What is strategic planning?
8 minutes read
Strategic planning is a must for every business, big and small. It’s a process to figure out where your company is going and how to get there—but it’s also so much more.
A strategic plan defines who you are as a business and lists concrete actions to achieve your goals. When the unexpected occurs, a strategic plan helps your business survive and find new opportunities while staying true to your values and mission.
On top of that, building a strategic plan is a team-building exercise that can bring together employees and transform how they communicate.
Takes companies to new level
“Strategic planning takes companies to a new level and a new way of functioning,” says Sandra Coffey, a Senior Business Advisor at BDC’s Advisory Services who coaches business leaders on preparing strategic plans.
“It leads to a lot of ah-ha moments and ideas that hadn’t been thought of before. It changes how teams work with each other and aligns them along a common vision.”
Many companies saw the benefits of strategic planning when the pandemic struck, Coffey says. Those with a solid plan were often more resilient in navigating the disruptions and were even able to seize new opportunities.
The benefits of team decision-making and problem-solving endure well beyond the strategic planning process.
“They tend to have better internal communication and be more open to new ideas,” she says. “The benefits of team decision-making and problem-solving endure well beyond the strategic planning process. The human element is amazing.”
What does a strategic plan include?
A strategic plan describes the company’s current state, desired future state and how to go from one to the other. Specific components usually include:
- An executive summary
- A company description
- Mission, vision and value statements
- Strategic analysis of the internal and external environment
- SWOT analysis (“SWOT” is an acronym for strengths, weaknesses, opportunities and threats)
- A description of your business goals and projects to achieve them
- A 12-month action plan that lists specific initiatives, who will carry them out, a timeline for doing so and key performance indicators to track progress
Some plans also include details of how implementation will be monitored and evaluated.
What is the timeframe?
The planning period for strategic plans typically used to be three to five years, but it’s now common for companies to use a shorter timeframe of two to three years due to the increasing speed of change in technology and markets.
Companies with several business units and holding companies that control several independently operating businesses often also create a longer-duration corporate plan. It may cover three to 10 years and outlines broader objectives for the entire organization and any shared services, such as marketing, human resources and finance. The corporate plan provides a framework for strategic planning in each unit or business in the organization.
It's not a business plan
A strategic plan isn’t the same thing as a business plan (sometimes also called an operating plan. The latter details how you run your company on a day-to-day basis. It is also needed for a new business or initiative to explain to bankers, investors or partners how and when you expect to make a return and profit.
On the other hand, a strategic plan outlines a company’s future goals and an action plan to go from the current state to the desired future state. The purpose is to build team alignment and decision-making capacity to be ready for the future and take advantage of opportunities to grow or become better at what you do. The audience is your team.
Take a company whose business model is selling software packages to the financial services sector. Its strategic plan may be to expand sales to a new market—heavy manufacturing, for instance—while its business plan details the budget and resources needed to support the current business model (how the company sells software packages right now) and strategic plan (how the company plans to supply software packages to the new market).
Why you need a strategic plan
Strategic planning is often neglected, but it is critical to your company’s success. It is vital even if you’re happy with the way business is going and don’t have ambitious plans to march off in a new direction.
Your strategy could be simply to find ways to be more efficient at what you do now. The planning process also lets your team brainstorm about coming changes that could affect your business and how to be ready for them.
“A lot of companies drive looking in the mirror, thinking nothing is going to change,” Coffey says. “They’re just doing the same-old and don’t lift their head above the water to see what’s coming. But change is inevitable, especially with COVID-19 and new technology coming day after day. If you don’t prepare, you’re more likely to hit the wall or miss opportunities.”
Who is involved?
Successful strategic planning requires close collaboration between owners, senior leadership and key employees. Owners or a board of directors may set high-level guiding principles (for example, to become a $100-million company), while leadership and key personnel can then hammer out more specific goals and actions to achieve the principles.
Some entrepreneurs make the mistake of not involving enough of their team. This can lead to a flawed plan and poor buy-in from employees needed to make it work.
“The best plans are based on all the ideas that come forward,” Coffey says.
Strategic planning is a first step to getting more sophisticated as a business. It builds a stronger team and improves decision-making and how managers communicate.
A closed-off process also deprives the business of one of the greatest side benefits of strategic planning: team-building and alignment.
“Strategic planning is sometimes the first time a business has ever had a management meeting,” Coffey says. “The entrepreneur may be used to calling the shots and doesn’t delegate. There’s no reflex to discuss issues and solutions, which can lead to poor decisions, especially during unforeseen events.
“Strategic planning is a first step to getting more sophisticated as a business. It builds a stronger team and improves decision-making and how managers communicate.”
It’s also important to involve an external facilitator to guide the process. This person can make sure the exercise results in a plan useful to your company that doesn’t sit ignored on a shelf. They can also ensure all perspectives are heard.
“If there’s no external facilitator, people often won’t pipe up or say anything that goes against what boss wants,” Coffey says.
How the plan is implemented
Many strategic plans fail because of flawed implementation. Stumbles often happen when a plan isn’t communicated adequately through the company and employees aren’t given enough time, support and resources to execute the action plan. The culprit is sometimes the plan itself: your plan may suffer from unrealistic goals or vague action items.
It’s vital to have regular team meetings to monitor the progress on the action plan, hold people accountable and recognize successes. Meetings are an opportunity to take corrective steps and tweak the action plan to account for changing conditions.
So how often should you meet? Coffey says monthly meetings are typical, with a deeper dive every quarter. A more in-depth review should occur annually to update the plan, evaluate what worked and didn’t, and develop a new action plan for the following 12 months. The penultimate year of the plan is a good time to set new goals for a renewed strategic plan for the next two to three years.
“A strategic plan is a living, breathing document that continually guides, inspires and strengthens your business,” Coffey says.
Strategic planning: 3 frequently asked questions
Planning is needed precisely because the future is uncertain. Organizations usually have enough information to make reasonable plans about important coming changes in markets and technologies. Thinking with your team about the future helps you prepare for and find opportunities in change and build an organization that can survive and even thrive when the unexpected happens, not simply react to events or, worse, fail to act at all.
“It may be hard to predict the timing of the future, but we can see trends,” Coffey says. “A lot of people predicted that online sales were important; COVID-19 just threw us seven to 10 years forward.”
Taking the time to work on your business instead of in your business can help you be less swamped day to day. Planning helps you delegate, improve decision-making and efficiency, reduce errors, boost growth and profit margins, and be more adaptable to change.
Sales and marketing without the right strategy won’t necessarily bring you a good return. They could just increase costs and effort. And even if sales go up, will you sell the optimal products at the best margins? Will you have financing, operations and distribution in place to handle the sales increase?
Working on a strategic plan will help you answer these questions.