What is strategic planning & why is it important?
Planning is an important part of most people’s days. Even if you’re the most driven person alive, it’s easy to get sidetracked if you don’t have an action plan.
Maybe you need to train for a marathon and sort the mail, but you binge-watch a new TV show instead. The next day, you’re behind on your training and an important bill goes unread – stalling your health goals and financial plans. And once you’re behind, it’s harder to get ahead.
The same scenario applies to business. Without strategic planning, it’s very difficult to meet long-term goals.
The strategic planning process helps you break your organization’s vision for the future into strategic objectives. You’ll prioritize which strategic goals to focus on, when they should happen, and how you’ll achieve them. This strategic framework drives your operational planning (how you’ll execute this strategic framework).
If you want to know how to apply strategic planning in your business, you’re in the right place. This roadmap will cover the benefits of strategic planning, the strategic planning process, the steps involved, and, most importantly, how to make the long-term goals of your strategic framework a reality.
What are the benefits of strategic planning for your organization?
Successful strategic planning results in a structured business in which your team is united in implementing the strategy execution of your desired outcomes. Here’s how the process helps an organization:
Creates cost-effective day-to-day operations
Your strategic framework will ensure that your day-to-day operations bring you closer to your long-term goals. Clarity regarding the strategic goals you want to achieve can help you identify what will (and won’t) help you achieve them.
Strategic planning also helps you better allocate your resources, thanks to a thorough understanding of your organization’s strengths and weaknesses. The process involves analyzing your business processes to find inefficiencies, so you can find ways to streamline workflows and save time, labor, and money.
Gives you a competitive advantage
Strategic planning gives your organization a competitive advantage since it involves thoroughly analyzing your internal strengths and weaknesses. It also considers new opportunities and external threats, helping you identify unique capabilities and areas where the organization can outperform competitors. Moreover, you can anticipate market trends and adapt to changing circumstances more easily.
Helps you track progress and communicate success
Identifying and tracking key performance indicators (KPIs) shows exactly how far you’ve progressed in achieving your organization’s goals. These metrics let you measure your organization’s performance against the specific objectives and goals set in your strategic plan.
Tracking your progress using KPIs can also help you communicate where your company is achieving success and how well. Stakeholders want to know these things, and marketing them can make your company a magnet for high-achieving talent.
Keeps bias out of your organization
Strategic planning fosters a systematic and objective decision-making process based on data and evidence – not personal opinions. This prevents cognitive biases from hindering your organization’s growth. Strategic planning encourages a balanced and inclusive decision-making approach by focusing on long-term goals and considering the broader impact of decisions on a diverse set of stakeholders.
When should you create a strategic plan?
No matter what stage of growth your organization is in, successful strategic planning targets your development toward your desired outcomes.
Strategic planning typically captures your vision for your organization’s next three to five years. However, businesses experiencing rapid growth (like small businesses and startups) might need a new strategic plan more frequently, like every two years.
Strategic planning is a continual process. After all, if you don’t adapt to a changing world, you’ll be left behind. Stay on top of changing markets and organizational needs by constantly reevaluating your business strategy, especially when making large organizational changes. You’ll also want to reevaluate your strategic plan once you’ve achieved the initial goals and desired outcomes from your original plan document.
Top 6 elements of a strategic plan
There are six key elements of a good strategic plan:
- Mission statement: Your mission statement is the north star of your strategic planning. It’s a concise, declarative statement that defines your organization’s core purpose and primary objectives. It explains the motivations, or the why, behind your plan, which motivates team members and stakeholders to work toward your organization’s goals. For example, a tech company’s mission statement could read: “Our mission is to empower people through innovative technologies, creating a more connected and sustainable world.”
- Vision statement: A vision statement outlines how you’ll achieve your organization’s driving motivation. It can also help employees solve problems based on organizational guidelines since your vision statement reflects your organization’s strategic plan in broad terms. To continue from the above example, a vision statement example might read: “Our vision is to be a global leader in driving transformative technological advancements that shape the future and enrich lives.”
- Organizational goals: Organizational goals are specific and measurable objectives an organization sets to achieve its mission and fulfill its long-term vision. These are realistic, attainable goals (e.g., performance expectations, KPI objectives, and specific deadlines). For example, short-term goals might include yearly or quarterly objectives for individuals, departments, or the entire organization (e.g., employee performance, turnover rate, or sales goals). Meanwhile, long-term goals might stretch these goals beyond one year.
- SWOT analysis: A SWOT analysis aims to create situational awareness about your organization’s position within your industry. The acronym stands for strengths, weaknesses, opportunities, and threats. This strategic management tool is a comprehensive assessment that helps you make informed business decisions.
- Action plan: Your action plan is the part of your strategic planning process that lays out exactly how you will achieve your goals and priorities. It captures your strategic initiatives and, specifically, how you will execute them.
- Key performance indicators (KPIs): Key performance indicators are measurable metrics that help you evaluate your progress toward your desired outcomes. KPIs include profit margins, sales data, customer satisfaction, and employee retention. These hard data help you track progress within your set time frame.
While these key elements sound similar to a business plan, some crucial differences exist.
A strategic plan outlines your organization’s overall direction, including its vision, mission, long-term goals, and strategies to achieve them. On the other hand, a business plan focuses on specific operational aspects, such as products or services, target markets, and competition, communicating goal-setting and priorities to team members, investors, and key stakeholders. Companies primarily use business plans for management and clarity, especially during the startup phase or when restructuring.
A new organization could create a business plan and use it as a building block of the strategic planning process once it’s more established.
How do you adapt strategic planning for your organization’s needs?
All businesses can reap the benefits of strategic planning at some point in their development. However, the strategic planning process will apply differently depending on your business type.
Below, we’ll go into how to make a strategic plan work depending on the organization type.
The strategic plan’s end result is a roadmap for your organization’s future development. For this reason, startups can especially benefit from the strategic planning process, as they have a large growth potential. Setting long-term goals, metrics, and strategic initiatives keeps startups focused on their desired outcomes and prevents them from being overwhelmed by an undefined future.
But because startups have so much potential, they’ll likely need to adjust their strategic objectives as they make pivots. Many startups have a small team, so they may need to revisit their strategic plan more often than the standard three to five years as they redefine the needs of their organization.
A well-crafted strategic plan offers unique benefits to nonprofits, benefitting those using the nonprofit’s services and the business itself. For one, it enhances donor and stakeholder engagement by showcasing transparency, accountability, and a clear roadmap for achieving impact and fostering trust, confidence, and increased support for the organization’s mission. Secondly, a strategic plan can improve a nonprofit’s resource allocation and efficiency, helping prioritize the initiatives and projects that align with its mission to create maximum impact with limited resources.
Finally, a strategic plan helps nonprofits measure their impact and adapt to changing circumstances. Nonprofits can set measurable objectives and KPIs to track progress and assess initiatives’ effectiveness. This makes it easier to respond to emerging needs and challenges, remain committed to long-term goals, and ensure sustained relevance and success in mission-driven endeavors.
Strategic planning is also useful when embarking on a complex, lengthy project that could take months – or even years – to achieve. When setting long-term goals during the strategic planning process, you’ll likely have some ambitious projects to achieve as a part of your overall business strategy.
A strategic project plan outlines the initiative or project timeline and gives an overview of its desired outcomes. This is especially helpful for long-term project management, where it can be easy to lose sight of your objectives amidst all the moving parts and multiple deadlines.
Also, a clear plan document for your project can help delegate responsibilities as your team changes (for instance, when team members retire or take leaves of absence and when new teammates are hired).
What is the strategic planning process?
Now that you have an overview of the elements that go into strategic planning, let’s get into the step-by-step methodology needed to make it happen.
- Analysis of current position: First, gain an understanding of your organization’s current position and how it fits into the broader industry. This is when you’ll complete a SWOT analysis, conduct research, survey your clients, and gather employee feedback.
- Strategy formulation: Now that you know where your organization stands, determine the direction you’d like to head and strategize how to get there. First, define your mission statement, vision statement, and organizational goals. Then, prioritize your strategic initiatives.
While a select leadership group (e.g., a handful of executives) usually completes the strategic planning process, incorporating stakeholder feedback in your decision-making is essential to ensure you’re on the right track.
Strategy development involves creating documentation that communicates your goals. One example is a strategy map, a flowchart of your strategic objectives, and an explanation of how one leads into the next. You can also create a roadmap to provide an overview of your plan’s execution timeline.
You should have a clear action plan with KPIs to measure your desired outcomes before moving into strategy execution. Remember, you can’t move forward without knowing where you’re going and how you’re getting there.
- Strategy execution: You’ve done the dreaming; now it’s time for the doing. Use your action plan, KPIs, and metrics to guide your strategy execution. Additionally, maintain clear communication with team members so everyone understands their individual roles in achieving the desired outcomes and how you’ll measure their performance.
- Evaluation: Track your progress to ensure successful strategic planning and to confirm you’re meeting your KPIs and metrics for success. Use strategic management tools like a balanced scorecard, which helps visualize the impact of your initiatives across the sectors of development, business processes, finance, and customers.
Also, evaluate whether your results align with your organization’s mission. Revise your strategic plan as needed to meet your organization’s changing needs and any updated timeframes.
Keep detailed notes of the challenges, setbacks, and successes you experience during your strategic plan’s time frame. This will improve your execution when it’s time to start the strategic planning process again.
How do you chart your strategic path to success?
Understanding the mechanics of strategic planning, how it links day-to-day operations to immediate and future objectives— is an important step in achieving your organization’s desired results. Not only will it enable you to manage your resources more effectively, but it will also ensure that your aspirations aren’t left to chance.
However, knowledge is only half the journey. Applying these strategic concepts in a way that aligns with your organization’s unique mission, vision and goals can be a challenge in itself. And that’s where IMD comes in and provide the knowledge and tools needed to help your business create a foundation for secure, long-term success.