A strategic plan is a document that shows where a company is going over the next few years and how it is going to get there. Most small companies don’t have a strategic plan. In the very smallest of companies the plan may be in the proprietor’s head. Larger companies need a more formal approach in order that everyone within the organisation knows where they are heading and how the goals will be achieved.
Even within larger companies strategic planning can be a simple warm-up of last year's documents. Strategic planning in many companies has become debased for a number of reasons:
• It is delegated to junior planners rather than prepared by principal strategic decision makers – i.e. the CEO or the businesses leaders.
• Looking 5 to 10 years ahead is difficult and so the strategic plan is forsaken and replaced by a 1 to 2 year business plan.
• Previous strategic plans may have taken up a good deal of preparation time and then put on a shelf and gathered dust.
Difficulties with strategic planning should not mean that the process is abandoned. The longer view is important. It provides direction that moves the business from where it is now to where it wants to go. It is a process that must be owned and driven by the leaders of the company. In a large company these people will need help from strategic planners who can assemble the detail.
We are going to approach the strategic plan by addressing three simple questions:
1. Where are we now?
2. Where do we want to go?
3. How are we going to get there?
Let’s look at each of these in turn.
Where are we now?
The strategic plan takes the long view. It looks at least 3 years ahead and probably more than 5 years. It is a look at the future for the business through a telescope. If the company has been in operation for some time there will be a base load of intelligence that can guide the plan.
A good starting point is to articulate what the company does and why people buy from it. This is not a statement of what it makes; rather it is an explanation of why the company exists. The aim may be to make as much money as possible but this is not the reason for existence. A business only exists if it continues to provide value for its customers. The big question to answer is “How do we do this better than the competition?”
Facts are important in mapping the current position of the company. Who are its customers? How many are there? Where are they? What are they buying? How much do they like the offer? How have they grown over time? Which segments are growing fastest? What is the competition like? How is the competition inhibiting growth of the company or presenting opportunities? What are company profits like? What is the pricing policy? How effective is the company’s marketing? And so on.
Where do we want to go?
Deciding where the company should go is at the heart of the strategic plan. Here it may be useful to use a framework such as Ansoff. This presents four options for developing the company – selling existing products to existing markets, selling new products to existing markets, selling existing products to new markets, and selling new products to new markets. Simplistic though it is, the Ansoff matrix is a good reminder of future options. It may suggest to us that one of the best ways of moving forward is selling more of our existing products to existing customers. This always makes sense in that existing customers have already bought into our products and if we have more headroom for increasing market share, it may be an easier option than trying to break into new markets with new products.
The old faithful SWOT framework could also be considered. An examination of a company's strengths and weaknesses matched against opportunities and threats in the marketplace may indicate the best way forward.
How are we going to get there?
The first two questions amount to around a half the strategic plan. They will have analysed where the company stands at the moment, its strengths and weaknesses, the opportunities and threats and where it wants to go. It is time to develop a map of goals and how the company will achieve them.
Deciding how a company is going to achieve its objectives is the final part of the strategic plan. There are many frameworks on this website that could suggest useful strategies. A good starting point is always Michael Porter. He would argue that at a high level a company needs to decide whether it has a strategy of beating the competition at low cost, building a brand through differentiation, or playing within a niche. There will be much detail to be covered in this part of the plan. How will you beat the competition? Which customers are key targets? What will be your pricing strategy? How will you use innovation to build your position?
Although there will be an overarching strategy for the company, you may want to think about strategies for different areas of the business – production, sales, marketing, and finance.
It may be helpful to map out the different components of the business and indicate for each how it is performing. The different areas of the business will have their own objectives that integrate to arrive at the overall strategy. A framework such as the one below could help.
The strategic plan should be challenging with ambitious and yet achievable objectives. It will have sales objectives, broken down by country, and the implications for finance, production and HR. Sales volumes, prices and costs of operation will outlined still at a reasonably high level. The strategic plan stays high level and gives a rationale as to why it will be possible to beat the competition or why products will be accepted in markets that have been targeted. Detailed sales and marketing plans that involve tactics come later.
Once the strategic plan is signed off, it should be cascaded through the company. Teams within the business must be aware of the overall goals and know their responsibility in the development of tactical plans that feed into this big picture.
The leadership team within the business will need a mechanism that helps keep track on the performance of the strategy so they can check if it is delivering as expected. Monthly updates will check on the status of the most important programs. These will show if an initiative is off track and if any corrective action is needed. Bear in mind that the strategic plan is likely to take a good number of months to develop, a number of months to implement, and still many more months for the implementation to have an effect. Patience is required – see the earlier blog "Patience is a virtue; give your frameworks time" - https://www.b2bframeworks.com/single-post/patience-is-a-virtue-give-your-frameworks-time
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