of strategy report , "make your strategy based on a vision".
This is an expression of the unique Point Of View you bring to the market. Make it simple, different, inspiring, and positive.
People who read your vision should be able to understand exactly what you stand for. Take a look at our guide on how to write a good vision statement to help you in the process.
Your vision will help you to:
- Bring alignment to your organization. People will unify their efforts towards a common goal, driving increased efficiency.
- Create strategies that are cohesive and focused.
- Inspire employees, investors, and other stakeholders to invest emotionally and commercially in your business.
Knowing your vision isn’t enough. Create a vision statement to articulate it and explicitly define it.
Mission statement vs Vision statement
You may also want to create a mission statement. A mission statement differs from a vision statement . A vision statement defines where you want to be in the future. A mission statement defines broadly how you will get there (part of your journey).
Many organizations are moving away from separate vision and mission statements due to the confusion surrounding their differences. Instead, you might want to try converting your mission statement into a series of focus areas.
For example, Patagonia's vision statement is:
"To share our love for the outdoors and create a diverse range of products for all facets of outdoor life."
And their focus areas are:
- "Best product"
- "Reduce environmental harm"
- "Encourage discussion on the environmental crisis”
Their focus areas essentially describe how they will achieve their vision and act as the bedrock for most of their strategic goals and KPIs.
2. Crafting your core Values
Values really don't get the credit they deserve. People often see them as a throw-away and vacuous - more aimed at marketing the organization than guiding its true internal behaviors. But a well-crafted set of values can be the difference between success and failure in the execution of your strategic plan.
Follow this guide to craft your company’s values , so they help you to:
- Assess your current state (the starting point) as an honest reflection of what you do well and are proud of doing.
- Make better decisions by ruling out courses of action that are not appropriate for your company
- Recruit better people who share your beliefs and passions
The values that go into your strategic plan shape your culture and are not aimed at customers.
Instead, they are a frank self-assessment of how your organization’s people behave as they deliver against your vision and Focus Areas.
They should reflect the values of your very best people and the values that have helped you to succeed the most in your journey to date.
If your strategy clashes with your company’s culture or values, it will fail. Identifying your core values is a critical component towards defining your starting point and your journey.
3. Defining desired Outcomes
A strategic plan leads nowhere without a set of clearly defined outcomes. Visions, missions, and focus areas are a great starting point - but no one will take your plan seriously unless you can clearly articulate what steps you are going to take to get there - and what success looks like for each of those steps.
Not all of your outcomes will be immediately quantifiable - and that's ok (your KPIs below will help you in those cases). But when you define your outcomes, make sure they look like this:
Action + Detail + Metric + Unit + Deadline
Expand our international operations into 3 new markets by 21st December 2022
Starting with a verb forces you to be specific about what you’re trying to do. If you can include a metric and a unit – do so.
It will keep you focused and honest when tracking your progress. Having a deadline works in much the same way.
Our guide on how to create strategic objectives walks you through the process of creating achievable and executable outcomes.
4. Declaring explicit Accountability
This is such a small detail, but it is also one of the key elements of a strategic plan that so many organizations fail to implement.
A lack of accountability will absolutely destroy your strategy execution . Lacking or confusing accountability results in:
- Outcomes not being delivered because no one knew who was in charge
- Conflicting interpretations of what the business should be working on
- Increased “finger pointing” and hearsay when things don't go to plan
- No one taking any satisfaction or pride in the outcomes delivered by their team
Define accountability in the initial strategic plan as part of defining your journey. Ideally, the people responsible for a particular segment of your plan should also have been critical contributors to the plan itself.
Contribution drives engagement. Engagement enforces self-accountability. Accountability enables execution.
For each of your outcomes, simply state ONE single person who will have primary accountability for that outcome. Avoid defining yourself accountable for every single outcome.
It's fine for the owner to invite other people to work on the outcome (either by cascading the goal or inviting collaborators), but it needs to be clear that the PRIMARY accountability sits with the one individual initially assigned to the outcome and no one else.
5. Establishing leading KPIs
Creating KPIs is probably the hardest of all the key elements of a strategic plan. But without KPIs, you won't know until it's too late whether or not you're succeeding towards your vision.
Note that KPIs are not the metrics you set to create your outcomes from step 3. Rather, KPIs should relate to how well you're delivering against the components of your mission or focus areas.
Let's take a look at some examples:
Patagonia's first Focus Area was “Best product.” A KPI for this focus area could be their Net Promoter Score - i.e., how many customers would recommend Patagonia's products and services to others.
Patagonia's second Focus Area was “Reduce Environmental Harm.” They could have a KPI for maintaining their carbon footprint at 0 (i.e., being carbon neutral).
Patagonia's third Focus Area was “Encourage discussion on the environmental crisis.” Probably the hardest to set an effective KPI. They could measure the number of mentions of the company on social media that also reference the environmental crisis.
Don't let establishing leading KPIs become harder than it needs to be. Follow this easy 4 step formula on how to write KPIs to be effective. Make sure that your KPIs accurately reflect what success looks like for each Focus Area and that you can accurately measure the KPI regularly.
Selecting the right KPIs is, therefore, one of the key elements of a strategic plan.
Crucial elements for a strategy's success
Companies that incorporate all five elements in their strategic planning process build easier-to-execute strategies.
People understand them and make consistent decisions throughout the organization. Pair them with regular reviewing organizational habits and you have highly adaptive companies that go beyond reacting to market changes. They anticipate and lead them.
Check out the features of the world's #1 strategic planning software!
Top-Down Vs. Bottom-Up Approach: A Comprehensive Guide
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12 Popular KPI Software Tools To Connect & Visualize Your Data (2023 Guide)
11 best reporting tools & software to drive strategy (2023 guide), your toolkit for strategy success.
Strategic Planning: Meaning, Features, Importance and Limitations
Everything you need to know about the strategic planning. Strategic planning means planning for strategies and implementing them to achieve organisational goals.
It starts by asking oneself simple questions like- What are we doing? Should we continue to do it or change our product line or the way of working? What is the impact of social, political, technological and other environmental factors on our operations? Are we prepared to accept these changes etc.?
Strategic planning helps in knowing what we are and where we want to go so that environmental threats and opportunities can be exploited, given the strengths and weaknesses of the organisation.
Strategic planning is “a thorough self-examination regarding the goals and means of their accomplishment so that the enterprise is given both direction and cohesion.”
Strategic planning is systematic, formally documented process for deciding what are the handfuls of key decisions that an organisation, viewed as a corporate whole must get right in order to thrive over the next few years.
In this article we will discuss about strategic planning. Learn about:- 1. Meaning of Strategic Planning 2. Definition of Strategic Planning 3. Features 4. Importance 5. Approaches 6. Process 7. Tools 8. Factors 9. Limitations.
Strategic Planning: Meaning, Definition, Importance, Approaches, Process, Tools and Limitations
- Meaning of Strategic Planning
- Definition of Strategic Planning
- Features of Strategic Planning
- Importance of Strategic Planning
- Approaches to Formal Strategic Planning
- Strategic Planning Process
- Tools of Strategic Planning
- Factors of Making Strategic Planning Effective
- Limitations of Strategic Planning
Strategic Planning – Meaning
Strategic planning means planning for strategies and implementing them to achieve organisational goals. It starts by asking oneself simple questions like- What are we doing? Should we continue to do it or change our product line or the way of working? What is the impact of social, political, technological and other environmental factors on our operations? Are we prepared to accept these changes etc.?
Strategic planning helps in knowing what we are and where we want to go so that environmental threats and opportunities can be exploited, given the strengths and weaknesses of the organisation. Strategic planning is “a thorough self-examination regarding the goals and means of their accomplishment so that the enterprise is given both direction and cohesion.”
It is “a process through which managers formulate and implement strategies geared to optimising strategic goal achievement, given available environmental and internal conditions.” Strategic planning is formalisation of planning where plans are made for long periods of time for effective and efficient attainment of organisational goals. Strategic planning is based on extensive environmental scanning. It is a projection into environmental threats and opportunities and an effort to match them with organisation’s strengths and weaknesses.
While long-run planning may not be fully equipped to absorb environmental shocks, strategic planning is done to comprehend, anticipate and absorb environmental vagaries. Strategic planning is a continuous process. Every time business organisations want to achieve a higher growth rate or change their operations, desire for better management information system, co-ordinate activities of different departments, remove complacency from organisations; they make strategic plans.
Planning is something we do in advance of taking action; that is, it is anticipatory decision making. It is a process of deciding what to do and how to do it before action is required.
Strategic planning can be defined as a managerial process of developing and maintaining a viable fit between organization’s objectives, skills and resources and its changing environment.
The company’s strategic plan is the starting point for planning. It serves as a guide to the development of sound sub-plans to accomplish the organizational objectives. The aim of strategic planning is to help a company select and organize its businesses in a way that would keep the company healthy in spite of unexpected changes in the environment. It purports to shape or reshape the company’s businesses and products so that they yield target profits and growth.
An interesting question that can come to the mind is that – how the conventional long range planning gave way to the strategic planning. Before the early 1970s, managers who made long-range plans generally assumed that plans for the future were merely extensions of what the organization had done in the past.
However, environmental shocks during the 1970s and 1980s, such as energy crises, deregulation of many industries, accelerating technological change, and increasing global competition undermined this approach to long-range planning.
These changes in the “rules of the game” forced managers’ develop a systematic approach to analyzing the environment, assessing their organization’s strengths and weaknesses, and identifying opportunities where the organization could have a competitive advantage. As a result the value of strategic planning began to be recognized.
Strategic Planning – Definition
Strategic planning is the process of determining a company’s long-term goals and then identifying the best approach for achieving those goals.
Strategic planning is an organization’s process of defining its strategy or direction and making decisions on allocating its resources to pursue this strategy, including its capital and people.
Strategic planning is a process to determine or re-assess the vision, mission and goals of an organization and then map out objective (measurable) ways to accomplish the identified goals.
Strategic planning is a continuous and systematic process where people make decisions about intended future outcomes, how outcomes are to be accomplished, and how success is measured and evaluated.
Strategic planning is the method by which a community continuously creates arti-factual systems to serve extraordinary purpose.
Strategic planning is systematic process of determining goals to be achieved in the foreseeable future. It consists of – (i) Management’s fundamental assumptions about the future economic, technological, and competitive environments. (ii) Setting of goals to be achieved within a specified timeframe. (iii) Performance of SWOT analysis. (iv) Selecting main and alternative strategies to achieve the goals. (v) Formulating, implementing, and monitoring the operational or tactical plans to achieve interim objectives.
Strategic planning is a coordinated and systematic process for developing a plan for the overall course or direction of the endeavour in order to optimizing the future potential.
Strategic planning is a business process that many companies employ to identify critical success factors that set the course for future growth and profits.
Lewis Carroll in “Alice in Wonderland” makes a good case for it – “Would you tell me, please, which way I ought to go from here?” said Alice. “That depends a good deal on where you want to get to,” said the Cat. “I don’t much care where…,” said Alice. “Then it doesn’t matter which way you go,” said the Cat.
Defining Mission Statement:
The mission statement is a short, concise statement that describes what the organization will strive to bring about — the reason why the company exists in terms of its impact on the rest of the world.
Defining Vision Statement:
One of the functions of strategic planning is to inspire people in the organization to work towards the creation of a new state of affairs. The vision is a means of describing this desired future, but it works best to inspire and motivate if it’s vivid — in other words, a vision should be a “picture” of the future. The visioning process is usually the very first step in the strategic planning process.
Defining Role Statement:
The mission statement would focus on results and outcomes, while the role statement gets more into the “how’s”.
A good way to think about this is to first state your mission, add a byline to it, and then add a role.
For example, if the Mission of a startup organisation is to “go where no man has gone before” there might be a set of role statements (usually there will be more than one). For example – To go where no man has gone before by building new technologies and starships that can…
In terms of organizations and strategic planning, an environmental scan involves considering the factors that will influence the direction and goals of an organization. And, it includes consideration of both present and future factors that might affect the organization, since; we’re planning for the future, not just the present.
For example, an environmental scan might project that in the next ten years, the number of people (potential customers) between the ages of 18-24 will increase from 30% to 40%. That’s important information if we want to decide what kind of new products we might consider introducing into the marketplace.
Should we work on developing products targeted at a dwindling seniors population? Or should we develop products to take advantage of the shift to a youth dominated market. The environmental scan forces us to look at these factors.
A competitive analysis involves looking at those that compete in the market place, and using information about the competitors to identify where organisational strengths are relative to those competitors. One of the principles for becoming competitive is to leverage one’s strengths with respect to competitors, and minimise the weaknesses.
Strategic Planning Goals:
Once we established a vision, mission and role, and done internal and external scans, we should have enough information to set goals for the period that our strategic plan covers. Goals in strategic planning can be either result oriented, or process oriented, although, it’s probably better to have results oriented goals.
For example – increase share price by 5%, increase return on capital investments by 10%, reduce employee turnover by 10%, bring three new products to market, and register 3 new patents. Bad and non-strategic goals are, for example, become the most regarded company in our field (too vague, hard to measure, improve customer service (vague), hire and retain more talented staff (vague).
Strategic Planning – Features
The following are the salient features of strategic planning:
1. Process of Questioning:
It answers questions like where we are and where we want to go, what we are and what we should be.
2. Time Horizon:
It aims at long-term planning, keeping in view the present and future environmental opportunities. It helps organisations analyse their strengths and weaknesses and adapt to the environment. Managers should be farsighted to make strategic planning meaningful.
3. Pervasive Process:
It is done for all organisations, at all levels; nevertheless, it involves top executives more than middle or lower-level managers since top executives envision the future better than others.
4. Focus of Attention:
It focuses organisation’s strengths and resources on important and high-priority activities rather than routine and day-to-day activities. It reallocates resources from non-priority to priority sectors.
5. Continuous Process:
Strategic planning is a continuous process that enables organisations to adapt to the ever-changing, dynamic environment.
It coordinates organisations internal environment with the external environment, financial resources with non- financial resources and short-term plans with long- term plans.
Strategic Planning – Importance
Strategic planning offers the following benefits:
1. Financial Benefits:
Firms that make strategic plans have better sales, lower costs, higher EPS (earnings per share) and higher profits. Firms have financial benefits if they make strategic plans.
2. Guide to Organisational Activities:
Strategic planning guides members towards organisational goals. It unifies organisational activities and efforts towards the long-terms goals. It guides members to become what they want to become and do what they want to do.
3. Competitive Advantage:
In the world of globalisation, firms which have competitive advantage (capacity to deal with competitive forces) capture the market and excel in financial performance. This is possible if they foresee the future; future can be predicted through strategic planning. It enables managers to anticipate problems before they arise and solve them before they become worse.
4. Minimises Risk:
Strategic planning provides information to assess risk and frame strategies to minimise risk and invest in safe business opportunities. Chances of making mistakes and choosing wrong objectives and strategies, thus, get reduced.
5. Beneficial for Companies with Long Gestation Gap:
The time gap between investment decisions and income generation from those investments is called gestation period. During this period, changes in technological or political forces can disrupt implementation of decisions and plans may, therefore, fail. Strategic planning discounts future and enables managers to face threats and opportunities.
6. Promotes Motivation and Innovation:
Strategic planning involves managers at top levels. They are not only committed to objectives and strategies but also think of new ideas for implementation of strategies. This promotes motivation and innovation.
7. Optimum Utilisation of Resources:
Strategic planning makes best use of resources to achieve maximum output.
General Robert E. Wood remarks, “Business is like war in one respect. If its grand strategy is correct, any number of tactical errors can be made and yet the enterprise proves successful.” Effective allocation of resources, scientific thinking, effective organisation structure, co-ordination and integration of functional activities and effective system of control, all contribute to successful strategic planning.
Strategic Planning – Approaches
Arthur A. Thompson and A. J. Strickland have described four basic approaches to formal strategic planning:
1. Bottom-Up Approach:
Initiatives in formulating strategy are taken by the various units or divisions of an organization and then passed upward for aggregation at the corporate level. Corporate strategy will then be a composite of these plans. The weakness of this approach is that corporate strategy may end up as an incoherent muddle that merely reflects the objectives of the divisions before the planning attempt was made.
2. Top-Down Approach:
Initiative is taken by the upper-level executives of the organization, who formulate a unified, coordinated strategy, usually with the advice of lower-level managers. This overall strategy is then used to establish objectives and evaluate the performance of each business unit.
3. Interactive Approach:
This approach is a compromise between the bottom-up and top-down methods, corporate executives and lower-level managers develop strategy in consultation with each other, making a link between wider corporate objectives and the managers’ detailed knowledge of specific situations.
4. Dual-Level Approach:
Strategy is independently formulated at both the corporate and business levels. All units form plans which suit their particular situations, and these plans are regularly reviewed by corporate management. At the corporate level, strategic planning is continuous and focuses on the larger goals of the organization- when to acquire and when to divest businesses; how to react to competition and the external environment; what priorities to attach to the organization’s various units.
Strategic Planning – Process
Even though the phrases, ‘Long-term Planning’ and ‘Strategic Planning’ are interchangeably used, we may have a line of discrimination in between them. Philip Kotler puts “whereas the company’s annual and long-range plans deal with current businesses and how to keep them going, the strategic plan involves adapting the firm define Strategic Planning as the process of developing and maintaining a strategic fit between the organizational goals and capabilities and its changing marketing opportunities”.
Strategic planning is the foundation for other type of plans. It depends upon developing a clear company mission, supporting objectives of a sound business portfolio and coordinated functional strategies. The strategic planning process is one in which the management converts its mission, objectives and goals into a workable strategy. It involves the preparation of ways and means to the circumstances of the organization’s environment.
In today’s highly competitive business environment, budget-oriented planning or forest-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress and make adjustments as necessary to stay on track.
The Strategic Management Process can be studied under five, different components.
1. Missions and Objectives:
A mission statement reveals the long-term vision of an organization in terms of what it wants to be and whom it wants to serve. It describes an organization’s purpose, customers, products or services, markets, philosophy, and basic technology. The mission statement describes the company’s business vision, including the unchanging values and purposes of the firm and forward looking visionary goals that guide the pursuit of future opportunities.
Objectives may be defined as “those ends which the organization seeks to achieve by its existence and operations”. It covers long-range company aims, more specific department goals, and even individual assignments.
Guided by the business vision, the firm’s leader can define measurable financial and strategic objectives. Financial objectives involve measures such as sales targets and earnings growth. Strategic objectives are related to the firm’s business position, and may include measures such as market share and reputation.
The mission justified the organization and legitimizes the corporate role in the society. It tells insiders and outsiders what the corporate stands for. The mission would carry the grand design of the firm and communicate what it wants to be. It will indicate broadly the businesses it will be in and the customer needs it seeks to satisfy. The mission is shaped by the capabilities and vision of the corporation’s leaders.
The main task in setting the corporate objectives is to decide the extent of growth the firm wants to achieve. Balancing the opportunities with organization’s capabilities and ambitions, the firm figures out its growth objectives. In addition to growth, there are certain other key determinants of corporate success, which apply to all firms – profitability, productivity, technology, competitive position, human resources, social responsibility and corporate image. The objectives are set in a measurable and time-bound manner.
2. Environmental Scanning or Surveying the Environment :
This is central to strategic planning. The second aspect of the strategic planning process is the environmental analysis. Since the basic objective of strategies is to integrate the organization with its environment, it must know the kind of environment in which it has to work. This can be known by environmental analysis.
The process of environmental analysis includes collection of relevant information from the environment, interpreting its impact on the future organizational working, and determining what opportunities and threats-positive and negative aspects are offered by the environment.
The environmental information can be collected from various sources like publications, verbal information from various people, spying, and forecasting. The process of environmental analysis works better if it is undertaken on continuous basis and is made an intrinsic part of the strategy formulation.
Basically, a firm gathers all relevant information relating to the environment and analyzes them in detail. It analyses both the Macro Environmental factors as well as Environmental factors that have specific to the business concerned.
i. Macro Environmental Factors or External Factors:
Under the macro environmental factors, it studies the demographic, socio-cultural, economic, political and legal environment. Business-specific environmental factors include emerging trends in the industry, structure of the industry, nature of the competition and the scope for invasion by substitute products.
ii. Internal Factors:
This is the process of assessing the company’s capabilities and resources, strengths and weaknesses, core competencies and competitive advantages. The firm also has to examine which of its perceived strengths actually constitutes the competitive advantage for the firm. The firm compares itself against the competition and develops its Competitive Advantage Profile (CAP). The process of internal appraisal also throws up the capability gaps of the firms, i.e., the gaps between its existing capabilities and the needed capabilities for tapping the opportunities spotted through the environmental survey.
3. Strategy Formulation:
Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats.
To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals. A competitive advantage can be based on cost or differentiation. Michael Porter identified three industry-independent generic strategies from which firm can choose.
After strategy chosen, it is put to implementation, that is, it is put into action. Various factors which are necessary for implementation are designed for suitable organization structure, developing and motivating people to take up the work, designing effective control and information system, allocation of resources, etc.
The most crucial task is formulating the corporate strategy. The effectiveness of the entire strategic planning process of a firm is tested and proved by the effectiveness of the corporate strategy it walks out. While the objectives clarify where the firm wants to go, the strategy provides the design to getting there.
The main function of the corporate strategy is to provide strategic direction to the firm. It is corporate strategy that ensures the fit between the firm and its environment. It finally sets the pace of the corporation’s total growth, and thereby it’s future and overall prospects. It can be stated that primary corporate strategy denotes the firm-product market-posture. It is the route map chosen for navigating the firm through all the fluctuations and turbulence the firm may face.
4. Strategy Implementation:
The selected strategy is implemented by means of programs, budgets, and procedures. Implementation involves organization of the firm’s resources and motivation of the staff to achieve objectives.
The way in which the strategy is implemented can have a significant impact on whether it will be successful. In a large company, those who implement the strategy likely will be different people from those who formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower level managers resist its implementation because they do not understand why the particular strategy was selected.
5. Evaluation and Control:
The strategy has to be monitored and adjustments that become necessary have to be brought. Essentially, the thing had to be compatibility of the strategy with the environment as well as internal realities.
The implementation of the strategy must be monitored and adjustments made as needed.
Evaluation and control consists of the following steps:
i. Defining parameters to be measured
ii. Defining target values for those parameters
iii. Performing measurements
iv. Comparing measured results to the pre-defined standards
v. Making necessary changes.
The results of implementation can be compared in the light of objectives set, and control process comes into operation. If the results and objectives differ, a further analysis is required to find out the reasons for the gap and taking suitable actions to overcome the problems because of which the gap exists. This may also require a change in strategy if there is a problem because of the formulation n inadequacy. This puts back the managers at the starting point of the strategy formulation.
Strategic Planning – 6 Main Tools: SWOT Analysis, Scenario Planning, Pest Analysis, Risk Analysis, STP (Situation-Target-Path) and Goals Grid Method
Tool # 1. swot analysis:.
SWOT analysis is a tool for assessing the business and its environment that helps focus on key issues. It can help us focus limited resources and capabilities to the competitive environment. SWOT stands for strengths, weaknesses, opportunities, and threats.
Strengths and weaknesses are internal factors. Opportunities and threats are external factors. The point of the SWOT analysis is to ensure that we have a marketing plan that is consistent with the resources and capabilities of our company.
Strengths could be:
i. A specialist marketing expertise.
ii. A new, innovative product or service.
iii. Location of business.
iv. Quality processes and procedures.
v. Any other aspect of business that adds value to product or service.
Weaknesses could be:
i. Lack of marketing expertise.
ii. Undifferentiated products or services (i.e., in relation to competitors).
iv. Poor quality goods or services.
v. Damaged credibility.
Opportunities could be:
i. A developing market or an emerging market.
ii. Mergers, joint ventures or strategic alliances.
iii. Moving into new market segments that offer improved profits.
iv. A new international market.
v. A takeover
Threats could be:
i. A new competitor in home market.
ii. Price wars with competitors.
iii. A competitor has a new, innovative product or service.
iv. Competitors have superior access to channels of distribution.
v. Taxation/Octroi/Service tax is introduced on product or service.
Examples of SWOT analysis:
i. Wal-Mart :
a. Strengths – Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.
b. Weaknesses – Wal-Mart is the World’s largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.
c. Opportunities – To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as – Europe or the Greater China Region.
d. Threats – Being number one means that you are the target of competition, locally and globally.
a. Strengths – Starbucks Corporation is a very profitable organisation, earning in excess of $600 million in 2004.
b. Weaknesses – Starbucks has a reputation for new product development and creativity.
c. Opportunities – New products and services that can be retailed in their cafes, such as – Fair Trade products.
d. Threats – Starbucks are exposed to rises in the cost of coffee and dairy products.
a. Strengths – Nike is a very competitive organisation. Phil Knight (Founder and CEO) is often quoted as saying that ‘Business is war without bullets.’
b. Weaknesses – The organisation does have a diversified range of sports products.
c. Opportunities – Product development offers Nike many opportunities.
d. Threats – Nike is exposed to the international nature of trade.
iv. Indian Premier League:
Where will you find the Mumbai Indians, the Royal Challengers, the Deccan Chargers, the Chennai Super Kings, the Delhi Daredevils, the Kings XI Punjab, the Kolkata Knight Riders and the Rajasthan Royals? In the Indian Premier League (IPL) – the most exciting sports franchise that the World has seen in recent years, with seemingly endless marketing opportunities. (Only strengths and opportunities)
Tool # 2. Scenario Planning:
In essence scenario planning is about being prepared.
Scenario planning is a fancy term for a very logical and sensible process — the “what if” process. It involves looking into the future, anticipating possible events, scenarios or changes, and analysing what will happen to the company as a result of those things happening, and, planning to minimise any damage, and maximise opportunities.
Scenario planning is often used in IT environments but applies to any business. For example, the IT department might anticipate what would happen if a major hurricane hit and destroyed their central computers. As a result they would minimize their risk by using offsite data storage geographically separate from the main installation, or move their central computers to a more resistant building.
Scenario planning can look at any set of possible circumstances. For example, an oil company might plan around the possibility that a new, non-petroleum based vehicle becomes available. As an outcome of this kind of scenario planning, they might look at the possibility of offering hydrogen fuel at their retail outlets (or charging stations).
It doesn’t mean they would implement those now, but they would be more prepared if such changes happened. In small business, one might consider, and plan for a scenario where one’s rent might double, or one might lose the prime retail space.
Tool # 3. Pest Analysis:
The PEST analysis or model is another tool, quite similar to the SWOT model, but is more specialized and focused on the external environment and important factors “out there” that can affect present and future business.
The PEST acronym stands for:
iii. Social, and
Once political, economic, social and technological factors are identified (which is the first step), the next step is to create a business strategies that will take advantage of these trends and changes, while minimizing risk to the company from those trends and changes.
Tool # 4. Risk Analysis:
Risk analysis involves identifying where a company might be vulnerable to various outside (usually) factors. Risk analysis may be conducted either within the structure of strategic planning, or, on its own. These days companies need to buffer the effects of a number of things “out there” so they ensure that they don’t become the victims of foreseeable events. We can never be sure that we have covered off all risks — we can only identify, and plan for risks we can foresee.
Tool # 5. STP (Situation-Target-Path):
STP or Situation-Target-Path is a very simple overview of the strategic planning method, it divides the planning process into three parts, starting with defining the situation – evaluating and analyzing the current situation and how it came about.
The second component – Target – involves defining goals and objectives for the future. Sometimes this is referred to as defining the ideal or desired future state.
The third component – Path – involved defining a map or path to achieve the goals or future state.
The STP method is simple, but accurately describes, at least in a general way, what strategic planning involves?
Tool # 6. Goals Grid Method:
A goals grid is a relatively simple technique to help us think more clearly about organizational and company goals, particularly when we are doing strategic planning.
Strategic Planning – Factors: An Open Systems Approach, Participation in Planning, Integration of Long-Term and Short-Term Plans and a Few Others
It is not sufficient to say that managers must take actions to make strategic planning effective, but they must be clear as to what actions can be taken in this direction.
Following factors are important for making planning effective:
1. An Open Systems Approach:
The problems of planning should be dealt through open systems approach. It suggests that managers must take into account interactions with their total environment in every respect of planning. Open systems approach makes it necessary on the part of the managers that they take into account the environmental variable such as, technological, social, cultural, legal, political, and economic.
Further, they must also take into account the internal interaction pattern that is, how their planning process is affecting others and is affected by others. When managers take all these factors into account is affected by others. When managers take all these factors into account, they are in better positions to plan and execute their actions.
2. Participation in Planning:
Planning progress should be a joint one. The best planning is likely to be done when managers are given an opportunity to contribute to plans affecting the area over which they have authority. Participation in planning affecting manager’s areas of authority at any level through their being informed contributing suggestions and being consulted, leads to good planning commitment, loyalty, and managerial effectiveness.
The various methods of participation in planning process may be followed in the organisations depending upon their requirements and understanding of the people.
3. Integration of Long-Term and Short-Term Plans :
Managers often focus their attention only on very short – term plans, even if they plan. A good planning process involves integration of long-term and short-term plans. A short-term plan contributes towards the achievement of the long-term plan. Thus, if a manager is planning for very short period, he must take into account his long-term plans also. He must constantly watch and review that his short-term plans contribute to his long-term plans. If this is not the situation, he must modify his course of action which may include modification in both long- term and short-term plans.
4. Communication of Planning:
Many planning efforts fail because managers do not adequately emphasise the role of communicating various planning elements, such as, goals, strategies, policies, and planning premises. If these are communicated clearly, adequately, and timely, the managers are motivated and initiated to take planning process. Which may be necessary for them. When a manager understands the various aspects of planning he is in a better position to foresee his future course of action and may develop a habit of planning every course of future action.
Planning to be effective must have the initiative and support of top level management. It is the top level which is responsible for success or failure of any organisational process, and planning is no exception. The basic objectives which are set at the top level must be two- way process which involves people at other levels also.
Further, when top management rigorously reviews subordinates programmes, it naturally stimulates planning interest throughout the organisation. The planning action by top management does not suggest in everything will come from the top and subordinates will do nothing, rather the planning process should be a joint one.
6. Establishing a Climate:
The managers should try to establish a climate where every person in the organisation takes planning action. Every superior managers should remove obstacles to planning and present facilities for planning of his can be done by setting clear goals, establishing and publishing applicable significant planning premises, involving all managers in planning process, reviewing subordinate plans and their performance, and assuring appropriate staff assistance and information at all levies of management.
Strategic Planning – Limitations
Strategic Planning in management is essential but there are practical limitations to its use. The reasons why people fall in strategic planning emphasise the practical difficulties encountered in planning.
A number of limits within which planning has to operate make this undertaking difficult.
Following are the limitations:
(1) Problems of Change:
The factor works more as limiting factor in the light of changes in future conditions. In a complex and rapidly changing environment, the succession of new problems is often magnified by implications that make planning most difficult. The problem of change is more complex in long-range planning.
Present conditions tend to weigh heavily in planning, and by overshadowing future needs, may sometimes results in error of judgment. Such factors as changing technology, consumer tastes and desires, business conditions, and many others change rapidly and often unpredictably. In such conditions, planning activities taken in one period may not be relevant for another period because the conditions in two periods are quite different.
(2) Failure of People:
There are many reasons why people fail in planning, both at the formulation level as well as implementation level. Some of the major failures are lack of commitment to planning, failure to develop, sound strategies, lack of clear and meaningful objectives, tendency to overlook planning premises, failure to see the scope of the plan, failure to see planning as a rational approach, excessive reliance on the past experience, failure to use the principles of limiting factors, lack of top management support lack of delegation of authority, lack of adequate control techniques, and resistance to change.
These factors are responsible for either inadequate planning or wrong planning in the organisations concerned.
(3) Lack of Accurate Information:
The first basic limitation of strategic planning is the lack of accurate information and facts relating to future. Planning concerns future activity and its quality will be determined by the quality of forecast of future events. As no manager can predict completely and accurately the events of future, the planning may pose problems in operation.
This problem is further, increased by lack of formulating accurate premises. Many times, managers may not be aware about the various conditions within which they have to formulate their planning activities.
Manager while going through the strategic planning process have to work in a set of given variables. These variables may be more in terms of organisational or external. These often provide considerably less flexibility in planning action.
Major internal inflexibilities that may limit planning are related to the psychology. Organisational policies and procedures, and long-term capital investment. The first internal inflexibility is in the form of human psychology in that most of the people have regard for the present rather than for future. The present is not only more certain than future, it is also more desirable, and more real.
Thus, resistance to change is a basic factor which works against planning because planning often depends on the changes. People may have feelings that if planning is soft-pedalled, the changes and the possible danger of future will be minimised. For them, planning tends to accelerate change and unrest.
Second type of internal inflexibility emerges because of organisational policies and procedures once these are established, they are difficult to change. Though these policies, procedures, and, rules are meant to facilitate managerial functions by, providing guidelines, they often are too numerous and exacting that they leave very little scope for managerial initiative and flexibility.
Since managers have to plan for future which is not static but changing, they often find themselves in great constraints. Such problems are more common in bureaucratic organisations where rules and procedures are the matters of prime concerns.
Third type of internal inflexibility comes because of long- term capital investment. Long-term planning is not a process of making future decisions, but a means of reflecting the future in today’s decisions. If the organisation has taken a long-term investment, it is committed by that and future actions have to be taking in the light of the investment. Thus managerial planning is limited to that extent.
Beside the internal inflexibilities, managers are confronted with many external inflexibilities and they do not have control over these. These factors may be social, technological, legal, labour union, geographically and economic. The managers have to formulate their plans keeping in view the demand of these factors. Thus their scope of action is limited making planning in effective in many cases.
(5) Time and Cost:
While going through the strategic planning process managers should also take into account both time and cost factors. The various steps of planning may go as far as possible because there is no limit of precision in planning tools. But planning suffers because of time and cost factors.
Time is a limiting factor for every manager in the organisation on, and if they are busy in preparing elaborate reports and instructions beyond certain level, they are risking their effectiveness. Excessive time spent on securing information and trying to fit all of it into a compact plans is dysfunctional in the organisation.
Often people feel that planning provides rigidity in managerial action. Many types of internal inflexibilities, may be results of planning itself. The planning stifles employee initiative and forces managers into rigid or straitjacket mode of executing their work. In fact, rigidity may make managerial work more difficult than it need be. This may result in it delay in work performance, lack of initiative, and lack of adjustment with changing environment.
Many people feel that planning is limited in value because best results can be obtained by a muddling through types of operation in which each situation is tackled when and if it appears pertinent to the immediate problem. Though this factor of rigidity of planning is limiting factor but without planning, it is really difficult to operate particularly in large organisations.
The planning also involves cost on the part of the organisation. The various factors analysed above contribute to the limitations of strategic planning, either making planning ineffective or making lesser degree of planned work.
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Six Characteristics of Successful Strategic Plans
If you want to grow, refine or even define your business, a strategic plan is a must. It determines the purpose of your business, sets a vision for the future and determines specific steps to get there.
Most senior executives understand the value of strategic plans and are willing to invest significant time and resources to develop them. However, all too often strategic plans fail to deliver on their vision. In fact, by some estimates 70 percent of strategic plans fail.
What makes for a successful strategic plan? After 20 years of facilitating strategic planning for dozens of organizations, I have come to understand that regardless of the industry, company size or current market conditions, strategic plans require the following six characteristics to succeed.
Six must-haves for successful strategic plans
Must-have 1: senior management collectively owns the strategic plan.
In most organizations each senior manager has a silo or line responsibility under his or her purview. In strategic planning, however, the entire senior management team must come together to recognize their collective ownership of the overall vision and strategic direction of the entire organization. To make this work, it’s advisable to have each senior manager’s compensation or bonus structure be tied to the organization’s execution of the plan as a whole, not just that of an individual department or area.
Must-have 2: The strategic plan is inclusive.
We often see strategic plans developed by CEOs or senior management teams and then cascaded down their respective organizations. This approach rarely works because the people on the ground—those ultimately responsible for executing the nuts and bolts of the plan—haven’t had input along the way.
The best plans make space for employees to be heard and to contribute to the plan as management begins to design tactics that will deliver on the vision. People respond better and feel ownership when they feel respected and included. What’s more, input from people on the front lines is invaluable because it grounds the strategic plan in the practical realities of the workplace and culture.
Must-have 3: The strategic plan incorporates operational realities.
Many organizations struggle to acknowledge their challenges and weaknesses. Without a candid assessment of the organization’s landscape, a strategic plan will not be effective.
With strategic planning, there’s an entire marathon between the starting blocks and the finish line. An organization’s operational realities will dictate the best way to run that marathon. If you don’t know your weaknesses, you will hit the wall before you even get to the five-mile marker.
Must-have 4: The strategic plan includes specific and tangible actions assigned to individuals.
We typically see an organization’s senior management team go off-site and create grandiose strategic plans that sound great in principle. However, when those same mangers get back to their desks, the operational realities of their jobs take precedence. Day-to-day tasks sideline many of their inspired plans and ideas.
The best strategic plans are extremely detailed. They drill down to the specificity of who will do what by when—and then not only hold those individuals accountable for delivery, but also provide them with the resources to do so.
Must-have 5: The strategic plan incorporates specific measures to evaluate progress.
How will you know that your strategic plan is a success?
It’s amazing how many organizations don’t ask themselves that question. In the majority of cases, organizations have to spend a few years just laying a strong foundation—they may have to build or refine a team, put in place systems, develop partnerships or more. This often means that monetary results don’t come quickly. So, how do you know you’re on track? How do you appease a board of directors that might be looking at the bottom line as an indicator of success?
The best strategic plans build in regular quantitative and qualitative measurements and milestones. In addition, those milestones must take into account not just whether an action was completed, but that it was done well.
Must-have 6: The strategic plan is linked to the organization’s profit and loss statement.
To be effective, strategic plans must be grounded in economic realities: planning takes considerable time and resources, embracing dramatic change can be expensive, and plans need to be funded and marketed to be successful. All these factors have associated costs that affect the profit and loss of the organization over both the short and long term. It’s essential that organizations understand these costs when devising and approving goals and actions.
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Top 10 attributes of successful strategic plans.
Published: June 09, 2023
Learn how to make sure your strategic plan succeeds with our top 10 attributes of successful strategic plans.
For all the attention and focus placed on strategic planning and change initiatives, it’s hard to imagine that many strategic plans fail, and many change initiatives fall short of producing any meaningful or lasting change.
Below, several business mentors compared notes on initiatives that have succeeded and created a top 10 list of shared attributes for successful strategic planning.
What Is Strategic Planning?
Strategic planning generates a desired pattern of decision making across an organization. Strategic planning is about how people throughout a company make decisions and allocate resources to help accomplish key objectives.
A good strategic plan provides a clear roadmap , including a set of guiding principles that defines the actions people in the business should take (and not take) and the things they should prioritize (and not prioritize) to achieve the overall company goals.
Key Characteristics of Strategic Planning
So, what are the characteristics of a good strategy?
Problems should be recognized, diagnosed, and investigated before good strategic planning can begin. Problems become the targets for strategic planning, so figure out what you're aiming for first.
Establish at least one guiding principle to help move you along your strategic path. The more guiding principles you have, the more effective your strategic abilities will become. If you have principles to fall back on, making trade-off decisions will be easier and you'll waste less time.
Goals, targets, and guiding principles tare great to have. But until action is taken, nothing actually happens. However, plan your action first. Jumping headfirst into action can be extremely unproductive, and even counterproductive, if taken without regard to targets and principles.
10 Attributes of Successful Strategic Plans
1. consider internal and external factors..
You need an objective and unbiased understanding of what's happening in and outside your business. Take a hard look at what’s happening externally and internally, paying special attention to the needs of your stakeholders. Internal factors can include your company culture, business resources, cash-flow management , and more. External factors can include the economy, competitive landscape, and industry regulations, among others.
2. Set purposeful, realistic goals.
It’s critical for your team to understand the purpose of your strategic initiative and have clear business goals that are aspirational but realistic, notes Ned Frey, owner of Foursight Seminars, Inc. He thinks of goals based on “purpose, focus, and passion.” Purpose, a big picture focus, action, and measurement through defined KPIs should all be prioritized in setting goals.
3. Create a sense of urgency.
“Without a sense of urgency, it’s too easy to put off until tomorrow what should be acted upon today,” says Allen Hauge, president of Hauge Farms, Inc. Setting smaller milestones within larger goals is important, but it's also important to get started. Plans often evolve as they go. It's about lighting the fire that inspires a will to change, even if it happens in small doses.
4. Leverage your organizational strengths.
What differentiates your business? Strategy is about understanding your company's strengths and leveraging them to get ahead. In the book Built to Last , Jim Collins and Jerry Porras discuss the importance of balancing the unchanging core (values and company purpose), while stimulating progress (change and innovation).
“Play to your organizational strengths. Not doing so is the equivalent of what Tom Rath describes as ‘taking the path of most resistance,’” says Steve Brody, a former senior executive with Coca-Cola.
5. Prioritize your organizational culture.
Working to align with your culture can go a long way toward moving your strategic plan forward. Employee buy-in and enthusiasm starts with understanding the 'why' behind your goals, along with outlining what steps they can individually take to help reach them.
6. Establish commitment from leaders.
Leaders can’t force change, but they can guide it. Regardless of their leadership style , savvy leaders know how to show their own commitment and delegate properly to reach larger strategic goals. Good leaders can have a large impact on a company's strategic goals, supporting and guiding employees along the way.
7. Commit to executing strategic goals.
Successful execution means having the discipline necessary to achieve your goals and make sustainable behavioral change. As long as change is in place and planned accordingly with the team's buy-in, leaders don't have to commit to reaching drastic goals overnight.
8. Be transparent about the steps it takes.
It’s essential for employees to embrace the strategic plan as their own plan. To accomplish this level of buy-in, leaders should be as transparent as possible right from the start and clear on what action steps to prioritize. To sustain the effort in the long term, employees should understand how their daily activities are having an impact – and be rewarded accordingly.
9. Monitor, measure, get feedback.
“Even the best strategic plans require adjustments along the way,” says Linda Gabbard , president of Framework Initiatives Company, Inc.
That means looking at both intended and unintended effects. A performance dashboard can help with this. Monitor your plan’s progress and KPIs. Additionally, obtain feedback from all stakeholders and stay nimble to adjust as you go. Identifying and evaluating key assumptions about the plan is essential. Periodically, challenge your assumptions and see if you can improve the plan.
10. Emphasize and reward positive results.
Recognize small wins, reward your team's efforts, and reinforce the positive results your strategic initiatives have produced. Doing so will go a long way to taking strategy from tasks to being a core pillar of what your company has become.
Successful strategic plans require clear, measurable, purpose-driven goals and full team buy-in. That way, individuals can be motivated to embrace their role in reaching larger strategic goals that can make a company thrive.
A version of this article was originally published on March 16, 2011.
Photo: Getty Images