Strategy requires making choices about the future. But here’s the problem: most humans (and therefore most organizations) are actually fairly bad at predicting the future! (Remember the now infamous prediction by IBM that the worldwide market for PCs was about four?!) Why? Because, well, the future is uncertain! There are numerous variables, each acting on one other, causing actions and reactions. As you move further into the future, the different combinations of variables grow exponentially, making it very difficult to accurately predict specific outcomes of almost anything.
But what if your organization COULD better predict the future? Or, perhaps more accurately, what if it had a robust enough strategic planning process that it could synthesize information, make educated guesses of future realities, and then have the ability to monitor and adjust more quickly than competitors in the market? I’m guessing in most industries, that would lead to significant competitive advantage (and for nonprofits, more optimized resources).
As we wind down the year (can’t believe I’m saying that), many organizations are in their strategic or annual planning cycles. And this year – perhaps more than most, as many experts are predicting a future recession becoming likely – it’s a good time to reflect on what makes an effective strategy – and an effective strategic planning process. Here are some good practices to consider as you try to improve your organization’s view into the future:
- A good strategic plan starts with an in-depth understanding of your organization’s external environment – the trends emerging in your marketplace; the changes in your customers/stakeholders’ needs; the current and future capabilities of your competitors; an understanding of your partners and suppliers’ capabilities; and the changes in technology, regulations, and risks. You can use simple tools like SWOT analysis (“O” is for external opportunities and “T” is for external threats) or Michael Porter’s seminal “Five Forces” model (which considers bargaining power of buyers and suppliers as well as threats of new market entrants and substitutes). But don’t create your plans in a vacuum – and don’t just rely on the opinions of your board and senior staff. Rather, collect as best you can some data and information (historic, current, and projections) of what’s going on in your environment, so that you have a better sense of the external realities facing your organization.
- A good strategic plan also starts with an appreciation of your organization’s internal environment. The “S” in SWOT is for internal strengths, and the “W” is for weaknesses. In your internal environmental scan, consider things like your mission (your true reason for existing as an organization); the value proposition you currently (or prospectively) offer your customers and other stakeholders; your vision (how the organization desires to be perceived in the future); your core values (the fundamental guiding principles and behaviors that embody your culture and decision-making); your core competencies (differentiated areas of expertise or market strength); your work systems, operations, and processes (including technology, equipment, facilities, partnerships, intellectual property); and your workforce capabilities. Understanding your internal environment will help you develop plans that leverage your strengths and mitigate your weaknesses – and plans that are based in reality.
- A good strategic plan considers the organization’s strategic advantages (those marketplace benefits that exert a decisive influence on your organization’s likelihood of future success) as well as strategic challenges (those pressures that exert a decisive influence on the likelihood of future success). Capitalizing on and leveraging strategic advantages as well as fully addressing strategic challenges enable the organization to create future value and mitigate future risks that threaten sustainability.
- A good strategic plan involves all key stakeholders in its creation – the governing board, senior leaders, other leaders and individual workforce contributors, suppliers and partners, key customers, key volunteers (for nonprofits), industry or other experts. Getting broad, diverse perspectives on the current state and – perhaps more importantly – on possible future state scenarios, will help the organization better predict emerging trends. It will also create buy-in with key stakeholders, who will be asked to implement the strategy.
- A good strategic plan considers a variety of future state scenarios or pathways for the organization, which could include new products or services; redefining customer groups or market segments; developing new core competencies; growth through acquisitions and/or through “organic” increases in revenue through marketing, sales, and partnerships; and/or divestitures.
- A good strategic planning process stimulates and incorporates innovation: it considers strategic opportunities – those prospects that arise from out-of-the-box thinking, brainstorming, capitalizing on serendipity, research and development processes, innovation, nonlinear extrapolation of current conditions, and other approaches to imagining a different future. Choosing which strategic opportunities to pursue involves consideration of relative risk and then making intelligent choices. It’s also helpful to keep in mind Michael Porter’s insight here: “The essence of strategy is in choosing what NOT to do.” It’s really about focus.
- A good strategic plan includes strategic objectives – aims, goals, or responses that articulate how the organization addresses its strategic challenges, competitive or market changes, strategic advantages, and core competencies. Broadly stated, strategic objectives articulate what your organization must ACHIEVE to remain or become competitive and to ensure long-term sustainability. They inform how long-term direction is set and guide the allocation and redistribution of resources.
- A good strategic plan considers an organization’s blind spots – it considers what might have been overlooked (or misinterpreted) in the plans and planning process itself, so that plans are more robust and so that more rapid learning, adjustment can take place as circumstances change. A good strategic planning process also considers an organization’s ability to execute the plan – the ability to mobilize the necessary resources and knowledge to implement the plan. It should also consider the organization’s ability to execute contingency plans or, if circumstances require, a complete shift in plans and rapid execution of new or changed direction. In this way, strategy becomes more fluid, responding to new information and continued changes in the environment. Given we can’t accurately predict the future, this becomes critical in keeping strategy relevant, agile, and responsive.
- A good strategic plan has flexibility – it attempts to balance the needs of all stakeholders; balance short- and longer-term time horizons; and balance the need for taking intelligent risks with maintaining stability.
- A good strategic plan uses data and not just conjecture and opinion. A good strategic plan synthesizes various data sources to create new insights – ideas that lead to strategic opportunities. These ideas usually come from non-directed, free thought. So a good strategic planning process balances data with creativity.
- Finally, a good strategic plan includes action plans, which translate strategic objectives into plans for implementation. Action plans specify resources (human and financial) that need to be committed, as well as time horizons for accomplishing plans (not all plans can be accomplished tomorrow, so think through the pace and trajectory of implementation). Action plans also include measures used to track the achievement and effectiveness of the plans, as well as to ensure alignment across organizational entities.
I’m sure there are other best practices in planning, but if you consider the list above, your organization’s planning process will be more effective, and your strategic plans will be more useful in creating value in a very unpredictable future.
Today – more than ever – organizations need strategies that are bold, compelling, well-resourced, integrated, implementable, realistic, agile, and inspiring. They need to be grounded in the current reality, but forward-looking to anticipate emerging trends, requirements, risks, and opportunities. They need to be rooted in data, but open to new ideas, creativity, innovation, and strategic opportunities. They need to create alignment and motivation for change, providing a compass or beacon for moving an organization forward. And perhaps most importantly – especially given the certainty that the future is unpredictable – they need to be flexible, agile, and responsive to ever-changing circumstances. No longer should strategies simply sit in nice 3-ring binders on the shelf, but they should be dynamic processes that facilitate organizational learning and adaption. As Eisenhower once said: “…plans are useless, but planning is essential.”
To learn practical techniques and tips to enhance your strategic planning process (at an enterprise, department, or team level), consider attending our November 13 workshop in Rochester, MN: “Strategy Formation that Makes Culture Change Happen.” Click here for more information.
What comments do you have regarding effective planning? Participate in a discussion on this topic: visit our LinkedIn group to post a comment. And follow me on Twitter @LassiterBrian!
Yours in Performance Excellence,
Brian S. Lassiter
President, Performance Excellence Network
Catalyst for Success Since 1987!
Photo credit redzonetech.net, businessnetworks.com
[this article modified from an original post June 2014]