Many SMEs recognise the importance of mapping out a future strategic direction for their business and acknowledge the need to become more structured in their approach, however, very often, business owners just don’t know how to start or where to begin. Without a clearly mapped out destination point for a business, its form becomes too malleable, shaped by the vagaries of an eternally changing environment, leaving the business a hostage to fortune.
A business owner could learn a few lessons from no fate, but what we make Sarah Connor, the heroine of the Terminator franchise. A warrior, who challenges accepted wisdom, carves out a new path and in so doing rewrites the future. ThinkTank channels this wisdom as we highlight;
What is Strategic Planning Exactly?
- How can businesses benefit from Strategic Planning?
- How should a business prepare for the Strategic Planning Process?
- Once the Planning team is selected, how does Strategic Planning work?
1. What is Strategic Planning exactly?
Most businesses undertake some form of it. Even when formal planning has not been present, there are usually underlying strategies at work, purely by accident or through some evolutionary process, however, strong businesses do not allow strategic direction to be set by accident or evolution, they have a well-defined plan that is revisited regularly and modified as market or operating conditions dictate.
Strategic Planning is defined as the Systematic process of envisioning a desired future for the business and translating this vision into broadly defined goals and a sequence of steps to achieve them while capturing it all in a Plan document.
2. How can businesses benefit from Strategic Planning?
Strategic Planning is rather like a SatNav for your business that kicks in once the current co-ordinates are noted (WHERE ARE WE NOW) clearly maps out the optimal route (HOW WILL WE GET THERE) to your final destination (WHERE DO WE NEED TO GO) noting key milestones along the way while being flexible enough to react quickly to unexpected detours.
Strategic planning ensures that everyone in the business has a clear direction where the business needs to go and a shared sense of purpose to get there. The plan will map out how the business Goals and Vision will be achieved through specific Strategies undertaken, and will outline who is responsible for each task and in what timeframe. To get the Strategic Planning Process off the ground and ultimately have a Plan document as the key output from the Process a team of people, hand picked by the business owner need to co-ordinate and drive the process.
3. Before any actual planning begins, there are several things that should happen
- Determine who will make up the planning team. It should mirror the top management team but it can consist of a wide variety of individuals throughout the business, be careful how you communicate how they were selected as you may be accused of favoritism.
- Select a team leader/facilitator. Someone with excellent communication skills and who is effective at leading group discussions. If a strong facilitator is not available, an outside consultant skilled in facilitation can be brought in who will bring objectivity and fresh ideas and perspectives to the process.
- Establish the ground rules for the planning process. All members of the team must understand that personal agendas and egos cannot be a part of the process.
- Assemble as much current information and data as possible regarding sales, gross profit margins, market share, competitors, customer & employee satisfaction, customer perceptions,the top ten customers by product/service and what percentage of total sales and gross profit they constitute and any other pertinent data/information that could be useful.
- Be realistic about the time frame required to complete a good strategic plan.This will depend to a large extent on the complexity of the business and the preparation of team members, it usually takes between two to three months.
- Establish a meeting schedule that allows all members of the team to attend and stick to the schedule. Schedule a series of four- to six-hour sessions with a specific agenda for each. A week or two between sessions allows team members to think about what has been discussed and to complete the work necessary to prepare properly. Up to six sessions may be required.
- Clearly communicate to all team members that nothing is sacred. An open mind is critical in any planning situation.
- Determine how and what the team will communicate to others in the business about the planning process. All employees should be aware that a planning team has been assembled to set a course for the future success of the business. Don’t discount the value of employees outside the planning team, they should be encouraged to provide input and feedback that could be beneficial.
- Create a positive environment for planning. Talk positively about the process. Don’t speak in negative terms about the amount of time it is taking and never discuss someone else’s ideas in a negative manner outside of the planning meetings. Hold planning sessions away from the office if possible.
- The facilitator/leader should prepare a meeting and assignment schedule to be distributed to each member of the planning team prior to each session. Each team member should read appropriate parts of this workbook and complete all applicable worksheets prior to each session.
4. Once the Planning team is selected, how does Strategic Planning work?
This is the point where business owners or a key person responsible for planning must get right in front of that flip chart with confidence and drive the planning sessions with purpose. Essentially, these are the steps that should be followed in developing a sound Strategic Plan:
This activity should include a scan of the business environment. Conduct a P.E.S.T.L.E Analysis (Identify the Political, Economic, Social, Technological, Legal and Environmental factors that impact the business) and a S.W.O.T Analysis (Identify the Strengths and Weaknesses internal to the business and the Opportunities and Threats posed by the external environment). Summarise the current state of the business based on the information gathered.
Setting Strategic Direction
Develop Goals: The environment scan involves a process which creates the platform for developing the goals of the business. Goals are the broad, general aims of your business, they are the wish list and represent future positions that the company wants to achieve. You need between 3-7 long-range goals. Goals must be attainable, easy to understand and require stretch (cant be too easy to achieve), goals should address critical aspects of the business like market share, growth, market positioning and innovation etc.
Develop the Vision Statement: At some point in the planning process you should identify what might be called the strategic philosophy i.e. your business Vision. It really doesn’t matter what it is called (Mission/Vision/Purpose) but this step is important because of the process that the team will go through as much as the words that eventually end up on paper.
Vision Statements are effective in conveying to employees, customers, suppliers and the general public what the purpose of the business is and where it is headed. The statement should be brief, simple, interesting and thought provoking not mundane and Me Too. For example, SuperValu has a strong Vision it is To be the Leading Irish retailer who is down to earth and takes real care in delivering goods, honestly priced food for individuals and families today.
Develop Objectives: Action planning involves carefully laying out how the strategic goals will be accomplished; this is where objectives come in. There is a clear distinction between goals and objectives. Goals are the broad general aims of the business, objectives define specifically what must be achieved and when in order to attain the goals. They should be S.M.A.R.T.Specific, Measurable, Attainable, Realistic, Timely.
Select Strategies: Now that the full focus of the business is in place with goals and objectives, it is time to develop the How to piece of the strategic plan. Your goals and objectives will be achieved through the successful implementation of strategies and associated tactics. How to outmaneuver the competition is what strategies are all about. Strategies equate with decision-making. There are many alternative strategies from which to choose for some goals and objectives. For example, should the company follow a pricing strategy based on market penetration or one based on margin maximisation?
If a penetration strategy is chosen, will the volume be sufficient to help achieve a goal of achieving financial strength. Decisions about what layout should be used for a brochure, where to advertise, etc. are not strategic decisions. These are tactical decisions.
Tactics represent the blood and sweat, so to speak, of carrying out the strategic plan. Tactics support strategies in that strategies layout how to accomplish goals and objectives and tactics are the nuts and bolts of implementing strategies.
To illustrate, here is an example of how all the components of Strategic Planning can fit together.
- Goal: Successfully launch the new Z200 vitamin line.
- Objective: Attain a 5 percent market share in our first full year of production with the Z200 product.
- Strategy: Establish the target market for our Z200 vitamins to be professional women between the ages of 25 and 45.
- Strategy: Position the Z200 vitamins as a high end, energy enhancing product that enhances energy and preserves youthful looks.
- Tactic: Attach coupons to the product packaging for immediate redemption to stimulate trial at the retail level.
You’ve planned the work, so now its time to work the plan. The action plan serves a dual purpose of formatting the strategic plan into a formal document as well as providing the basis for developing accountability for implementation of the plan & timing which is paramount to its successful implementation. Remember, its not just a document that stays on the shelf, it should be treated as a live document that the entire company must engage with that can bring about real transformational change for commercial advantage.