Most aspiring entrepreneurs and new businesses are often advised to focus on strategic planning before starting. What does it mean and why is it so essential? Can one do without it and why not? These are some just some of the many questions that entrepreneurs and businesses may come up about strategic planning.
What is Strategic Planning?
When you’re starting out a business, you cannot go into the market without preparing for it. This would require a multidimensional and multilayered approach that would look like a well-formulated action plan outlining the strategies for your business to enter the market, flourish, stabilize, deal with setbacks, revive, stabilize and flourish again – all this while making a profit.
Such a comprehensive preparatory process can be understood as strategic planning when it outlines these aspects:
– Company/business priorities
– Company goals
– Operational requirements
– Operational dynamics
– Resource allocation
– Risk evaluation
– Result and goal evaluation
– Change and disaster management
Strategic planning is more of a journey rather than a mere step in the process of building a business. While some may know it as strategic management, others know it as the art of creating strategies for businesses.
What Does It Encompass?
• Formulation and implementation of business strategies and evaluation of their outcomes.
• Integration of various divisions and subdivisions to achieve a seamless workflow.
• Formulation and incorporation of organizational values.
• Documentation of guidelines and an action plan(s).
• Future goals, pivot scenarios, and expansion opportunities.
• Merger, exit, and asset liquidation guidelines.
Comprehensive strategic planning would answer the what, why, when, who and how of a business venture to all the prospective stakeholders.
Advantages of Strategic Planning: Why Do We Need Strategic Planning?
1. It outlines a CLEAR PATH for the company.
This is the most critical of all benefits. Some studies show that the strategic planning process makes a significant contribution to improving a company’s overall performance, regardless of the success of a specific strategy. No business can hope to succeed by not having a plan and simply hoping to stumble across success. A strategic plan works like a roadmap, clearly defining the best route for your organization to take in the years ahead.
2. It brings a sense of FOCUS.
A strategic plan establishes a direction for your business to take. It sharpens the focus on goals and the means to get there. Strategic planning also helps the employees to know what is the company exactly doing and why has it chosen to do it. This makes organizational goals and objectives real, understandable, and achievable. It also helps the employees to understand the relationship between their performance and the company’s success at a deeper level.
3. It improves RISK AWARENESS.
Another reason for entrepreneurs to make strategic planning a priority is that it helps to reduce potential risks, particularly in times of economic uncertainty. Taking the time to establish a comprehensive strategic plan means the business has a better awareness of its strengths and weaknesses and where it stands in the market, both individually and in relation to competitors. This way, a business is better equipped to make decisions and therefore minimize risk.
4. It gives everyone A SENSE OF PURPOSE.
Strategic planning isn’t just beneficial for upper management. It gives everyone in the organization a sense of purpose. It helps to achieve synergy between different parts of the organization. Strategic planning is in place to facilitate the collaboration between the managers of different departments. With a definitive mission and clear objectives to work towards, the staff will know that their efforts count towards something and will be motivated to do their job. This, in turn, will enhance sincerity amongst all employees as they have a sense of responsibility for the outcomes of their efforts.
5. It REDUCES RESISTANCE to change and IMPROVES RESOURCE ALLOCATION.
One of the primary aims of strategic planning is to inform the whole organization about the company’s plans, strategic changes, and their implications, and how these changes should be executed. Explaining this thoroughly at different levels would reduce resistance to change as executives and managers would be less uncertain about the future. Any new products, services, strategies, goals, or objectives that require resource allocation (moving people from one team to another or moving the facilities into another country), can be done more efficiently when aligned with strategic objectives. Competitive advantage is often achieved without strategic planning but if the company wants to achieve a sustainable competitive advantage, it must plan strategically.
Strategic Planning Process
Proper strategic planning would take a set route before materializing into something actionable. The illustration below gives an overview of a strategic planning process.
1. Goal Setting: A goal is a realistic, measurable, time-bound target for achieving specific outcomes at a set time in the future. Goals are like steps of a staircase that lead one to his/her mission and vision. Goals form the bridge that turns your mission and vision to reality. Ideal goals are SMART – Specific, Measurable, Achievable, Relevant, and Time-bound.
2. Strategy Formulation: A strategic planning system has two major functions – One, to develop an integrated, coordinated, and Two, consistent long-term plan of action, and to facilitate the adaptation of the organizational change. The design of the system must include steps to make sure that effort fulfills its adaptive mission.
3. Implementation: Implementing your strategic plan is as important, or even more important, than the strategy itself. A common pitfall in executing organizational goals is not taking daily actions to reach the desired goal. Employees should be aware of the practical step-by-step actions that will move the organizational goals forward.
4. Evaluation: Regular meetings about tasks should be held with each team to talk about their progress. That way, everyone will understand how their contributions to the whole company will play out, and thus, there will be clear answers to critical questions and to get everyone on track.
5. Revision and Reimplementation: Implementation must be monitored to be successful. Due to constantly changing external and internal conditions, managers must continuously review both environments as new strengths, weaknesses, opportunities, and threats may arise. If new circumstances affect the organization, management must take corrective actions as soon as possible.
Most companies use strategic planning to formulate and implement effective decisions. Focusing on the long-term strategy of the business is essential. Strategic planning helps the organization and employees to understand the current status of the company in the market. It assists productivity by aligning everyone’s works toward the organization’s goals; leading the business to be a better position to address any impending issues. While it may require a significant amount of time, effort, and resources, a well-thought-out strategic plan efficiently fosters company growth, goal achievement, and employee satisfaction.