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Strategic Planning-Start with the End
Posted by B2B on: 2006-11-06 14:53:15
By A. Michael Weaver
The objective of strategic planning is many times confused with that of a business plan. Whereas the strategic plan may be a part of a complete business plan, the timeframe and purpose is different and distinct. A strategic plan constructs a concept of the future of an industry or business and provides a roadmap to successfully guide the company to a set of goals in a defined point in time in that future.
Normally, the decision to develop a new strategic plan is triggered because some area of the business is not achieving the results the ownership has hoped or something new and unexpected has changed in the marketplace. Traditionally, the approach for developing a strategic plan was to define the market size, customers profile and competitors’ strengths and weaknesses. Then, the preparer would review the company’s past financial performance, determine its key customers’ characteristics, calculate its market share and access how the company stacked up against its existing known competition. Using the past rate of growth to project the future, some optimistic, usually unrealistic, goals were established without a clear method of measuring whether they were ever obtained. The process usually involved only a small group of top executives and resulted in a document that quickly became obsolete. Because it was designed to meet yesterday’s needs, this type of strategic plan was eventually placed on the book shelf beside all the others that preceded it.
Strategic planning in today’s rapidly changing environment must not be constrained and limited by the past definitions of the industry, market, products/services, customers or competition. To be successful and usable as a functioning guide to the future, the strategic plan must be adaptable, sustainable and comprehensive. The entire organization must accept it intellectually and emotionally. In other words, the strategic plan becomes the essence of the vision and direction of the company to the ownership, the employees and the public.
This is accomplished by "starting with the end". Beginning with an open mind and a blank sheet of paper, what is possible in the next three to five years? Dare to challenge some basic assumptions and break down the walls you constructed around your vision of your business! What will be your customers’ wants and expectations? What new uses will exist for your products and services? What new markets and opportunities will be possible in the future? Will new competition come from other companies like yours or alternative product and service providers? Are there operational cost reductions or productivity developments on the drawing board? What industry trends could be adjusted because of governmental oversight and regulations? Will there be shortages or new materials that will change your supply chain practices? How many of these possible changes can you influence and manage? What contingencies should you include in your planning process for those you cannot control?
Once a clear and concise vision of the future of three to five years out is defined and supported by the planning group, ownership and top management should set of goals for the company (revenues, net profit, gross margin, return on investment, etc.) as a whole and each major functional area (sales, operations, financial, human resources, R&D, etc.). Quantitative measures of success must be established for each goal both for the end of the planning period and for various milestones along the way.
Each total company goal should be analyzed as to what changes and actions will be required in the present operation of each major functional area in order to achieve success within the timeframe of the planning period. Viewing where each functional area is currently positioned from the point of where it needs to be in the future will form an outline of what has to be accomplished along the way. It must also be recognized that these changes and actions will not necessary result in linear improvements and may impact the short term performance of that group as well as other functional areas. For example, a planned implementation of new personnel software system may affect hiring procedures in human resources, payroll processing in accounting and employee communications in operations.
It is important to involve the entire organization in the tactical portion of the planning process that identifies the methods and courses of actions required to achieve the short term or milestone goals. This ensures that important details and considerations have not been overlooked and provides the vehicle for everyone to adopt the plan as their own.
A word of caution, short-cutting the complete top to bottom planning process can increase the chance of failure by more than 50% and possibly place the company half-way to nowhere.
To summarize, the keys to successful strategic planning are as follows:
1. Look beyond today and question the basic assumptions regarding everything about the business.
2. Listen to all input, challenge the status quo, and look at all possibilities before defining a clear, concise and objective vision of the future.
3. Search outside the organization before considering the changes inside.
4. Consider other market, scientific and industry trends.
5. Look for unexploited and undeveloped market opportunities.
6. Branch out to explore new uses and new customers for products and services.
7. Address fear of change and ability to change in order to achieve emotional buy in of the entire organization to the plan.
8. Create evaluation criteria and measurements of progress for each milestone for each functional area and the total company.
9. Publicize the starting point and journey highlights to reach the future goals.
10. Celebrate each major accomplishment and successful step along the way.
Weaver Research & Consulting Group was founded in 1998 to thoroughly research client problems and develop sustainable management solutions. Michael Weaver has a MBA from Pepperdine University and a technical undergraduate degree. His 30-year career includes managing manufacturing plants, technical staffs and major projects for a Fortune 500 firm both in the US and overseas. Over the past eight years, he has used these skills to provide practical advice to owners of small and mid-sized companies. He is an Accredited Associate with the Institute for Independent Business International (IIB). and a Strategic Partner with Profiles International.
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