Strategic planning is a key process for driving change, growth, and value creation in an organization. Business strategy defines where and how to compete. The strategic planning process provides a discipline for understanding customer needs, the market and competitive environment, the competitive position of the firm, the strategy and the core competencies required, and the actions necessary to develop the core competencies and implement the strategy. It is the tool for changing the firm from what it is to what it aspires to be.
Some organizations struggle with the strategic planning process. They may have made some effort at planning without realizing any noticeable benefit. Some organizations go through the motions of strategic planning and then put the resulting document on a shelf and dust it off the next time they get around to planning again. Without a clear understanding of the process and purpose, strategic planning can be frustrating or intimidating.
The strategic planning process need not be burdensome. But there is a certain amount of discipline required to plan effectively. There are nine major reasons why organizations fail to achieve the appropriate value from the strategic planning process, as follows:
Failure to understand customer needs. The reason for any firm’s existence is to serve the customer and meet their needs. Unfortunately, some organizations have lost sight of this. Instead their focus is on generating revenue or profits or simply producing products. An important element of the strategic planning process is understanding the customer and their needs. Competition is all about providing value as perceived by the customer, which means meeting their needs. Only when a firm understands those customer needs are they ready to identify a plan to provide a value offering with a competitive advantage.
Failure to recognize the market environment correctly. The strategic plan should identify the path to competitive advantage over other suppliers in providing value to the customer. Underestimating or failing to understand the capabilities of competitors can allow the firm to head down a path that is already crowded with similar suppliers. Or failing to see a logical evolution in market structure or the market environment can leave a firm without a tenable market position. The organization needs to have confidence that the plan, when achieved, will provide a great future for the constituents of the firm. Being blindsided by industry or market changes similarly reduces the value of the plan. It is impossible to be totally prescient but the planning effort needs to take a close look at the market and competitive environment and provide a path to competitive advantage with appropriate contingencies for high risk scenarios.
Failure to see the reality of the firm’s position. Too often organizations spend a good part of their planning efforts patting themselves on the back. Sometimes firms stumble for the opposite reason, a “woe is me” attitude without thinking creatively about what are or could be competitive strengths. Instead the company should realistically assess strengths and weaknesses as compared to competitors in light of customer needs. Only after developing a clear understanding of where they stand today is a firm able to plan the path towards what they wish to become.
Failure to define a strategy that is strategic. A common failure is developing a statement of strategy that prompts no action. The central part of the strategic planning process is developing a business strategy that will build and leverage core competencies to meet customer needs. A previous article described what this strategy statement is not; it is not buzzwords, a set of goals, a long-range forecast, or a few random actions for the future. Instead it is a clear description of where and how to compete. The strategy prompts action to build the capability to do compete effectively.
Failure to determine the action plan required. The strategic planning process provides the framework for prioritizing all of the actions that will create competitive advantage and provide value to the customer. Most strategic plans will have an action plan. The big error that occurs is in not identifying the critical actions required to build or enhance the firm’s core competencies and pursue the strategy and instead including a list of random actions. This stage of the planning process requires the firm to focus its efforts and resources on the actions that will create value for the firm over the long term.
Failure to do the implementation. It is not enough to list actions, they must be accomplished. Too often these are considered long-term actions and the organization forgets about them and goes about its day-to-day activities. This is why the action plan should always list the responsible parties and the milestone dates. Since these are the actions that determine how effectively the firm will compete in the future, these should be the highest firm’s priority actions and receive appropriate attention.
Failure to communicate the plan with clarity. The strategic plan is more than a planning tool. It is the means to organize, prioritize, and energize the organization and transform it from what it is today to what it must be in the future. The strategic plan needs to be communicated broadly and clearly within the organization to motivate people and change the organization. One common error is producing an overly complex document. The information required for strategic planning is the information that the leadership team should be considering every day. The plan itself then should be the most critical information that guides the decisions and actions of the firm.
Failure to get buy-in from the organization. Sometimes a committee or even an individual is assigned the task of strategic planning. Or the executive team goes off for a two-day planning session. Then the plan is revealed to the organization. Without any ownership or involvement much of the organization then ignores what is being communicated. Rather it is better to plan in stages and seek input broadly throughout the organization. The greater the ownership, the greater the participation in implementation.
Failure to use the plan to drive day-to-day decisions. Perhaps the most common cause of failure, too often the strategic planning process is viewed as an annual process with little relevance to daily operations. The purpose of strategic planning is to guide the firm into a successful future based on building the capability to better meet customer needs and provide an advantage over competitors in doing so. A myopic focus on shipping today’s product while ignoring the future competitiveness of the firm is short-sighted. Business strategy and the strategic plan should set the priorities and guide every decision. Therefore, the strategic plan should impact the annual operating plan, the budgeting process, the performance management process, the weekly staff meetings, and every other decision-making process.
Strategic planning is about the options and the choices. It needs to be comprehensive but does not need to be complex. The strategic planning process needs to answer a few questions, such as – Which customers are we best suited to serve? What are their needs? What factors in the market environment present threats or opportunities? Which competitors do we face and what are their strengths and weaknesses? How do we best compete and deliver value to our customers? What differentiates us from our competitors? What actions do we need to take in order to better meet customer needs and distance ourselves from our competitors? With the answers to such questions the organization has a direction for the future.
Is your strategic planning process building the organization for the future? Do you see other modes of failure of the planning process?