Basically, What is strategic planning?

Written by Chris Pinter                                                                                           

Strategic Planning 101     

Strategic planning is the driving force in growing any company.  How you deal with your customers, relate to the business environment and treat your follow man are all considered when looking at your strategic plan.  Indeed there is no right way to do strategic planning.  It is more like developing a road map towards reaching a goal.   There are a number of concepts that you can use to help you develop a strategic plan.

What are your environment conditions?

The environmental conditions affect your strategic plan the most.  These are the outside factors that will affect your ability to deliver on your strategic plan.  Conditions such as the following:

Political influence/stability – Is there a stable government in place in your region? Is your industry a target for political lobbies, or activists?  Does your project have political champions who can rally behind your cause?

Weather conditions – Do you live in a tornado or hurricane prone area?  Could snow ice or other weather conditions affect power to your building or cause loss of productivity?

Economic conditions – The overall economy and the regional economy will affect your business and will change over time.

Human resources/employment conditions – Are there people in your area that can perform the work you need?  Do you need to hire from outside of your region or train staff?

Competition –   Do you know your competition?  Do you regularly identify and monitor competitive influences.  It is important to understand all of the competitors including direct and indirect competitors in order to develop a complete understanding of this influence.

There are many other outside influences that will affect your business.  It is important to routinely survey the economic, political and social conditions that affect your business to understand how these outside influences will affect your business.  A daily scan of the newspaper, stock market and other news sources are a great way of staying on top of the outside forces you cannot change.

Where are you today?

It is very common to assume you know where you are because as you work in your business you have a detailed understanding of the day to day activates.   Understanding the daily activities is in fact only one of the variables you need to consider when looking at where you are.  You need to develop a complete picture of the internal influences.   Some of these influences included the following:

Vision – What is your current vision? Does your mission statement reflect what you do today?  This statement should be viewed from the customer point of view not from an internal point of view.   I see too many technology companies have missions statements that look like the following:

“….to leverage the company’s diverse engineering talent and their extensive experience in developing embedded wireless products to provide uniquely differentiated products and engineering services. “

This statement reflects capabilities and it does not do it very well.   A mission statement is a given statement.  How are you currently changing in the world?  What industry do you serve?  What is your unique selling proposition?  In any case it is important to know where you are today before you start to plan for tomorrow.

Staff resources – One of the biggest internal influences is your staff.  People generally do not like change.  How your team manages change and performs work assignments will have a direct affect in how well you can implement strategic planning activities.  In big businesses, management and unions work together to move the company forward… generally speaking this is a slow process.  In small business team members need to perform more duties required by the company often including tasks outside of their training.   You need to know how flexible your team is in order to understand your abilities to implement strategic changes.

Financial resources – Understanding your finances is a corner stone to good business.   Small businesses under five employees generally have poor accounting skills but the accounting required is rather minimal.  Large businesses have expert accounting skills but have to manage a large amount of transactions.  Each faces different challenges so you need to understand your strengths and weaknesses in your accounting processes and financial position.  Understanding the pros and cons of your financial situation and reporting methods are always critical.

Capabilities –   A snap shot of what your internal capabilities and your contractors capabilities is very important to develop a base line of what your organization can accomplish.  From the baseline you can decide which skills will help you achieve your strategic goals and which one you no longer need.

Where do you want to go?

The reason why strategic planning is so important is because without a direction who knows where you will end up.  Even if your company is just servicing existing customers your outside influences could change the environment in which you operate.  This will have an effect on your business if you like it or not.  If you have a direction then you have some influence in the outcome.

  • Where do you want to be in one year and five years?
  • Do you want to grow or stay the course?
  • Do you want to cut cost or expand capabilities?
  • Do you want to sell your business?  How do you position the company for sale?

Your goals will reflect the destination.  Well at least one point in time sometime in the future.  How you get there is what we want to plan.  Once you know what the playing field looks like and you have a start point and an end point; then you can have a focused discussion about the strategic plan.

What are the risks you must overcome?

Of course there is one more thing we need to recognize in order for the strategic plan to be success.  That is risk.   The last thing you want to do is start down the road your plan has laid out only to be sidelined by an unknown risk.   So it is important to identify and develop a response for each risk.

There is risk is every venture.  No project is without risk.  In order to identify risks you need to look at what influences affect your business.  These influences will have both pros and cons.  There are both positive and negative risks.   What you want to do is influence the positive risks so these risks are more likely to happen and suppress or avoid the negative risks.

An example of a positive risk is: If you complete the project by a specific date then you can be eligible to receive a tax credit. An example of a negative risk is:  If you fail to meet the deadline the client will back charge you 10% of the project fee.

There are a number of strategies to dealing with risk.

  • Positive risks:
    • Share – Share the risk with a contractor who is better able to exploit the risk.
    • Exploit – Take steps to ensure the risk happens.
    • Enhance – Take steps to improve the size or capacity of the risk.
  • Negative risks:
    • Avoid – Modify your plan to get rid of the problem.
    • Transfer – Assign the risk to an outside part such as an insurance company.
    • Mitigate – Although you might not be able to remove a risk entirely you could possible reduce the bad characteristics of the risk.

Strategic planning is probably the most important activity a company can do to influence success.  All businesses perform strategic planning even those that say they do not.  Of course those don’t just do bad strategic planning.  This brief touch at strategic planning is intended to give you a starting point for an in depth discussion on your particular needs.  Consider all angles and think about the underlining conditions that make up each assumption and driving issues that will affect your strategic plan.

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