STRATEGIC PLANNING

What Is Strategic Planning?

Strategic planning and business development are intrinsically linked; the latter cannot be successfully accomplished without regard to the former.

A strategic plan should not be confused with a business plan. The former is likely to be a very short document whereas the latter is likely to be much more substantial and detailed. The former provides the foundation and framework for the latter.

If you don't know where your business is going, any road will get you there. Small business owners are often so preoccupied with immediate issues that they lose sight of their ultimate objectives. That's why a business review or preparation of a strategic plan is a virtual necessity. This may not be a recipe for success, but without it a business is much more likely to fail. A sound strategic plan should:

• Serve as a framework for decisions or for securing support/approval,
• Explain the business to others in order to inform, motivate and involve,
• Assist benchmarking and performance monitoring,
• Stimulate change and become building block for next plan.

A strategic plan should be visionary, conceptual and directional in contrast to an operational plan, which is likely to be shorter term, tactical, tightly focused, implementable and measurable. A strategic plan must be realistic and attainable.

Essential points to observe during review and planning process

A critical review of past performance by the owners and management of a business and the preparation of a plan beyond normal budgetary horizons require a certain attitude of mind and pre-disposition. Some essential points which should to be observed during the review and planning process include the following:

• Relate to the medium term i.e. 2/4 years,
• Be undertaken by owners/directors,
• Focus on matters of strategic importance,
• Be separated from day-to-day work,
• Be realistic, detached and critical,
• Distinguish between cause and effect,
• Be reviewed periodically,
• Be written down.

Precursor To Developing A Strategic Plan

It is desirable to clearly identify the current status, objectives and strategies of an existing business or the latest thinking in respect of a new venture. Correctly defined, these can be used as the basis for a critical examination to probe existing or perceived Strengths, Weaknesses, Threats and Opportunities (SWOT). This then leads to strategy development covering the following issues discussed in more detail below:

• Vision
• Mission
• Objectives
• Values
• Strategies
• Goals
• Programs

KEY STEPS

Vision

The first step is to develop a realistic Vision for the business. This should be presented as a pen picture of the business in three or more years time in terms of its likely physical appearance, size, activities etc. Answer the question: "if someone from Mars visited the business, what would they see (or sense)?" Consider its future products, markets, customers, processes, location, staffing etc.

Mission

The nature of a business is often expressed in terms of its Mission which indicates the purposes of the business, for example, "to design, develop, manufacture and market specific product lines for sale on the basis of certain features to meet the identified needs of specified customer groups via certain distribution channels in particular geographic areas". A statement along these lines indicates what the business is about and is infinitely clearer than saying, for instance, "we're in electronics" or worse still, "we are in business to make money" (assuming that the business is not the Royal Mint!).

Objectives

The third key element is to explicitly state the business's Objectives in terms of the results it needs/wants to achieve in the medium/long term. Aside from indicating a necessity to achieve regular profits, objectives should relate to the expectations and requirements of all the major stakeholders, including employees, and should reflect the underlying reasons for running the business. These objectives could cover growth, profitability, technology, offerings and markets.

Values

Values governing the operation of the business and its conduct or relationships with society at large, customers, suppliers, employees, local community and other stakeholders.

Strategies

Next are the Strategies - the rules and guidelines by which the mission, objectives etc. may be achieved. They can cover the business as a whole including such matters as diversification, organic growth, or acquisition plans, or they can relate to primary matters in key functional areas, for example:

• The company's internal cash flow will fund all future growth,
• New products will progressively replace existing ones over the next 3 years,
• All assembly work will be contracted out to lower the company's break-even point.

Goals

Next are Goals. These are specific interim or ultimate time-based measurements to be achieved by implementing strategies in pursuit of the company's objectives, for example, to achieve sales of £3m in three years time. Goals should be quantifiable, consistent, realistic and achievable. They can relate to factors like market (sizes and shares), products, finances, profitability, utilization, and efficiency.

Programs

The final elements are the Programs which set out the implementation plans for the key strategies. These should cover resources, objectives, time-scales, deadlines, budgets and performance targets.

It goes without saying that the mission, objectives, values, strategies and goals must be inter-linked and consistent with each other. This is much easier said than done because many businesses, which are set up with the clear objective of making their owners wealthy often, lack strategies, realistic goals or concise missions.

OUR APPROACH TO STRATEGIC PLANNING

Statements on vision, mission, objectives, values, strategies and goals are not just elements of future planning. They also provide benchmarks for a historic review. Most managers will find it exceedingly difficult to develop a future strategy for a business without knowing its current strategies and measuring their success to date.

The starting point must be to determine a company's existing (implicit or explicit) vision, mission, objectives and strategies. These are then judged against actual performance along the following lines:

• Is the current vision being realized?
• How has the company's mission and objectives changed over the past say, three years? Why have the changes occurred or why have no changes occurred? Identify primary reasons and categories as either internal or external,
• Description of the actual strategies followed over the past few years,
• Critical examination of each strategy statement by reference to activities and actions in key functional areas covering such matters as:
  • How has the company been managed?
  • How has the company been funded?
  • How has the company sought to increase sales and market share?
  • How have productivity/costs moved?

Each element is quantified by reference to actual performance. We Ask "why not"?, "why only"?, or "why so"? and locate the reasons for differences between the actual and desired performance.

The technique for exploring performance shortfalls is to review the business's financial return and to drill down through the components of this return to locate and assess the key determinants of performance.

Address Causes Not Symptoms

In reviewing a business it is essential to cut through the symptoms of problems and reach the underlying causes. Questions that can assist in revealing the real causes include the following:

• "What stopped the business from?"
• "What caused the cause of?"
• "Why didn't the business achieve a 25% return?"

By way of an example consider why this company may be unable to increase its market share:

Because it cannot penetrate major customers because its product range is too narrow because the company doesn't have the capability to produce additional products because of shortcomings in R & D because of a lack of expertise and resource because R & D is not an immediate priority because of a lack of profits because of a high interest burden because the company is over-reliant on borrowings because the shareholders won't/can't raise additional permanent capital.

The moral in this case is that there are no major customers due to under-capitalisation!

USE OF SWOTs

Having built up a picture of the company's past aims and achievements, the SWOT (strengths, weaknesses, opportunities and threats) analysis can commence.

Strengths and weaknesses are essentially internal to the organisation and relate to matters concerning resources, programs and organisation in key areas. These include:

• Sales - marketing - distribution - promotion - support;
• Management - systems - expertise - resources;
• Operations - efficiency - capacity - processes;
• Products - services - quality - pricing - features - range - competitiveness;
• Finances - resources - performance;
• R&D - effort - direction - resources;
• Costs - productivity - purchasing;
• Systems - organization - structures.

If a start-up is being planned, the strengths and weaknesses are related mainly to the promoter(s) - their experience, expertise and management abilities - rather than to the project.

The objective is to build up a picture of the outstanding good and bad points, achievements and failures and other critical features within the company.

The external threats and opportunities confronting the company can exist or develop in the following areas:

• The company's own industry where structural changes may be occurring (Size and segmentation; growth patterns and maturity; established patterns and relationships, emergence/contraction of niches; international dimensions; relative attractiveness of segments);
• The marketplace which may be altering due to economic or social factors (Customers; distribution channels; economic factors, social/demographic issues; political & environmental factors);
• Competition which may be creating new threats or opportunities (Identities, performances, market shares, likely plans, aggressiveness, strengths & weaknesses);
• New technologies, which may be, causing fundamental changes in products, processes, etc. (Substitute products, alternative solutions, shifting channels, cost savings etc.)

Against an uncertain and shifting background, the objective is to identify and prioritize the key SWOTs in a one-handed manner.

Once the SWOT review is complete, the future strategy may be readily apparent or, as is more likely the case, a series of strategies or combinations of tactics will suggest themselves. We use the SWOTs to help identify possible strategies as follows:

• Build on strengths,
• Resolve weaknesses,
• Exploit opportunities,
• Avoid threats.

See the finished article UK Business Ltd's Strategic Plan

For a free initial consultation contact now