What is strategic planning?

Strategic planning is a process in which an organization’s leaders define their vision for the future and identify their organization’s goals and objectives. The process includes establishing the sequence in which those goals should be realized so that the organization can reach its stated vision.

Strategic planning typically represents mid to long-term goals with a life span of three to five years, though it can go longer. This is different than business planning, which typically focuses on short-term, tactical goals, such as how a budget is divided up. The time covered by a business plan can range from several months to several years.

The product of strategic planning is a strategic plan. It is often reflected in a plan document or other media. These plans can be easily shared, understood, and followed by various people including employees, customers, business partners, and investors.

Organizations conduct strategic planning periodically to consider the effect of changing business, industry, legal, and regulatory conditions. A strategic plan may be updated and revised at that time to reflect any strategic changes.

Chief information officers use strategic planning to determine how IT can be best used to further an organization’s business goals.

Why is strategic planning important?

Businesses need direction and organizational goals to work toward. Strategic planning offers that type of guidance. Essentially, a strategic plan is a roadmap to get to business goals. Without such guidance, there is no way to tell whether a business is on track to reach its goals.

The following four aspects of strategy development are worth attention:

The mission

Strategic planning starts with a mission that offers a company a sense of purpose and direction. The organization’s mission statement describes who it is, what it does, and where it wants to go. Missions are typically broad but actionable. For example, a business in the education industry might seek to be a leader in online virtual educational tools and services.

The goals

Strategic planning involves selecting goals. Most planning uses SMART goals — specific, measurable, achievable, realistic, and time-bound — or other objectively measurable goals. Measurable goals are important because they enable business leaders to determine how well the business is performing against goals and the overall mission. Goal setting for the fictitious educational business might include releasing the first version of a virtual classroom platform within two years or increasing sales of an existing tool by 30% in the next year.

Alignment with short-term goals

Strategic planning relates directly to short-term, tactical business planning and can help business leaders with everyday decision-making that better aligns with business strategy. For the fictitious educational business, leaders might choose to make strategic investments in communication and collaboration technologies, such as virtual classroom software and services but decline opportunities to establish physical classroom facilities.

Evaluation and revision

Strategic planning helps business leaders periodically evaluate progress against the plan and make changes or adjustments in response to changing conditions. For example, a business may seek a global presence, but legal and regulatory restrictions could emerge that affect its ability to operate in certain geographic regions. As a result, business leaders might have to revise the strategic plan to redefine objectives or change progress metrics.

What are the steps in the strategic planning process?

There are myriad different ways to approach strategic planning depending on the type of business and the granularity required. Most strategic planning cycles can be summarized in these five steps:

Identify

A strategic planning cycle starts with the determination of a business’s current strategic position. This is where stakeholders use the existing strategic plan — including the mission statement and long-term strategic goals — to perform assessments of the business and its environment. These assessments can include a needs assessment or a SWOT (strengths, weaknesses, opportunities, and threats) analysis to understand the state of the business and the path ahead.

Prioritize

Next, strategic planners set objectives and initiatives that line up with the company’s mission and goals and will move the business toward achieving its goals. There may be many potential goals, so planning prioritizes the most important, relevant, and urgent ones. Goals may include a consideration of resource requirements — such as budgets and equipment — and they often involve a timeline and business metrics or KPIs for measuring progress.

Develop

This is the main thrust of strategic planning in which stakeholders collaborate to formulate the steps or tactics necessary to attain a stated strategic objective. This may involve creating numerous short-term tactical business plans that fit into the overarching strategy. Stakeholders involved in plan development use various tools such as a strategy map to help visualize and tweak the plan. Developing the plan may involve cost and opportunity tradeoffs that reflect business priorities. Developers may reject some initiatives if they don’t support the long-term strategy.

Implement

Once the strategic plan is developed, it’s time to put it in motion. This requires clear communication across the organization to set responsibilities, make investments, adjust policies and processes, and establish measurement and reporting. Implementation typically includes strategic management with regular strategic reviews to ensure that plans stay on track.

Update

A strategic plan is periodically reviewed and revised to adjust priorities and reevaluate goals as business conditions change and new opportunities emerge. Quick reviews of metrics can happen quarterly, and adjustments to the strategic plan can occur annually. Stakeholders may use balanced scorecards and other tools to assess performance against goals.

A balanced scorecard focuses on four key parts of a business’s strategic plan: financial, customer, internal business processes, and learning and growth.

Who does the strategic planning in a business?

A committee typically leads the strategic planning process. Planning experts recommend the committee include representatives from all areas within the enterprise and work openly and transparently where information is documented from start to finish.

The committee researches and gathers the information needed to understand the organization’s current status and factors that will affect it in the future. The committee should solicit input and feedback to validate or challenge its assessment of the information.

The committee can opt to use one of many methodologies or strategic frameworks that have been developed to guide leaders through this process. These methodologies take the committee through a series of steps that include an analysis or assessment, strategy formulation, and the articulation and communication of the actions needed to move the organization toward its strategic vision.

The committee creates benchmarks that will enable the organization to determine how well it is performing against its goals as it implements the strategic plan. The planning process should also identify which executives are accountable for ensuring that benchmarking activities take place at planned times and that specific objectives are met.

How often should strategic planning be done?

There are no uniform requirements to dictate the frequency of a strategic planning cycle. However, there are common approaches.

Quarterly reviews

Once a quarter is usually a convenient time frame to revisit assumptions made in the planning process and gauge progress by checking metrics against the plan.

Annual reviews

A yearly review lets business leaders assess metrics for the previous four quarters and make informed adjustments to the plan.

Timetables are always subject to change. Timing should be flexible and tailored to the needs of a company. For example, a startup in a dynamic industry might revisit its strategic plan monthly. A mature business in a well-established industry might opt to revisit the plan less frequently.

Types of strategic plans

Strategic planning activities typically focus on three areas: business, corporate or functional. They break out as follows:

Business

A business-centric strategic plan focuses on the competitive aspects of the organization — creating competitive advantages and opportunities for growth. These plans adopt a mission evaluating the external business environment, setting goals, and allocating financial, human, and technological resources to meet those goals. This is the typical strategic plan and the main focus of this article.

Corporate

A corporate-centric plan defines how the company works. It focuses on organizing and aligning the structure of the business, its policies and processes, and its senior leadership to meet desired goals. For example, the management of research and development skunkworks might be structured to function dynamically and on an ad hoc basis. It would look different from the management team in finance or HR.

Functional

Function-centric strategic plans fit within corporate-level strategies and provide a granular examination of specific departments or segments such as marketing, HR, finance, and development. Functional plans focus on policy and process — such as security and compliance — while setting budgets and resource allocations.

In most cases, a strategic plan will involve elements of all three focus areas. But the plan may lean toward one focus area depending on the needs and type of business

What is strategic management?

Organizations that are best at aligning their actions with their strategic plans engage in strategic management. A strategic management process establishes ongoing practices to ensure that an organization’s processes and resources support the strategic plan’s mission and vision statement.

In simple terms, strategic management is the implementation of the strategy. As such, strategic management is sometimes referred to as strategy execution. Strategy execution involves identifying benchmarks, allocating financial and human resources, and providing leadership to realize established goals.

Strategic management may involve a prescriptive or descriptive approach. A prescriptive approach focuses on how strategies should be created. It often uses an analytical approach — such as SWOT or balanced scorecards — to account for risks and opportunities. A descriptive approach focuses on how strategies should be implemented and typically relies on general guidelines or principles.

Given the similarities between strategic planning and strategic management, the two terms are sometimes used interchangeably.

What is a strategy map?

A strategy map is a planning tool or template used to help stakeholders visualize the complete strategy of a business as one interrelated graphic. These visualizations offer a powerful way for understanding and reviewing the cause-and-effect relationships among the elements of a business strategy.

While a map can be drawn in several ways, all strategy maps focus on four major business areas or categories: financial, customer, internal business processes (IBPs), and learning and growth. Goals sort into those four areas, and relationships or dependencies among those goals can be established.

For example, a strategy map might include a financial goal of reducing costs and an IBP goal to improve operational efficiency. These two goals are related and can help stakeholders understand that tasks such as improving operational workflows can reduce company costs and meet two elements of the strategic plan.

A strategy map can help translate overarching goals into an action plan and goals that can be aligned and implemented.

Strategy mapping can also help to identify strategic challenges that might not be obvious. For example, one learning and growth goal may be to increase employee expertise but that may expose unexpected challenges in employee retention and compensation, which affects cost reduction goals.

The balanced scorecard part of the strategy map helps managers keep track of what tasks must be accomplished to achieve strategic planning objectives.

Benefits of strategic planning

Effective strategic planning has many benefits. It forces organizations to be aware of the future state of opportunities and challenges. It also forces them to anticipate risks and understand what resources will be needed to seize opportunities and overcome strategic issues.

Strategic planning also gives individuals a sense of direction and marshals them around a common mission. It creates standards and accountability. Strategic planning can enhance operational plans and efficiency. It also helps organizations limit time spent on crisis management, where they’re reacting to unexpected changes that they failed to anticipate and prepare for.

Sources : 

1. techtarget.com
2. betterup.com
3. web articles