Strategic planning is a coordinated and systematic process to develop a plan for the overall direction of an organization and the allocation of resources to optimize future potential. Many businesses start with just an idea and a desire to succeed. Sometimes it works; more often, it doesn’t. According to the US Small Business Administration (SBA), the main reasons businesses fail are lack of a solid plan and lack of adequate capital. These two reasons are related, especially in tough economic times. After all, if you don’t invest in a good plan for your business, why would you expect anyone else to invest in your business?
Strategic and business planning is not just a box to check off your to-do list. Strategic planning is the foundation of everything: your business identity, your marketing and sales, your operations, your management approach, and your financing. However, apologies abound for not doing so. Even well-established companies need to stand out from their competitors to grow and improve their margins.
Regardless of the size of your business or how long you’ve been in business, if you’re willing to invest, you may be someone who can outperform your competition and change the nature of our economy through new processes, products or services.
Planning is much more than just a team-building exercise, but one of the benefits of using the inclusive planning process described below is the creation of a strong and cohesive management team. The feedback from my Strategic Planning Workshop is that the process brings out the different management perspectives and structures them into a unified strategy.
My six-step process for building a workable strategic plan is the foundation of my Strategic Planning Workshop.
Eastern Participants – Develop a common understanding of the planning process and the frameworks that provide information about your business. This step defines the general framework for the process and explores alternatives to more fully develop different aspects of the process. Planning team members should come from the functional units of the company (finance, marketing, operations), so they may have different perspectives depending on their area of expertise. The owners’ end game is an important driver of strategy.
Review your current mission, goals/objectives – Establish the starting point and examine alternatives that can add value to your current plan. Whether your current goals and objectives are loosely defined or well defined, they define your business and how it is run. If you’re not sure where you are, you’ll have a hard time pinpointing your address. I use a three-question, customer-focused exercise to define your current business, and then look at the next 12 months.
When you define your business from a customer perspective, you can make a difference in your success. Growth comes from focusing on customers and consistently delivering value to them. Although strategic plans generally cover longer time frames, a solid plan for the next year is important to have confidence in a three- to five-year plan.
Prepare your situational analysis – Identify market segments, competitors, capabilities, core competencies and opportunities. Instead of trying to tackle big, broad markets, define your niche, and preferably define it for your competitive advantage. To position yourself against your competitors, understand who they are and what their market strategy is.
When you consider your capabilities, you need to do an honest Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis. All of your core competencies should be strengths, but does each one add value? Are they unique and sustainable? How important is each competency to your customers? Finally, identify and evaluate your perceived opportunities. Preparing a situational analysis can be an intense activity, especially if you find that you are not well aligned with your customers. If you’re not well aligned, you’re left with the options of finding new customers, developing new products or services that meet customer needs, or becoming a statistic. Over the past two years, we’ve seen some notable examples of companies failing to respond to changing customer needs and wants or changing government regulations.
Formulate your strategy – Brainstorming; develop the industry scenario; full strategic reviews; formulate strategies, mission statement, goals and objectives. “First comes the thought; then the organization of that thought into ideas and plans; then the transformation of those plans into reality.” – Napoleon Hill, author of Think and Grow Rich.
This is where you differentiate yourself and find ways to beat the competition. Some companies have done poorly in the down economy, but others have grown and prospered because they had a strategy that was responsive to change. Small businesses have an advantage over their larger rivals because they can move faster to respond to change and implement new ideas. This step definitely requires some thought, but the rewards can be substantial. Remember that many of today’s great companies were founded during a recession. Other small companies proved they had value and were acquired by a larger company.
Prepare your implementation plan – Define action plans, schedules and budgets. Action without a strategy is wrong. A strategy without action is a waste. What specifically needs to be done to achieve your goals and objectives? Who needs to do it and what other resources will they need? When do you have to do it? Actions should be broken down into measurable steps according to a timeline and assigned to specific people. How are you going to finance your plan? Your implementation plan is your basic reality check. If the schedule is unrealistic or you do not have the necessary people, resources or funds; What adjustments can you make to achieve your goals?
Prepare for monitoring – Establish metrics and a monitoring schedule. Once you have established what needs to be done, you need to define how you are going to measure progress towards meeting your goals and objectives and how often. Monitoring should be frequent enough that corrective action can be taken before critical dates are missed. Monthly progress reviews and quarterly strategy reviews may or may not be enough. Setting minimum, target, and broad goals can also be helpful. Remember that the plan is not set in stone. If your reviews show that something isn’t working, change it.
I generally recommend using the SCORE business plan outline that was developed for start-ups but can be easily adapted for established businesses. The questions answered during the planning process feed directly into the sections of the business plan: Description of the business: what do you do? Products/Services – What do you sell? Marketing Plan – how are you going to sell it? Operational plan: how will you carry out the daily operation? Management plan: how will your business be managed and by whom? and the Financial Plan – how will you finance the business?
As you go through the steps of developing your strategy and preparing your plan, it is important to keep the endgame in mind. Although no one can guarantee the success of your business, good planning builds a solid foundation for your business and minimizes risk to you.