Recently, I was visiting with a client who told me he believed that his strategic plan was only 30 percent effective. He said, “I know our strategic plan is not producing the profits we had hoped for, but I don’t know if the problem is the plan or my people.”
Most CEOs know profitable growth is the key driver to creating shareholder value, and developing effective business strategies is the key to profitable growth. Successful strategic planning is not a mysterious process available to an exclusive group of top-performing companies. It is a result of executive commitment, hard work and a well-defined approach.
Despite good intentions and major resource commitments, few organizations have strategic planning processes that lead to high-impact business strategies. At many companies, a focus on short-term results, detailed financial forecasts and formal presentations skews the process, crowding out attention to key strategic issues. Even in cases when the right issues are identified, owners and management teams often lack the time, resources or objectivity required to challenge the status quo.
A successful strategic planning process includes four critical steps:
▪ Build the foundation. Senior management commitment and adequate planning resources are hallmarks of all top organizations. I cannot emphasize enough that these are essential pre-requisites for an effective strategic planning process. Owners and senior staffs of top performing companies build a successful, high-performance culture that drives their decisions by executing these initiatives:
Maximizing shareholder value is the governing objective and permeates all levels of the organization including front-line employees. Key performance indicators are defined and measured across the entire business. Superior performance is generously rewarded at all levels. Poor performance is not tolerated at any level. Market intelligence is demanded to close gaps in management’s understanding of the business environment. Management development programs are provided to teach employees to think like owners. And communication up and down the organization is consistent and continuous.
▪ Implement strategic planning processes. The best companies have more than one model in their strategic arsenal and use the best one to suit the occasion. For example, the outcome of a “strategic performance review” (evaluating whether a business unit is “on strategy”) and an “environmental scan” (evaluating whether major threats or unanticipated opportunities exist) would determine whether a comprehensive strategy work-up is required or whether a less comprehensive approach is adequate.
▪ Develop strategy support systems. The best support systems increase both the efficiency and the quality of strategic planning. They help key insights to be broadcast and understood internally and ensure that current situations are addressed. Owners and senior executives are in a unique position to increase the value of cross-business synergies and align business functions with corporate objectives, while enhancing the business skills and tools to improve operational planning.
Leading companies use many analytic tools and frameworks to achieve optimal results. Tools used to identify key strategic issues include external customer research, competitive benchmarking, technology evolution mapping, market segmentation, and scenario analysis. An external focus on customer and competitor developments helps an organization identify strategic opportunities as well as threats. SWOTs (Strengths/Weaknesses/Opportunities/ Threats) analysis are effective frameworks for assessing market attractiveness and competitive position.
Leading companies develop a culture promoting the use of information technology in the strategic planning process. Top companies use information technology to “de-layer” interaction between hierarchical levels and cross organizational boundaries.
IT resources provide shared tools to manage the planning process timeline and activities, support decision making and provide online documentation of the strategy and the final plan.
▪ Align organization decision making to the plan. Organizational alignment can be a powerful tool to change behavior and achieve sought-after performance. Most would agree that managers want to “do the right thing,” but misalignment prevents optimal performance by diffusing focus and undermining process credibility.
To achieve alignment of people and management systems when executing a business strategy, companies are investing in thoughtfully designed communication programs to communicate strategic objectives. They also invest in formal programs for tracking actual results against performance commitments, create accountability and share information appropriately throughout the organization.
In summary, strategic planning is hard work and demands commitment, resources and the well-defined disciplined process described above. Decision processes must be tied to the strategic planning process, and incentive programs have to be aligned to the plan. Owners and senior managers play a critical role in the planning process by setting direction, expectations and providing resources that match the Plan goals. Finally, communicating the Plan’s goals and results is key to consistent performance.