The process of an organization identifying its strategy or giving direction
Strategic planning is the process of an organization identifying its strategy or giving direction, as well as making decisions deciding how to allocate resources to accomplish that strategy.
Strategic planning is the process of recording and determining a business's direction by evaluating both where you are now and where you want to go in the future.
It provides a space for an individual to write down their vision, mission, and values, as well as long-term goals and strategies for achieving them.
The process of identifying a company's goals, the resources needed to attain them, and the rules that will govern the purchase, use, and disposal of those resources.
Strategic planning is a top-level management function. This planning flow can go from the corporate level to the divisional level or vice versa. There are two approaches to strategic planning:
It is a centralized method of strategy development in which the organization's general mission, strategic intent, objectives, and strategies are decided by the corporate center or head office. Unit managers are frequently seen as enablers of pre-determined business strategies.
It's a characteristic of independent or semi-independent divisions or subsidiary corporations when the corporate center doesn't regard its strategic function as directly determining the purpose, objectives, or strategies of its operational activities.
It might choose to act as a catalyst and facilitator, keeping things simple and concentrating on the big picture and overall strategic.
The strategic plan first gained popularity in the late 1960s, and it remained popular in the business world until the 1980s when it began to lose its fame. However, in the 1990s, there was a great deal of interest in strategic business planning, and it is still essential in today's industry.
Dealing with Uncertainty in Strategic Planning
Unpredictable, unstoppable, and sometimes meaningless conditions that may have a direct impact on projected outcomes are referred to as strategic uncertainty. A typicaldozens of new strategic unknowns.
They must be well organized into logical groups or topics in order to be manageable. The importance of each cluster can then be assessed in order to define priorities for information gathering and additional analysis.
A future trend or event that has intrinsic unpredictability is a good example of strategic uncertainty. When additional analysis and information collecting are ineffective at reducing uncertainty,.
Scenario analysis is a method of analyzing future occurrences by examining various probable outcomes. As a result, it is one of the most common types of projection that does not attempt to depict a single exact vision of the future. It offers a number of potential future possibilities.
The significance of strategic uncertainty is that each piece of strategic uncertainty contains prospective trends or events that could affect current, proposed, or even potential companies.
The impact of strategic uncertainty will be determined by how vital the impacted strategic business units (SBU) are to the company.
The importance of some strategic business units is greater than that of others. The sale, profit, or cost of strategic business units can all be used to determine their relevance.
Because of the strategic ambiguity, a never-ending process of information collection and analysis consumes resources perpetually.
A strategy map is a planning tool that helps stakeholders see a company's entire strategy as a single interconnected graphic. These diagrams are a great method to comprehend and review the cause-and-effect linkages between the many aspects of a business strategy.
While a strategy map can be developed in a variety of ways, all focus on four primary business areas or categories: financial, customer, internal business processes (IBP), and learning and growth.
Goals can be sorted into one of the four categories, and links between them can be constructed. For example, a strategy map can include a financial target of cost reduction and an internal business processes (IBP) goal of improving operational efficiency.
Broader goals can be translated into action plans. These goals can then be aligned and implemented with the help of a strategy map.
Strategy mapping can also assist in identifying strategic difficulties that aren't immediately apparent.
To cite an example, one learning and growth goal could be to enhance staff knowledge, but this could result in unexpected employee retention and compensation issues, which could impact cost-cutting goals.
Stages of Strategic planning
The strategic planning process necessitates a great deal of thought and planning from a company's executive management. Executives may explore a variety of possibilities before deciding on a course of action and then selecting how to implement it strategically.
Finally, a company's management should choose a strategy that is most likely to deliver good results (typically defined as increasing the company's bottom line), and that can be implemented in a cost-effective manner with a high possibility of success while minimizing financial risk.
Strategic planning involves five stages that are described below:
Stage 1: Determining strategic position
This step sets the foundation for all work going forward. To figure out where you need to go and how you'll get there, you must first figure out where you are now. It also includes appropriate stakeholders from the beginning, taking into account both internal and external sources.
Have a chat with your company's management by gathering consumer insights and gathering industry and market data to identify significant strategic challenges. This will provide you with a comprehensive image of your market position as well as customer information.
It's also a good idea to go over your firm's mission and vision statements or create them if you don't already have them to offer yourself and your team a clear picture of what success looks like for your company.
Review your organization's basic principles as well to remind yourself of how your organization plans to achieve these goals.
To begin, identify the issues that need to be solved using industry and market data, such as customer insights and present and future expectations.
Create a list of your company's internal strengths and weaknesses, as well as external opportunities (ways your company can grow to meet requirements that the market doesn't currently meet) and threats (your competition).
Use a SWOT diagram as a framework for your initial analysis o, and you can easily categorize your findings into Strengths, Weaknesses, Opportunities, and Threats (SWOT) to define your present position using input from executives, customers, and external market data.
PEST analysis is an alternative to a. PEST represents (Political, Economic, Socio-cultural, and Technological) is a strategic technique for identifying dangers and possibilities for your company. Your unique strategic position in the market will become evident as you integrate this knowledge, and you can begin to clarify a few key strategic objectives.
Stage 2: Setting objectives
After you've determined your present market position, you'll need to set objectives to help you reach your desired goals. Your goals should be in line with the mission and vision of your firm.
For setting your objectives, you may be asking yourself some important questions such as:
→ Which of these initiatives will have the most influence on attaining our company's mission/vision and improving our market position?
→ What are the most critical sorts of impact (e.g., client acquisition vs. revenue)?
→ What will the competition's response be?
→ Which initiatives are the most critical?
→ What will we have to do to achieve our objectives?
→ How are we going to track our progress and see if we've met our objectives?
To assist you in achieving your long-term strategic goals and activities, objectives should be unique and measurable. Updating website content, enhancing open email rates, and producing new leads in the pipeline are all possible goals.
Stage 3: Creating a plan
It's now time to create a strategic plan for achieving your goals. This step entails deciding on the techniques that will help you achieve your goals, as well as creating a timeframe and clearly articulating roles and responsibilities.
Before making any definite decisions on the plans, they should be carefully evaluated by top-level management, and a feasibility analysis of the alternatives is necessary.
Strategy mapping is a useful tool for visualizing your course of this process. Strategy maps, which work follow the top-down approach, make it easier to see how company processes work and where improvements can be made.
True strategic decisions almost always entail a trade-off in. For example, your organization may opt to put less money into customer service in order to put more money into producing an intuitive user experience.
Be ready to say "no" to efforts that do not improve your long-term strategic position based on your values,, and defined priorities.
Stage 4: Implementing and executing the plan
The development of the company enterprise depends on the strategy's effective implementation. Theis now in its active phase.
At the start of this stage, a new structure should be put in place if the overall plan does not mesh with the company's present setup. Your strategic goals are more likely to be achieved if you create the concrete actions that your team must perform. It is important that everyone in the organization is aware of their roles within the company as well as how those roles relate to the broader objective.
By mapping out your processes, you can easily turn your broad strategy into a detailed plan. Use key performance indicator (KPI) dashboards to explain team roles effectively. The completion process and ownership for each step of the journey are illustrated in this detailed method.
To ensure that you stay on track, establish regular evaluations with individual contributors and their managers, as well as check-in points.
Stage 5: Monitoring the plan and ensuring effectiveness
The plan's last step involves monitoring and ensuring its effectiveness, allowing you to reevaluate your goals and make course corrections based on past successes and failures.
Determine whichyour team has met and how you can continue to fulfill them at the end of each quarter, changing your plan as needed. It's important to reevaluate your priorities and strategic position every year to ensure that you're on the right track for long-term success.
Use balanced scorecards to track your progress to gain a full understanding of your business's performance and execute strategic goals.
Your goal and vision may need to alter over time; an annual evaluation is an excellent chance to think about those changes, draft a new strategy, and implement it again.
We can see the various stages of strategic planning with the help of an example where you are planning a trip from New York to London:
Stage 1: If you are planning to travel from New York City (JKF) to London (LHR), you prepare your journey by knowing where you are and where you want to get to.
Stage 2: Here we ask ourselves some questions: how do we get there, and prepare our schedule.
Stage 3: In this stage, we construct our plan of traveling, finding the best possible means of reaching there.
Stage 4: This is the stage where you are putting your plan into action. You pack your bags and are all ready for departure, seeing the scenic view from above-having connection flights at the airport.
Stage 5: The last stage involves monitoring your plan to see that you're sitting in the right seat and the meals served to you are proper.
Strategic Planning Vs Financial Planning
The strategic plan illustrates the path to attaining the company's strategic objectives (vision),indicates the path to reaching financial goals.
A financial plan is needed to managethe organization, while a strategic plan is needed to align resources with the company's long-term goals.
A strategic plan is a five-step process that includes defining a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy, and tracking the strategy's success. On the other hand,prepare statements such as balance sheets, income statements, and cash flow statements.
Financial planning is concerned with the management of funds or the usage of cash flow over time, whereas strategic planning is concerned with the organization's road map.
Financial planning is used to meet predetermined financial goals, whereas strategic planning is used to make long-term plans that are guided by the company's vision and mission. The effectiveness of this planning determines a company's success.
Frequently Asked Questions (FAQs)
The major problems while planning a strategy is that it lacks ownership, can lead to poor communication, lack of alignment, slow adoption of the plan, etc.,
Some of the misconceptions of:
It is quick and easy,
It is the same as an annual work plan,
An outsider can generate the plan,
It is mainly for top-level management.
A strategic plan should look into the future as far as you feel comfortable. But bear in mind that you must be certain that the atmosphere of your business will remain steady for the duration of the timeframe you select.
You should at the very least review your plan twice a year or even every quarter. Even if you believe that your current plan is off the rails and needs to be scrapped, you should still carefully consider what went wrong the last time.