Strategy and Planning – How to Do It Right the First Time
By Eric Johnson
Strategy and Planning are the core activities in any organization that provide guidance and link the “whys” to the “hows” that define utilization of resources in producing high quality outputs. These are also core events in the business cycle that should be driven by data behind both external and internal forces to best approach the most advantageous deployment of resources toward customer satisfaction.
Whether it’s that time of the fiscal year or whether changing conditions necessitate a shift in the business approach, strategic planning is an event that everyone knows needs to happen, but few look forward to. The reason for this is that it involves a certain level of “future prediction” that is revolved around the expected market conditions during the scope of activities. And few want to be on the receiving end when the forecasted way of doing business misaligns with unexpected shifts in the macro-environment. In slow moving industries with little change, the primary drivers are centered on economic conditions and long-term habit shifts, since the production of outputs and the marketplace are expected to vary little. In industries where the tempo is much more upbeat, the variables increase dramatically to involve economic conditions, changing tastes, innovation, workforce skills and abilities, input costs, and in the case of international operations, tariffs and other trade impediments.
In light of all this, how can an organization create a robust model to increase the odds of strategic success with each planning event? In our experience, best practices revolve around four major components of strategic planning: economic conditions, market forces, internal resources and capabilities, and leadership experience. To best position the organization in these areas, we see the following 4 core points as advantageous:
1. Have a portion of your strategic team monitoring economic data
There are specific economic indicators that can help shape the discussion around deployment of assets and resources. Housing starts, consumer confidence, GDP numbers, etc. can all be relevant, depending on the industry and customer base. Understanding how these factors affect the organization will inform how they are used. The CFO and/or controller is a great partner to assist in developing these economic indicators plan along with the COO, as a way of linking resources to the market.
2. Keep a keen eye on not only your competitors, but also your suppliers
Competitive intelligence is critical in strategic planning for two reasons: first it gives you an idea of the innovation occurring within your marketplace so you can adjust your products and services accordingly. While this information is captured towards the rear of the timeline, its visibility sparks sense of urgency. Next, CI reduces complacency as long as the messaging is aligned, positive, and keeping within the culture of the organization. It is here that the corporate communications group (grounded in effective change management if necessary) can play a key role in developing the message so that it inspires employees toward the identified goals.
3. Know your limits – and what to do to exceed them: internal resources and capabilities
Strategic plans are only as good as the ability to execute, so a good strategic planner starts with the end in mind. How many employees of various skill sets are at hand? Are there market penetration plans that require different skillsets? What is the marketplace for those skillsets? All of these questions and more are a fundamental part of deciding on whether or not the resources necessary in accomplishing the strategic plan are available and can be deployed. And if not…how to acquire them.
4. Draw on your experienced leaders – but give your new managers leverage to take risks
The focal point of effective strategic planning is execution, and this by and large will fall to the manager-level leadership to enact action. Experienced managers and leaders are apt to draw on their previous experiences which reduces risk via established patterns and lessons learned. However, newer managers or managers with a higher risk quotient for activities that have no precedent should be permitted to engage in those actions as long as their conclusions are data oriented and meet an established organizational threshold for risk/reward. The impact to the business is crucial here – lines of business with greater impact to cash flows should be scrutinized with greater weight as opposed to lines with less impact. However, those lines should be considered as a sandbox of sorts – an area where risks can be insulated from the rest of the organization.
Leadership in any organization has the internal benefit of having experienced past successes and failures and their experiences are often drawn into the strategic discussion. However, in this regard, leaders should task their teams in producing data as to the “why’s” behind those experiences to draw out the associated patterns. Additionally, these teams should engage in further collaboration to expand on these patterns. While past gains are not indicative of future success, they can indicate patterns that should be taken into account.
While a full comprehensive approach to strategic planning is significantly more intensive than this essay, we view this as a high-level start into deeper dive analysis. When including other internal aspects such as financial background and marketing expertise, the goal of every organization is to account for as many significant variables as possible that affect business outcomes, with the goal of increasing efficiency and market share – ultimately increasing shareholder value.