The Key Drivers of Strategic Planning
A definition of “strategic” is a good place to start. Webster’s defines “strategic” in terms of war and this may be appropriate in the cut throat world of business. The Oxford English Dictionary states “relating to the identification of long-term or overall aims and interests and the means of achieving them” and this seems a reasonable definition.
The key word in business is “overall” and this is what this article will discuss, the formulation of the overall aims of the business. The other key point in both dictionaries’ extended definitions was a shortage of resources. This is an important point to bear in mind. Your critical resources might include cash, experienced staff or materials in limited supply.
We are thinking at the strategic level in this article. The detail of how the strategy is achieved belongs in the business plan. The emphasis is on data gathering and in-depth thought and consideration.
My suggested process is to gather information, consider the information and set down your path.
You will need to know the following at a minimum:
1. Desires of ownership: Whatever the ownership structure, its desires should be clearly understood and documented. Thoughts on this:
- For most businesses, ownership will wish to grow the business and maximize revenue and profit. Occasionally there may be an overarching aim specific to that business, or a secondary, but important, desire to be satisfied.
- If the exit is in a foreseeable timeframe then it is a driver to many other decisions. For example: do we maximize the value derived from the existing product line or do we do two years R&D to have a state of the art product?
- The strategy may not be communicated outside the ownership if it is felt that this would jeopardize the stability of the business.
2. Desires of other stakeholders: Other stake holders may include non-active shareholders, private equity lenders, and/or the bank. Each may have its own wishes as to the direction the business should take. These need to be considered and balanced.
3. Our brand: What is it really? It is not the logo. Consideration of this question may give you some insight. Brand is defined by Seth Godin as:
A brand is the set of expectations, memories, stories and relationships that, taken together, account for a consumer’s decision to choose one product or service over another. If the consumer (whether it’s a business, a buyer, a voter or a donor) doesn’t pay a premium, make a selection or spread the word, then no brand value exists for that consumer.
The implications of this definition are worth some thought. Note that it is consumer facing.
4. What we sell: Define what you sell. Is your product hard goods, service, knowledge or a more nebulous concept such as a feeling of wellbeing, Starbucks being a good example of a vendor of this intangible product. Thoughts on this:
- How long will we satisfy the market place? Do we need an end of life plan for a product?
- Has the demand in the marketplace changed and what product revisions do we need to meet this change.
If the product base needs revision, then this must be fully formulated in the business plan. At this stage we are concerned with the broader picture.
5. Who we sell to: The customer base is defined by the product. We need to consider:
- What are the broad characteristics of our customers?
- Do we wish to expand the customer base or enter into completely new markets?
- If so with which products or new products?
6. Who our competitors are: This is a time for an honest evaluation free of prejudices and ego. Some thoughts:
- Chart out the competitor universe and compare products, potential products, positioning and marketing strategies. Add other comparisons that are useful in your circumstances.
- Look to what is on the horizon in your industry. We all carry a smartphone. We used to carry a phone, a diary, a map and a camera. And not too long ago.
Consider the Information
Sit back and think about the information you have in front of you. The information should be sufficient to see a path ahead, or maybe a new path. If you are missing a piece in this puzzle, get it.
A timely word on assumptions. Use as few as possible. We cannot get hard data on everything but we should make the best attempt. We often lapse into assumption out of laziness. The assumption then takes on the guise of fact and can lead to poor decision making. Do not let an assumption take on the guise of fact.
Give this piece time. Mull it over for a few days. Sleep on it. Too often this piece of the process is the smallest when it should be the biggest. We have all been to the strategic planning meeting where the information becomes the focus, consideration is skipped over and we jump into business planning. Business planning comes later.
Just for emphasis I am going to say it again. Give this piece time. Mull it over for a few days. Sleep on it. This is the crux. Everything else falls from it.
Set Down Your Path
This is where vision comes in. Not the vision that you use to lead into your website, those few words of motherhood, but the true vision of what your business will be going forward. Some thoughts:
The vision is achieved over its own time frame, not the fiscal year of your finance department. If it is a ten year vision, it is a ten year vision. Breaking that down is a part of the business planning process and the budgeting process.
If you do not have consensus among stakeholders then you will have strife. If not today then in the future. Those not along for the ride are best left behind.
Get this down on paper. Use timelines, charts, diagrams or whatever you need to ensure clarity. Append all of the information that supports the viability of your chosen path.
Once it is on paper circulate it to all contributors and any other key personnel. You need not have a full consensus but you must have buy in.
A Personal Note on this Paper
Too often at my clients, the “strategic planning session” is really the business planning process. Strategic is the big picture, business planning is the tactics and timeline to achieve the big picture. I am not trying to set out a textbook methodology. I am trying to aid in the most important and most neglected piece – the thought and conceptualization needed to truly define the path to the end game. The end game is yours to decide – usually pots of money but sometimes an altruistic goal.