Strategic planning is a tool that is useful for guiding day-to-day decisions and also for evaluating progress and changing approaches for moving forward. In a previous article we described the purpose of strategic planning. The process for strategic planning can often be an iterative process but it has these key elements:

1. Set strategic goals and objectives
2. Prepare a situation analysis
3. Define or refine the business strategy statement
4. Develop the action plan

Strategic planning is iterative in two dimensions. Within the process, for example, we might establish objectives and then discover through the process that the objectives need to be revised or that the strategy cannot be supported with actions. The process is also iterative over time as we should not be constantly developing a new plan but rather adjusting and revising the plan periodically as the reality of the market changes or as we adjust the objectives, strategy, or action plan.

The strategic goals and objectives describe the targets or milestones that the organization plans to achieve over the planning period. In a previous article, we described in more depth the definition of goals and objectives. The plan might describe targets for sales revenue, profits or margins, market share, ROI, etc. It can also set goals and objectives for sources of revenue (e.g., % from new products or specific segments), levels of quality, customer satisfaction or retention. The list of potential goals and objectives is endless but the key is to identify the few that are strategically significant, in other words, which goals and objectives will mean that we have moved the organization toward our vision of a successful future? Better to have a short list of meaningful goals that the organization can rally around than a laundry list.

The situation analysis has two major components – the external analysis and the internal analysis. Obviously, the external analysis looks at the environment in which the company does business and the internal analysis looks at the company itself and its position in the market. There are lots of tools that might be used in the situation analysis such as SWOT analysis, PEST analysis, Porter’s Five Forces, etc. The important thing is not the quantity of charts and tables but rather the quality of the understanding of the business.

The external situation analysis describes the nature of the market and the competitive environment in which the organization competes. What is the market? How large and what are the drivers of the market and its growth? Who are the potential customers and what do they look like? How do they make decisions and what are their needs? What are the relevant segments of the market and how do they differ? How can we best understand the market and the customers? Who are the competitors? How do they compete? What are their strengths and weaknesses? Etc.

The internal situation or position analysis describes the organization’s capabilities and position relative to the market, the customer needs, and the competitors. It might include such things as identification of strategic issues; analyses of the mix of customers, products, or market segments; market share and trends; profitability and trends; customer perception, satisfaction, and retention; efficiency and capacity; culture and image: organizational structure and capabilities; strengths and weaknesses; etc. Again, this isn’t an exercise in developing an overwhelming compilation of charts and tables and analyses. The purpose is to develop a realistic perspective of the company’s position and its ability to provide value relative to competitors and to develop core competencies that lead to competitive advantage in meeting the needs of customers.

Given the objectives, the market situation, and the competitive position, the next element of the strategic planning process is the statement of strategy. In previous articles we described the purpose of the business strategy and provided some descriptors of strategy. The strategy statement describes where and how the organization will compete to provide superior value in meeting customer needs. This is the heart of the strategic planning process. In the strategic planning process the goals and objectives describe what the strategy should achieve. The situation analysis provides the logic behind the strategy decision. The strategy statement provides the direction for decision-making for the organization to move forward towards its objective and its long-term vision.

The final element of the strategic planning process is the action plan. The action plan describes the tactics and specific actions required to implement the strategy. It describes the actions that will take the organization from its present position to the position where it will achieve the goals and objectives. A previous article described tactics and action plans. The action plan needs to be specific enough that it can be monitored and it needs to be a realistic set of actions that will achieve the necessary change in performance to actually carry out the strategy and reach the objectives.

The strategic planning process should not be onerous. It is an opportunity to step back from the day-to-day operation of the business and think about how the organization should change or what actions are necessary to achieve a longer-term vision.

Is your planning process driving your organization forward or driving it crazy?