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Table of Contents
- Strategic Planning is not easy
- Analysis of Current Position
- Evaluation and Selection
- Summary and Conclusion
Strategic Planning is not easy – practice lots and it should get better
Strategic decisions are the most difficult for an organisation. You will be considering the boundaries of the organisation, challenging the mission, the vision and possibly the values by which you currently work. The information available to you may be vague, and highly interpretive. The impact of the decisions will be felt at all levels; from your employees to your Board, your customers, your suppliers and your shareholders. Scary prospect? Maybe, but strategic planning is essential to ensure your organisation can continue to thrive, and achieve greater success in a world characterised by volatility, uncertainty, complexity and ambiguity (VUCA); where change is an ever-accelerating reality and where technological ‘disruption’ abounds.
Statistics About Strategic Planning
There is a widely-quoted statistic that 90% of strategic implementations fail. This has been comprehensively debunked. However, as you will see from a range of studies and sources, there is still a significant issue with success, and that hasn’t changed over the past 2 decades. The Execution Premium by Kaplan and Norton (2006) states: “We conducted a survey in 1996 about the state of strategy execution. We learned that most organisations did not have formal systems to help them execute their strategies. Only 40% of organisations linked their budgets to their strategies, and only 30% linked incentive compensation to strategy. In the great majority of surveyed companies, fewer than 10% of employees reported that they understood their company’s strategy. Clearly, employees who do not understand the strategy cannot link their daily activities to its successful execution”. A little further on in the same section they state: “We conducted a follow-up survey in 2006, receiving responses from 143 performance management specialists”. More recent studies have shown:
- 72% of respondents noted at least one strategic initiative failure in last 3 years due to delays in decision making 
- 70% of respondents acknowledged that improvements were needed in trust and collaboration between leaders and employees to successfully implement strategic initiatives 
- Only 23% of respondents felt they were highly effective at fully assessing the needs of external stakeholders 
- 34% of respondents acknowledged difficulty in finding the right metrics to measure business performance over different timeframes. 
- On average, 95% of a company’s employees are unaware of, or do not understand, its strategy. 
- Some 60% of organizations do not link their financial budgets to strategic priorities. 
- The compensation packages of 70% of middle managers and more than 90% of frontline employees have no link to the success or failure of strategy implementation 
- 86% of executive teams spend less than an hour a month discussing strategy. 
- More than 70% of companies with a strategic plan don't execute it. 
- Research suggests 80% of companies are dissatisfied with their planning and budgeting processes. 
- Only 23% of companies use a formal strategic planning process to make important strategic decisions. 
- Just 45 percent of the respondents said they were satisfied with the strategic-planning process.. 
- In companies surveyed who use formal strategic planning processes, 79% of leaders say the planning leads to strategic decisions that allow the company to meet its goals and challenges. 
- Forty- five percent reported that planning processes failed to track the execution of strategic initiatives. 
- Strategic planning at a point in time appears to double the longer term likelihood of survival as a corporate entity 
Failing to Plan is Planning to Fail [Winston Churchill paraphrasing Benjamin Franklin] Much of the observed failure lies in the implementation phase of strategic planning. Success in implementation is a discipline in its own right and is supported by an entire industry of project and examples, program and portfolio management professionals with increasing levels of professional rigor in their practices. Choosing the right implementation resources to complement your own team, energy and competencies will be a major factor in your success. Evidently, it’s important to plan, but how do you know you’re making the RIGHT plan? You need a process to give structure to your deliberations. You need to be able to collate your data, your assumptions, and your ideas and to have a framework through which you can evolve your plans and examples. The first component of your framework will be a radar, or trigger, to bring your attention to the need to engage at a strategic level. Formally this would be a ‘diary date’ on the corporate calendar - to convene the team and conduct your Strategic Planning. This might be fine in environments where stability allows a strategic plan to exist and sustain for a period of three or five years. Unfortunately, such environments are becoming much less common, as the speed of change in all sectors accelerates.
This may be a bit melodramatic, but it touches on a valid point that you need, at least, to understand what is happening in your environment to be able to gauge what your own actions should be. You may have a new competitor in your market, or new demands from your customers, or new Government regulations to be followed. It is better to pro-actively scan your environment and take well reasoned and planned actions rather than react to situations as they present themselves. As Jack Welch is also quoted as saying, “Don’t manage - Lead change before you have to”. Strategic planning should not be regarded as a rigid and time-bound event. You and your team will benefit from spending time ‘thinking strategically’ as part of your everyday routine, coming together regularly to assess whether you are still on track to meet your objectives, whether your objectives are still valid or whether some new factor needs to be taken into account and acted upon. Unfortunately, some huge organisations have failed to understand this in the past Steve Sasson, the Kodak engineer who invented the first digital camera in 1975, characterized the initial corporate response to his invention this way: “It was filmless photography, so management’s reaction was, ‘that’s cute—but don’t tell anyone about it.’ “
Strategic Planning is a Process, Right? Strategic planning is a process, but not one that is necessarily linear.
The many moving parts of your internal and external environments often work to influence each other. You may require a number of iterative passes through the process until you gain the necessary clarity for your next steps. It’s a process that you can practice, and I would suggest, increasingly often. By constantly measuring where you are within your operating environments you can be confident that you won’t be taken by surprise. It will provide you with the plans and energy to be proactive in your markets. You will want to avoid reacting to your competition, who may be more mobile and forward looking than yourself.
Pick your steps carefully – but don’t ponder too long
The Strategic Planning process is deconstructed into the following steps:
- Analysis of Current position
- Articulation of Future position
- Generation of Options
- Evaluation and selection of preferred option(s)
Your journey through this framework will provide you with a sense check that:
- You understand the question you are trying to answer
- You understand your current capabilities and any gaps that you need to fill
- You appreciate your capacity to deliver a chosen strategic initiative
- You have clearly chosen strategic initiative(s) that you can fully get behind and provide the necessary energy and leadership to achieve.
Analysis of Current position
Develop a clear understanding of what your organisation is, and isn’t, its strengths and weaknesses and its ongoing mission. These are the fundamentals of your business that act as a reference point for future decisions. They can, however, be challenged. If you find that they no longer correlate with your vision and provide a sustainable future, you may want to ‘re-imagine’ your organisation. This has been necessary in industries such as the tobacco industry where previously strong markets have seriously declined on the basis of scientific, societal and legal challenges.
Is your current performance meeting your existing company objectives? If not, where are the gaps? A KPI-driven framework, such as Balanced Scorecard should be developed. Have you brought into focus the external environmental factors that may impact on your performance, both now and into the future? PESTLE analysis will help with this. What are your current capabilities and capacity? SWOT analysis, incorporating PESTLE findings into the Opportunities and Threats, will give you focus into the decision making examples coming later in the framework. Data supporting current performance will be necessary to enable the comparative analysis and reporting of strategic options as part of the decision-making process. A streamlined and effective Business Intelligence process, even for smaller companies, will significantly improve the Strategic Planning process.
Articulation of Future position
You have all the data at your fingertips now. You have an idea, or ideas, of where you want to be heading. You will be answering the following questions:
- Where does the organisation see itself?
- Will it look and feel different?
- Will it continue to have the same Vision and Mission, or will there be a change here too?
- What are your shareholders’ expectations?
Tactical Performance vs. Time
How do you expect the performance metrics to look in your vision of the future? You might be articulating this through the higher level KPIs – such as Overall Revenue targets, EBITDA targets, Market Share, Customer Satisfaction targets, Employee Satisfaction results, Process efficiency targets. Answers to these questions create the gaps that need to be filled by your tactical initiatives. One useful question to address at this stage is: What will it look like if we ‘Do Nothing’ and continue with our existing business model? This answer gives you the comparative for your strategies and also a vision of your future performance in an as-is state.
Generation of options
So – How will you close the Gap?
- What will your market structure look like? Will you be looking to increase share in current markets, and how? Will you be opening up new markets and segments?
- What is your product or service strategy going forward? Enhanced or new features, or new products or categories?
- What channels will you be using to support your product and market choices?
- What are your customers telling you? What do your sales statistics tell you?
- What external factors do you need to consider?
You should generate any number of options at this point, and it is a good time to use a facilitator in the process. Plus, make sure you have the right people in the room. Although generated and led by the Executive team, strategic planning should draw on expertise from your best sources within and outside the organisation.
Evaluation and selection
Now comes the interesting bit. You have data to support your decision-making, you have a number of options which are worthy of consideration to close the gap between where you are now and where you want to be. It is important to leverage your data and get as much ‘hard’ analysis as possible, although the data may be incomplete, riddled with assumptions and open to interpretation. Developing a future-looking Balanced Scorecard (or similar set of target KPIs) will help to martial that data and support your decision-making. Consider using a model where you can evaluate your options against weighted strategic priorities. This will help you to develop some relative-ranking of potential strategies, based on their impact on your key priorities. More difficult to evaluate is the impact that the external (PESTLE) factors will have on operational performance. These factors often prove the real driver behind strategic initiatives. For instance; Customer preferences, competitor analysis, changes to legal or regulatory requirements, or technological advances. And, if you were reading this in September 2008 – the uncertainty surrounding the Lehman Brothers situation might not be immediately apparent, but certainly worth keeping on your radar.
There are several models to depict your strategic options. The one below is a higher-level version that allows you to later drill into more specific product / market options that will then present themselves
Growth Planning Quadrants
As you get down to a shortlist of options to consider for implementation your ‘sense check’ will include a confirmation of the ‘Strategic Fit’ of options.
Does your preferred tactic make sense alongside your current business model? For instance, opening up a new market with an established and successful product set. Or, will your new initiative create confusion to your stakeholders and employees, such as an auto manufacturer deciding to diversify into cosmetics as a major product segment. There would be pros and cons to both of the above scenarios. Does your organisation have capacity and capabilities to deliver either option? A point worth noting here; the greater the change to the business model, the longer and more intense will be the implementation journey towards success. What does good look like? Strategic Plan on a Page. The example below is a well depicted Plan-on-a-Page that encompasses everything that this telecommunications company wanted to achieve, including the portfolio of project initiatives that it spun off to achieve its objectives.
Are you going to be another statistic? The majority of evidence for failed strategic initiatives centres around the implementation of those plans that you have so carefully crafted. What can you do to improve your chances of success and get ahead of the pack?
First question: Are you ready to pick up the challenge? The entire leadership team should be behind the initiative and willing to provide visible and pro-active leadership.
Second question: Have you got the skills AND capacity to manage and deliver the initiative along its entire lifecycle from initiation to completion? If not, you need to invest to build both capability and capacity. Too often initiatives fail because Senior Responsible Officers attempt to deliver new initiatives alongside existing commitments. The necessary ‘fat’ in organisations to be able to do this was slimmed down in the 1980’s and increasingly since then. Online marketplaces for interim or consulting resource will allow you to onboard top-talent for defined periods to deliver specific elements of your plan.
Third question: Can you communicate your vision and bring your staff along on the journey? Again, you might need to on-board some specialist change management resource to supplement your own team on this. But if this still feels difficult, and your message isn’t clearly being received – maybe you should re-look at your initiative and finesse it to the point where your staff can describe it themselves and support its intent.
Fourth question: Have you re-jigged the rest of your business to align with your new strategy? Review all operational plans and processes, resourcing, rewards and incentives and corporate budgeting to ensure alignment. Consider the messaging to current customers, shareholders, financiers and suppliers as you will want all stakeholders to understand and support your strategy.
Fifth question: Do you have governance arrangements in place to monitor progress, provide guidance and provide essential decisions in a timely manner? Go beyond standard project reporting and determine under what conditions you would pull the plug on this initiative and re-focus your resources on something more appropriate or profitable. In this way you avoid the pitfall of blindly following the latest strategy, when by the time it is delivered it may no longer still be relevant. Call on expert Program management skills to support you in this area. If you can answer these questions positively, you will have gone a long way to meeting the challenges pointed out in the various studies of “Why Strategic Initiatives Fail”.
Summary and Conclusion
In this world of increasingly volatile, uncertain, complex and ambiguous business dynamics the role of strategic planning has been questioned as taking too long, absorbing too much leadership time, providing too little certainty of success. Now, more than ever, you need a structured method of determining how you are performing in both your internal and external environments. You need to understand the dynamics of your environments to direct your energy and resources to improve your performance, or even continue to survive, into the future. The first pass through the process will take time and focus – and as with any process, the more you practice the more efficient you will become. Your data collection and analysis will develop to be business-as-usual, your internal preparedness for the ‘big decisions’ will be better honed, and the entire team will feel motivated to be involved and to deliver the chosen initiatives. As the business environment in the VUCA world becomes more and more dynamic and operational, faster responses are required. With practice, you and your organisation will evolve to become lighter on your feet, more focused in your decision making and nimble in changing direction. Your strategic decision making will become more akin to lightly steering a helicopter rather than performing a three-point turn in an oil tanker.
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