With its long-term focus and clear objectives, strategic planning can help your organization succeed, overcome obstacles, and capitalize on opportunities.
Strategic plans outline strategic goals and objectives, chart a course for achieving them, and even prepare for potential risks and opportunities. It guides decision-making and smart resource allocation, keeping your organization on track.
Strategic plans usually get a makeover every five years, with yearly check-ins to keep them relevant. C-level executives lead the strategic thinking behind the plan, addressing vital questions such as:
- What steps will our company take to reach its objectives?
- How will we execute our plans to achieve our goals?
- Which strategies will we use to achieve our desired outcomes?
When your organization embraces strategic planning, it can help cultivate a collaborative environment, increase employee morale, and create a shared vision. By joining forces, everyone can work towards the same objectives. Also, it’s possible to detect any potential obstacles or possibilities that may not be obvious.
Table of Contents
Defining Strategic Planning
Strategic planning is a systematic and proactive process within an organization that involves the development of a clear and coherent plan for its future direction.
Setting long-term goals, developing strategies to achieve those goals, and effectively allocating resources are all parts of this process.
Through strategic planning, organizations can better anticipate and adapt to industry, competition, and market changes, ultimately increasing their chances of success and sustainability.
The Importance of a Strategic Plan
Every organization needs a strategic plan. It defines long-term goals and objectives and guides daily actions and the decision-making processes.
In addition, a strategic plan helps you identify problems and come up with solutions. Shared priorities and goals foster unity and collaboration among stakeholders, employees, and customers. Here’s why strategic planning is so important.
- Sets clear long-term goals: Ensures the organization is headed in the right direction
- Maintains alignment with organizational vision and mission: Provides clear direction to all stakeholders
- Provides guidance to daily decision-making: Makes sure actions and choices are consistent
- Facilitates adaptability to changing environments: Gives the flexibility and resilience you need
- Maximizes efficiency and effectiveness: Optimizes resource allocation and utilization
- Proactive problem-solving: Address issues before they get out of hand
- Establishes shared understanding and commitment: Promotes collaboration between stakeholders
Who uses Strategic Plans?
A diverse array of organizations employ strategic plans to guide daily operations and realize long-term visions.
Strategic planning has stood the test of time as a method that benefits organizations of all sizes, industries, and locations.
By integrating strategic planning with other appropriate tools, organizations can enhance their performance and competitiveness in the market.
Examples of organizations that leverage strategic planning include;
Businesses and Corporations:
No matter the size, planning is key for companies that want to grow, innovate, and stay ahead.
Non-profit Organizations and Charities:
Strategic planning ensures organizations use their resources wisely and make informed decisions to reach their goals and have a real impact.
In the military, comprehensive strategic planning is necessary to devise tactics, allocate resources, and guarantee the security and success of missions.
Healthcare Facilities and Organizations:
Hospitals, clinics, and other healthcare organizations employ strategic planning to maximize patient care, allocate resources prudently, and promote progress in medical treatments and technologies.
Strategic Planning Process
According to many experts, there are four phases, each with distinct components. They are goal setting, strategy formulation, implementation, evaluation, and control.
(I’ve seen models with five or six phases. However, these four phases are fundamental.)
Each phase builds upon the previous one while providing feedback and analysis that can be used to refine and improve the plan.
Phase 1: Define Vision, Mission and Objectives
First, you have to lay the groundwork. Strategic planning must be grounded in the organization’s mission, vision, and values.
Creating a successful corporate strategy starts with a clear and compelling vision statement. This is a brief and bold declaration of your organization’s future goals and aspirations. It answers the question: “What do we want to become?”
A vision statement helps guide your mission statement, explaining what you do, how you do it, and why you do it. A vision statement should be concise and impactful yet aspirational and realistic. It should reflect your company’s values, purpose, and core competencies.
Your shared vision helps you communicate your brand identity to customers, so they know that you’ll serve them better than anyone else. It binds your internal stakeholders together and inspires your team. In a vision statement, you should talk about what customers will gain from your products or services from their perspective.
Here are some examples of good vision statements from different industries:
- IKEA: “To create a better everyday life for the many people.”
- Disney: “To make people happy.”
- Google: “To provide access to the world’s information in one click.”
A mission statement declares your organization’s “reason for being.” It sets you apart from the competition and lays the foundation for everything you do. It aligns your priorities, strategies, plans, work assignments, and organizational structures with your purpose.
A mission statement provides direction for your choices and keeps you on track to reach your objectives. It clearly articulates your values and purpose to all those involved, including stakeholders, customers, and employees.
Your vision and mission statements are a representation of your company culture that grows and changes over time. Review and update them regularly to express your identity and direction.
Here are some mission statement examples from different industries:
- JetBlue: “To inspire humanity, both in the air and on the ground.”
- IKEA: “To offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”
- Nike: “To bring inspiration and innovation to every athlete in the world.”
Objectives serve as a GPS, pointing to your desired results and showing progress. However, strategy experts may have conflicting views on objectives and their proper implementation.
Some people regard objectives as a helpful tool for managers to guide their teams, while others view them as clear-cut outcomes rooted in an organization’s mission and vision. Nevertheless, your objectives should encompass qualitative and quantitative aspects, remaining relevant and achievable.
It is important to be able to identify the difference between primary and secondary objectives. The primary objective represents your business’s profit target, shaped by your corporate strategy. In contrast, secondary objectives are the supporting goals that contribute to reaching the primary objective, such as enhancing customer satisfaction, increasing market share, or driving innovation.
Lastly, establish goals with clear deadlines based on your strategy. Goals help you measure your progress and make any necessary changes. In addition, goals inspire you and your team to unite behind a shared vision and strive for success.
|Industry||Primary Objective||Secondary Objective|
|Retail||To increase sales by 15% in the next quarter||To improve customer loyalty by offering discounts and rewards|
|Education||To provide quality education to all students||To enhance teacher training and professional development|
Phase 2: Crafting the Strategic Plan
In the second phase, the strategic plan is crafted by analyzing the internal and external environment. By conducting a SWOT analysis for the internal assessment, your organization can identify what it does well, where it can improve, any potential opportunities, and potential risks.
This analysis can also uncover potential insights that could lead to large-scale organizational changes.
If you want to assess the external environment, a PESTLE analysis is a great tool to use; it breaks down the external environment into six distinct categories, which are discussed in more detail in the article.
We should use the insights gathered from these assessments to form a concrete strategy. By enabling each department, division, or business unit to contribute, the organization is able to move closer to achieving its mission and objectives.
A well-defined strategy allows an organization to coordinate, optimize, and sustain its actions. For example, a company may devise a strategy focusing on customer service excellence to enhance customer satisfaction and foster brand loyalty.
Phase 3: Implement the strategic plan
The third phase of strategic planning focuses on putting the plan into action. This step calls for the unwavering commitment of leaders throughout the organization and prioritizes credibility and communication. Let’s delve into the significance of these three elements to uncover the essentials of successful strategy implementation.
Seeing the strategic process through to completion is vital. This means striving to achieve the goals and implementing the changes that stem from the process. Embracing this commitment ensures the strategic plan’s success.
A robust strategic plan requires credibility, cultivated through representative participation, dedication to every step of the process, and clear documentation. Upholding credibility helps foster trust and smooth execution.
As the lifeblood of any relationship, communication plays a critical role in the professional realm. The process of strategy implementation hinges on effective communication, which should be considered a shared responsibility.
Now, let’s explore the nuts and bolts of strategy implementation. This phase involves transforming the strategic plan into tangible actions, such as rolling out a new marketing plan to boost sales or adopting new work management software to enhance efficiency. However, a plan’s value lies in its implementation.
To ensure successful implementation, delegate responsibility to functional managers who can efficiently and effectively execute tasks. But beware of potential issues arising from uninvolved managers who face unexpected decisions. Hence, it’s crucial to involve divisional and functional managers in both strategy formulation and implementation.
Typical actions involved in strategy implementation include adding new departments, hiring employees, altering marketing campaigns, modifying pricing strategies, developing financial budgets, establishing cost-control procedures, training employees, transferring managers among divisions, and enhancing management information systems.
Customizing Strategy Implementation
Keep in mind that strategy implementation varies across organizations. For example, manufacturing companies may prioritize production efficiency and quality control, while service organizations might emphasize customer satisfaction and innovation. Governmental organizations, on the other hand, could focus on public welfare and accountability.
Strategy implementation is not a one-size-fits-all process. Instead, tailor your approach based on your goals, resources, and context. Following these steps and tips can make your strategy implementation more successful and ultimately achieve your desired outcomes.
Phase 4: Assessing the Plan, Process, and Performance in Strategic Planning
The last step in strategic planning is to assess the plan, the methods used, and the effectiveness of the strategy. Organizations must be prepared to embrace changes, insights, and revisions.
These four phases of strategic planning are crucial for ensuring long-term success, enabling effective resource allocation, and sustaining a competitive edge in a constantly changing market.
Strategy evaluation is essential for several reasons, as it helps:
- Identify issues before they escalate and harm performance or reputation.
- Ensure the achievement of goals and progress toward the vision.
- Adapt to changing environments and capitalize on new opportunities or address emerging threats.
- Prevent complacency and promote continuous improvement and innovation.
Strategy evaluation unfolds in three stages:
- Reviewing internal and external factors: Analyze your organization’s SWOT (Strengths, Weaknesses, Opportunities, and Threats) and examine the assumptions and expectations underpinning your strategies to determine their validity.
- Measuring performance: Compare actual results with expected outcomes and evaluate the effectiveness and efficiency of your strategies in terms of costs, benefits, risks, and results.
- Taking corrective action: Identify issues or discrepancies, determine necessary actions to improve or modify strategies, and communicate the evaluation results and actions taken to relevant stakeholders.
Effectively evaluating your strategies requires adhering to specific criteria, such as:
- Balancing long-term goals and short-term objectives, ensuring adaptability to changing situations.
- Comparing strategies with industry standards, competitor benchmarks, best practices, or historical data to identify areas for improvement or gaining a competitive edge.
- Demonstrating a clear understanding of external environment opportunities and threats and considering how various factors affect your organization.
- Adopting a balanced approach that takes into account quantitative and qualitative factors and addresses all organizational aspects.
To measure performance effectively, employ methods such as:
- Financial ratios and market performance measures: Numerical indicators that reflect your organization’s financial standing or market performance, such as ROI, EPS, and net profit margin.
- Qualitative factors: Non-numerical indicators that assess your organization’s performance in terms of customer satisfaction, employee satisfaction, and other areas.
Types of Strategies
There are three primary types of strategies employed by organizations:
- Corporate Strategy
- Business or Competitive Strategy
- Functional Strategy
Corporate strategy involves top-level executives carefully weighing the pros and cons of a company’s portfolio and deciding which businesses, services or products to own and operate. It may lead to business expansion or contraction through increased or decreased investment. In addition, companies can diversify their portfolio by expanding into related industries, creating synergy between the businesses.
Business or Competitive Strategy
At this level, each business unit or product line is equipped with a strategy that is tailored to maximize its competitive advantage. Identifying and offering a unique and competitive target market is key to a successful business strategy.
For instance, Pepsi has distinct strategies for its beverages and snacks businesses.
Each of the areas of the business, like marketing, finance, and operations, has its own distinct functional strategy. Each area determines the best way to execute its activities to achieve its corporate goals.
For example, individual business units within AmEx decide how to utilize the company’s website to promote its products.
Aligning Strategies for Success
Crafting and executing strategies can be a daunting task in large organizations, yet it is critical to ensuring success for success.
The main steps in strategy formulation include analyzing the external and internal environment, identifying opportunities, and creating and executing strategies to capitalize on them.
Michael Porter’s Generic Business Strategies
Michael Porter outlined three generic business strategies that can help organizations gain a competitive edge in their markets:
- Cost Leadership
A differentiation strategy requires creating products or services that are different from competitors and appealing to customers. This strategy emphasizes product or service quality.
Apple tailors its innovative, stylish devices to specific target groups, while Beats Electronics’ design sets them apart from competitors.
Cost leadership enables organizations to produce products or services at lower costs, allowing them to offer more competitive prices for the same quality product. This strategy involves creating products or services in large quantities at a reduced cost.
Walmart and Ikea exemplify companies that use cost leadership as their primary strategy. Walmart’s straightforward business model keeps costs low and passes savings onto customers, while Ikea’s flat-pack production enables more efficient and cost-effective production and shipping.
Through a focus strategy, businesses are able to recognize and prioritize the needs of a distinct customer segment within a niche market. This approach focuses on providing tailored solutions to meet the individual needs of a specific customer base.
Rolex, for example, produces luxurious watches that appeal to a select group of wristwatch buyers. The Rolex brand has become synonymous with luxury and serves as a status symbol among the elite.
Strategic planning tools and examples
Business leaders must take advantage of strategic planning tools to craft effective strategies. Here, we’ll explore a variety of widely-used strategic planning tools and see how they have been utilized effectively in the real world.
You can gain strategic insights by utilizing SWOT analysis, Porter’s Five Forces, and scenario planning.
SWOT analysis is a nifty technique for pinpointing strengths, weaknesses, opportunities, and threats. Businesses can thrive by crafting strategies that capitalize on strengths and opportunities while minimizing weaknesses and threats. Take Netflix, for instance; it seized the opportunity of creating a web-based movie rental service to become one of the world’s leading streaming platforms.
PESTLE analysis dives into Political, Economic, Social, Technological, Legal, and Environmental factors, enabling businesses to adapt to market changes. For example, a company like Tesla can employ PESTLE analysis to anticipate shifts in laws, technology, and society that may affect their business.
Porter’s Five Forces
Porter’s Five Forces analysis helps businesses identify the strength of their relationships with buyers, suppliers, and competitors, illuminating the competitive forces in an industry. In addition, it highlights the risks created by new entrants and substitutes.
Walmart, for example, has harnessed its supplier power and economies of scale to offer lower prices than competitors.
Scenario planning is valuable for anticipating various outcomes and formulating strategies for each. It’s invaluable when navigating unpredictable and turbulent situations.
Shell Oil Company has a known history of using scenario planning for economic, political, and environmental trends in their business throughout the years.
The balanced scorecard looks at financial, customer, internal process, learning, and growth areas to evaluate performance against established goals and objectives. By keeping a close eye on these aspects, businesses can measure progress and take the necessary steps to correct any problems.
For example, Google employs the balanced scorecard to measure product development, customer satisfaction, employee training, and financial progress.
Best Practices for Strategic Planning
Here is a list of best practices for strategic planning in your organization.
Ensure that everyone in the organization, from senior management to new hires, is included in the strategic planning process. By engaging everyone in the process, you build a feeling of ownership and create a collective understanding of the company’s goals and the plan to reach them.
Stay on track by reviewing and adjusting your strategic plan regularly. You shouldn’t be afraid to tweak your plan if new information or market conditions change.
Open the Lines of Communication
Share the strategic plan using all available communication channels so everyone is on the same page. Clear communication helps employees understand the company’s objectives and their contributions to achieving them, ultimately inspiring and engaging them.
Strategic planning is all about insight, preparedness, and agility. Focus on creating lasting value instead of getting weighed down by bureaucracy.
Stimulate the Strategic Dialogue
Sticking to the same old strategic planning routine won’t cut it. Instead, constantly reinventing the process and stimulating strategic dialogue will keep it fresh.
Cultivate a culture of learning and Innovation
Build a learning environment that encourages continuous improvement. Your employees can contribute valuable insights and ideas to your company’s strategic direction if you let them.
Monitor Competitors and Industry Trends
Keep tabs on competitors’ strategies and industry trends to pinpoint opportunities or threats. Armed with this knowledge, you can fine-tune your strategy, ensuring your company stays ahead of the competition.
Strategic thinking allows leaders to set ambitious goals and devise plans to bring them to fruition, as we discussed in this article. Read More here about Strategic Thinking.A company needs leaders who can think strategically and lead effectively at all levels to foster growth and innovation. Here’s more about strategic leadership.
David, Fred R., and Forest R. David. Strategic Management: A Competitive Advantage Approach, Concepts. 16 ed., Pearson, 2016. Oreilly.
Fleisher, Craig S., and Babette E. Bensoussan. Business and Competitive Analysis: Effective Application of New and Classic Methods. 2 ed., Pearson Education, 2015. Oreilly.
“Mission statement examples: 16 of the best to inspire you.” Biteable, 15 June 2021, https://biteable.com/blog/mission-statements/. Accessed 6 April 2023.Wright, Tom.
“17 Noteworthy Vision Statement Examples (+Bonus Template).” Cascade Strategy, 27 July 2022, https://www.cascade.app/blog/examples-good-vision-statements. Accessed 6 April 2023.