The strategic plan enables organizational leaders to establish the goals of the business and come up with appropriate steps to realize them. Previously, organizations could formulate strategic plans for at least ten years. Today, they come up with plans that cover the utmost three years. Formulating a strategic plan involves numerous steps that are interdependent. It would be difficult for an organization to develop an effective strategic plan without the support of the leadership. Organizational leaders should consider both the long-term and short-term objectives of the firm when developing a strategic plan. Different scholars have diverse views regarding what entails strategic planning processes. They identify different steps that must be followed to come up with a successful strategic plan. Despite the disparities in the number of actions, all scholars agree on at least four key factors that are essential in the development of a strategic plan. The factors are interdependent, and the failure of one may hamper the success of the others.
The Diamond-E framework summarizes the factors as management preference, organization, resources, and environment. The strategic planning process must consider the interests of the leadership. It would be hard for the administration to support a strategic plan that does not meet their preferences. One should consider the organizational capacity when developing a strategic plan. A firm cannot implement a strategic plan that does not observe the correct management standards or is against corporate culture. Resources are paramount for the success of a strategic plan. Thus, a strategic planning process must factor in the resources that are at the disposal of an organization. Moreover, the process should comprise a comparison between the existing and required resources. One should be sure that an organization can bridge the resource gap before going on with the strategic planning process. Analyzing the environment of a business helps to determine the success of a strategic plan. Understanding the impacts of different environmental factors facilitates the strategic planning process. A strategic planning process should identify the challenges and opportunities that environmental forces pose to an organization. This reflection assignment will compare the Diamond-E template to different strategic planning processes.
Reasons for Selecting the Articles
The articles used in this essay are Strategic Planning Process: Nine Steps of Setting Proper Strategic Plan by iEduNote, Strategic Planning that Produces Real Strategy by Judah, O’Keeffe, Zehner, and Cummings, and Strategic Planning Process: Importance and Implications by Springfield. Numerous reasons contributed to the selection of the three sources. When choosing an article, it is imperative to consider the quality of writing. The article should be easy to understand and digest. The writing should be unambiguous, free of random, uncluttered, and pleasant to read. The three articles are of high quality. The writers have used simple words that are easy to read and comprehend. Additionally, the writing is uncluttered. All the articles have been written systematically. The authors have outlined the strategic planning processes starting from the initial to the final phase. Consequently, individuals with limited knowledge about strategic planning processes can use the articles without difficulties. Numerous scholarly journals discuss the steps of strategic planning processes. Thus, there is adequate peer-reviewed information regarding what entails strategic planning processes. When selecting an article, it is imperative to ensure that it contains accurate and authentic information. One should avoid articles with glaring inaccuracies as they can be misleading. The three articles were selected because they comprised accurate information. A comparison between the articles and existing peer-reviewed journals showed no inconsistencies. Some articles fail to highlight distinct essential facts, resulting in misinformation and inaccuracy. The three articles are written systematically without ignoring the information that might seem too obvious to many readers. The objective is to ensure that readers do not misconstrue the intended message.
It is imperative to understand the context of an article before using it to compile a report or essay. At times, articles may appear correct on the surface but turn out to be erroneous if their context is analyzed. Some articles may contain inaccurate statistical data or wrong messages. Thus, it is imperative to consider the broader context of an article before it is selected. The objective of this easy is to reflect on the viewpoints of different writers regarding strategic planning processes. The three articles have been chosen as their contexts are in line with the primary objective of the essay. The articles complement each other and comprise invaluable information about what entails strategic planning processes. The majority of online articles are developed through existing theoretical frameworks or theories. Others help to build existing frameworks. One should select an article that relates to an existing conceptual framework or contributes to advancing a current theory. The three articles are written in line with the Diamond-E framework. The article by iEduNote has identified nine phases of strategic planning processes. It can go a long way towards advancing the Diamond-E framework.
An excellent article should be focused on. The report must identify the goal that it aims to realize. For instance, the paper may intend to sway someone or explain the stages of doing something. An article that does not guide the reader towards the intended objective is insignificant. The three articles were selected because they are focused on. Their primary goals are to guide the users on how to formulate strategic plans. They outline the steps involved in strategic planning processes in a systematic manner such that it is easy for the reader not only to understand the procedures but also to use the articles to formulate a strategic plan. An excellent article should be compelling to attract the attention of the reader. Writers use appealing language, arguments, or captivating topics to attract readers. The article by Judah, O’Keeffe, Zehner, and Cummings was selected due to its attractive subject. Every entrepreneur would like to come up with a successful strategic plan. Thus, they cannot desist from reading an article that enlightens them on how to develop real strategies.
One should consider if an article offers insights into a significant issue. Moreover, the information contained in an article should be of great value to decision-makers. The three articles were selected because they provided invaluable information about strategic planning processes. The articles shed light on the issue of strategic planning, which is a major challenge to the majority of organizational leaders. Additionally, the information contained in the articles can help entrepreneurs to make long-term decisions that can be of significant value to their businesses.
Analysis and Discussion
The article by iEduNote (2017) adds valuable information to the Diamond-E framework. The framework emphasizes the significance of considering four critical variables that influence the success of the organizational strategic plan. They include the organization, resources, environment, and management preferences. The model assumes that one has to have explicit knowledge of the company’s mission and strategic goals. Conversely, iEduNote (2017) emphasizes the importance of analyzing the prevailing conditions of an organization before embarking on strategic planning processes. The article states that management should consider the mission of the organization and the expectations of the key stakeholders. Moreover, it recommends an evaluation of the past strategic plans to identify their impacts on the organization. Strategic plans may influence decision-making, resulting in the creation of factions with vested interests, and affect resource allocation. Thus, it is imperative to consider them before starting the strategic planning process.
The Diamond-E framework recommends environmental and capability risk analysis to ensure that a strategic planning process considers the future changes in internal capacity and environmental transformations that might affect organizational performance. The framework does not outline a process that should be used to implement the strategic plan and make adjustments if necessary. On the other hand, the article recommends monitoring and adjusting the strategy under implementation to ensure that it meets the desired objectives. The article complements the Diamond-E framework. Just like the framework, the article highlights the significance of evaluating organizational capabilities, internal and external environmental factors that might affect business, and available and missing resources. The article underlines the importance of ensuring that these variables align with the organizational strategy. Similarly, the Diamond-E framework underscores the significance of consistency to guarantee the success of the strategic plan. iEduNote (2017) emphasizes the importance of ensuring that the strategic planning processes pay attention to the interrelationship between the different variables that promote organizational success. The article raises the question of the significance of management preference in the strategic planning process. For instance, it does not regard management choice as an essential attribute to consider when formulating a strategic plan. Instead, the article insists that the strategic planning process should consider the mission, vision, and objectives of the business.
A theoretical framework that outlines the steps in the strategic planning process ought to be comprehensive. The article by iEduNote (2017) brings out the strengths and weaknesses of the Diamond-E framework. It confirms that the structure puts into consideration the essential variables, which impact the formulation and implementation of strategic plans. Just like the framework, the article accentuates the significance of evaluating the internal and external environment and organizational capabilities in the course of the strategic planning process. Personal interests should not interfere with the strategic planning process. The article disregards management preference as a significant factor in strategic planning. A major weakness of the Diamond-E framework is the inclusion of the management choices as a variable that influences strategic planning processes. Conflicting interests amid the managers may hamper the effective formulation and implementation of the strategic plan.
According to Judah, O’Keeffe, Zehner, and Cummings (2016), a strategic planning process must fulfill three essential parameters, which are adaptability, bold ambition, and concrete guidance. The article by Judah et al. (2016) augments the Diamond-E framework by introducing the idea of bold ambition in the strategic planning process. However, it warns that the goal must be feasible. While the Diamond-E framework recommends the consideration of organizational financial capabilities during the strategic planning process, the article argues that budgeting should be done independently. It claims that running the strategic planning process separately gives managers adequate time to evaluate critical factors like business conditions, competitive dynamics, and consumer needs. Judah et al. (2016) argue that the strategic planning process should be conducted in the first quarter of every year. While the Diamond-E framework recommends consideration of the linkage between organization and strategy, the article by Judah et al. (2016) insists on treating the two variables separately.
The article raises the question about the effectiveness of management preference in formulating a successful strategic plan. The diamond-E framework suggests that strategists should pay attention to the interests of the management when formulating a strategic plan. On the other hand, Judah et al. (2016) argue that consideration of the directorate’s preferences results in the formulation of a strategic plan that lacks genuine customer insight. Such a strategy is difficult to implement. The article suggests that analysts and planners should assume the responsibility of formulating strategic plans and must operate independently without interference by the management. It argues that the strategic planning process should consider the input of those close to the customers. The Diamond-E framework advocates consideration of organizational resources during the strategic planning process. The planners should have precise information about the available and missing resources. On the other hand, Judah et al. (2016) contrast the framework. They propose a biased allocation of resources in an organization. They argue that a strategic planning process should focus on devising ways to redeploy available resources to essential opportunities.
The Diamond-E framework does not give information about when to make strategic decisions. The majority of the strategic planning processes do not leave room for “free-flowing debate outside of the annual planning window, which is typically formal and jam-packed with other priorities” (Judah et al., 2016, par. 11). Judah et al. (2016) argue that organizations must do away with the traditional annual planning cycles to keep pace with the changing environmental forces. Organizational needs should influence the strategic planning processes. The article complements the Diamond-E framework on the significance of considering environmental factors in strategic planning processes. It holds that the factors should influence the strategic programs that a business initiates. It argues that environmental factors may result in a cut off amid the strategic needs and the necessary resources. Thus, a strategic planning process should be a continuous and flexible endeavor to accommodate the changing environmental factors.
The article by Judah et al. (2016) clarifies the weaknesses of the Diamond-E framework. The framework acknowledges management preference as an essential variable that should be considered in strategic planning processes. Nevertheless, it does not appreciate that considering management preferences hampers the capacity to come up with an effective strategic plan. It hinders a company’s ability to meet consumer needs entirely. Judah et al. (2016) advise that the interests of the management should not interfere with the organization’s strategic plan. Thus, the role of the strategic planning process should be left to planners and front-line employees who understand the needs of the target customers. Moreover, the Diamond-E framework suggests consideration of organizational resources when formulating a strategic plan. Conversely, Judah et al. (2016) argue that resources should not hinder a company’s capacity to develop a robust strategic plan. Instead, the organization should allocate resources selectively depending on the significance of the projects.
The article by Springfield (2017) augments the Diamond-E framework. The framework holds that a strategic planning process should consider the financial ability of the organization. Considering the resources that an organization has helps to develop a feasible strategic plan. Springfield (2017) underscores the significance of considering the interests and capabilities of the organization when developing a strategic plan. It enables planners to come up with a strategic plan that does not only meet the needs of the business but also falls within its financial capabilities. Diamond-E framework cites environmental factors as a critical variable that influences the success of a strategic plan. The framework underscores the need to guarantee consistency between organizational strategy and environmental forces. Similarly, Springfield (2017) stresses the importance of ensuring that there is a connection between environmental forces and corporate strategy. Strategic planners should make sure that they consider market conditions when developing a strategic plan. The strategic planning process should anticipate potential changes in the external forces that influence business and come up with a contingency plan.
Springfield (2017) contradicts the Diamond-E framework regarding preferences. The structure suggests consideration of management preferences in the course of the strategic planning process. It would ensure that the developed strategic plan receives the full support of the management. On the other hand, Springfield (2017) believes that strategic planners should consider the interests and preferences of consumers. In other words, consumer preferences should guide strategic planners in developing policies, guidelines, procedures, and tasks that a firm should observe to realize its objectives.
Springfield (2017) confirms the strengths and weaknesses of the Diamond-E framework. The article highlights organizational resources, interests, and environment as essential variables that should be considered during strategic planning processes. It outlines the significance of each variable to the strategic plan. Similarly, the Diamond-E framework acknowledges the value and influence of these variables on organizational strategy. The framework insists on making sure that there is consistency between the variables and the strategic plan. The elaboration of these variables by Springfield (2017) is an affirmation that the Diamond-E framework covers the essential attributes that influence strategic planning processes comprehensively. On the other hand, the article clarifies one weakness of the Diamond-E framework. The framework emphasizes the importance of consistency between strategy and management preferences. It fails to acknowledge that the management choice may not correspond to consumers’ interests and market conditions. A strategic plan should enable a business to meet customer demands and respond to dynamic market conditions. Thus, a strategic planning process should consider consumer interests rather than pay a lot of attention to management preferences.
The assignment has been an invaluable eye-opener on the significance of organizational strategy, strategic planning, and the Diamond-E template. Previously, I believed that corporate strategy facilitated the realization of organizational goals only. However, after the assignment, I understood that Strategy determines the viability of the business. It dictates if an organization will recruit and retain experienced workers. Employees prefer to work in an organization with well-defined goals, vision, mission, and an explicit strategy to achieve them. Previously, I regarded strategic planning as a process that enabled the business to formulate ways to achieve its strategic goals. After the assignment, I now appreciate the role of strategic planning in ensuring that there is consistency between organizational resources and business strategy. Additionally, the task has enabled me to realize the importance of strategic planning in unlocking the underutilized resources. The assignment reveals the significance of the Diamond-E template in enabling organizations to develop effective strategic plans. In the past, I acknowledged the importance of environment, organizational resources, and management preferences in the success of the business. The Diamond-E template has helped me to understand their significance in strategic planning processes.
The assignment has helped me to figure out why most organizations fail to achieve the objectives of their strategic plans. I have learned that a strategy should be flexible to accommodate changes in the internal and external environment. Sadly, many organizations do not formulate flexible strategies. The Diamond-E template has helped me to appreciate the crucial stages that entail strategic planning processes. For instance, it has made me acknowledge the significance of conducting an environmental scan before embarking on a strategic planning process. Moreover, I have understood the importance of ensuring that there is consistency or alignment amid the variables that impact organizational strategy. I have learned that even though the consideration of management preferences and corporate resources is paramount to the strategic planning process, it should not hinder the planners’ capacity to develop a feasible and efficient strategy. Resource allocation should be done selectively according to the value of the strategy to an organization.
From the assignment, it is evident that the Diamond-E template does more than just identifying the variables that impact organizational strategy and strategic planning processes. I have learned that a template is an essential tool for evaluating an existing strategy. Strategic planners can use the Diamond-E template to come up with strategic proposals and novel ideas that might help to boost a business strategy. The assignment has taught me that in the case of inconsistency between a strategy and organization, the management should not change the former. Instead, it should endeavor to transform an organization to suit the formulated strategy. The management should avail the essential resources to enable an organization to implement a formulated strategy. The assignment has taught me that no single strategic planning process applies to all organizations. Instead, individual businesses ought to modify existing strategic planning templates to suit their needs.
Some variables that influence the strategic planning processes include management preferences, organization, resources, and environment. Strategic planners should ensure that there is consistency between these variables and organizational strategy. Lack of coherence may fail a strategic plan, which could be costly to the business. The Diamond-E framework outlines the steps that entail strategic planning processes. They include environmental scanning and organizational analysis. Economists and business intellectuals identify different phases of strategic planning processes. The existing literature on the strategic planning process underscores the significance of environmental examination to ensure that a strategy aligns with external and internal forces of business. While the Diamond-E framework recommends the consideration of management preferences in strategic planning processes, other articles advise planners to pay attention to consumer needs. They argue that conflict in management preferences may result in business formulating a strategy that does not satisfy market conditions. This assignment has helped me to understand the concepts of strategic planning process and strategy. It has also enabled me to appreciate the importance of the Diamond-E template in strategic planning processes. The assignment has helped me understand the importance of ensuring that there is consistency between strategy and environment, resources, organization, and management preferences. Additionally, I have learned that resources should not be a major impediment to the formulation of an effective strategic plan.
iEduNote (2017). Strategic planning process: Nine steps of setting proper strategic plan. Web.
Judah, M., O’Keeffe, D., Zehner, D., & Cummings, L. (2016). Strategic planning that produces real strategy. Web.
Springfield, R. (2017). Strategic planning process: Importance and implications. Web.
Strategic Planning Process: Nine Steps of Setting Proper Strategic Plan By iEduNote
Strategic planning process has 9 steps to make effective use of human and material resources of organization for achieving objectives of organization.
Strategy is the sum of determining the purpose or mission and the basic long-term objectives of an enterprise, and the adoption of courses of action and allocation of resources necessary to achieve these aims.
It covers several steps, starting from the initial examination of the current state of affairs, through the preparation of a plan and down to the final checks on how the plan is affecting daily performance.
Strategy concerned with the direction in which human and material resources will be applied with a view to increasing the chance of achieving selected objectives which requires 9 continuous steps.
Nine Steps of Strategic Planning Process
Step-1: Planning Awareness
The first step in developing a strategic plan is to take stock of the existing situation; an organization’s current mission, its goals, structure, strategy and performance; the values and expectations of the major stake-holders and power brokers of the organization and the environment in which the organization exists and operates.
Commitments made in previous plans must also be reviewed at this stage. Such earlier commitments might have created groups with vested interests, allocated resources, and exerted other influences on decisions about the future.
Former organizational missions are most likely to cause managers to establish commitments and groups which exert considerable influence on future decisions.
The goal, strategy, structure, and organizational performance accompanying the current mission must also be examined.
The organization’s current goals, methods used to achieve them and the rate of success in achieving them — all have a major bearing on the decisions to be made for the next round of strategic planning.
A last element of the planning awareness is the understanding that managers must have knowledge about the environment of the organization.
Step-2: Formulating Goals
The second step for management to develop a strategic plan is to clearly spell out what an organization wants to achieve in the future.
Formulating goals demands from managers’ necessary affirmation and verification of reasons or justification of the organization’s existence, the definition of its mission or purpose, and establish strategic objectives.
The beliefs, values and expectations of the dominant coalition of stake-holders tend to shape any new mission statement and concomitant goals and strategies. Managers vary in their attitude and expectation.
For example, some managers are found more concerned about delivering new goods and services and, hence, give more importance on research and development of goals.
Managers aspiring to dominate the market would like to design goals in terms of acquisitions of and merger with other companies.
Managers with social orientation and responsibility tend to set goals likely to produce favorable social effects along with profits.
In case of large organizations in particular, the process of goal development is complex, “Individuals and groups, both internal and external to an organization, engage in a process of bargaining and out of this exchange organizational goals emerge.
The relative power of these various stakeholders in the organization determines the nature and character of the bargaining process and the goals that ultimately emerge.
Step-3: Analyzing the External Environment
Once the formulation of organizational goals is over, the next step is to look at the factors in the environment which might affect the management’s ability to accomplish them.
Scanning or assessing the environment is the process of collecting information from the external environment about factors having the ability to exert influence on the organization.
The assessment of environment is done on economic, social, political, legal, demographic, and geographic counts.
In addition, the environment is scanned for technological developments, for products and services in the market and for other factors required to determine the competitive situation of the firm.
The main purpose of an environmental assessment is to identify opportunities and threats to the organization so that managers can develop a strategy to face them.
This step may be taken along with the next step i.e. step four, analyzing the internal environment or the organization’s own resources.
Step-4: Analyzing Internal Environment (or own organizational resources)
The analysis of internal environment or the organization’s resources from within identifies its present strengths and weaknesses by examining its internal resources.
Audit and evaluation should be undertaken in matters of research and development, production operation, procurement, marketing, products and services.
Such other important internal factors as human resources and financial resources, the image of the company, the organization’s culture and structure and relations with customers should also be assessed.
The critical factor in an organizational analysis is a statement of what the organization does better or worse than its competitors.
Managers, in other words, must answer the question about their strength or weakness compared with their competitors so far as internal resources are concerned.
Step-5: Identifying Strategic Opportunities and Threats
Having the facts provided by assessment of the external and internal environments in steps three and four respectively, managers proceed to the fifth step.
There they identify their opportunities to achieve their goals, on the one hand, and the threats that could hamper and halt them. Both these factors must be considered for effective strategic planning.
In short, managers should use all the information provided by their scanning of both sides of the environment in the course of strategic planning that are likely to affect their organization in the future.
Step-6: Performing Gap Analysis
Gap analysis identifies the expected gaps between where managers want the organization to go and where it will actually go if they maintain the current strategy.
Gap analysis helps to point out areas in which an organization is likely to succeed, but its real value lies in identifying the limitations of the present strategy and pointing out the areas requiring change.
Thus gap analysis helps determine the causes of the gaps and, most importantly, makes managers concerned about the issues to be seriously addressed in designing a new strategy—the core issue of step seven.
Step-7: Developing Alternative Strategies
At this step of the strategic planning process, managers are faced with the question of whether a new strategy is required and, if so, what kind of strategy it will be. If no gap is found from the above analysis (step six), there is hardly any problem.
But gap analysis quite often tends to show that some changes in strategy are required. Hence managers as a matter of course have to identify new alternatives, evaluate each of them, and choose a new or an alternative strategy.
The nature and extent of gaps exercise considerable influence on the complexity of the process. Sometimes only minor adjustments in existing goals and strategies are required.
An image problem of the company might be rectified by some simple measures such as a change in advertisement or modernization of equipment to expedite delivery of products or services.
At other times, important changes in matters of organizational strategy become necessary.
An organization may require entering into a new market, redesigning a product, or even merging with or acquiring another organization to face new and changing competition.
Finally various alternatives have to be carefully considered and evaluated before the choice is made. Strategic choices must be examined in the light of the risks involved in a particular situation.
Although some opportunities appear to be profitable, they might not be pursued for the risk of failure and consequent bankruptcy of the company.
Time is another critical factor in selecting a strategy. For example, even a very high quality product may fail if it is introduced to the market at a wrong time.
Step-8: Implementing Strategy
However good a strategic plan may be, it cannot fully utilize its potential unless it is implemented effectively at each level of the organization.
A corporate level strategy must generate appropriate strategic plans for each unit of business. Within each business unit, supportive functional strategies must be developed.
Again, as the overall strategy filters downward, managers at each level must follow the full strategic planning process in a similar manner and must develop in their turn, strategies for the major organizational divisions, subdivisions and each major functional area.
Managers must also remember that a strategy must have the support of the employees at every level for its success.
It is therefore important for the managers to give due consideration to the attitudes, values and goals of organization members at the time of implementing a new strategy.
Step-9: Measuring and Controlling Progress
At the last step, managers must evaluate the effectiveness of the strategy being pursued.
Necessary checking should be done by management to see whether it conforms to the strategy that they designed in step seven and is achieving the goals that they set forth in step two.
The results of the evaluation and control measures during this last step of the process inform managers about the actions required to enforce a strategy, which is not being followed or to revise or improve a strategy that is not working.
At this final stage managers can employ several criteria to measure the success of a strategy. Some of them are;
- External consistency: How far is the strategy helping the organization to cope with the demands of the external environment?
- Internal consistency: Is the strategy using organizational resources to achieve the objectives set by management?
- Competitive advantage: Does the strategy enable the organization to do things better than its competitors?
- Degree of risk: Is the risk involved in the strategy consistent with the organization’s expectations?
- Contribution to society: Is the strategy socially responsible?
- Motivation: Is the strategy contributing to the morale, motivation and commitment of the people in the organization?
If the plan fulfills these above criteria at the final stage of the strategic planning process, managers might feel assured that the strategy is working well and according to their expectation.
Strategic Planning That Produces Real Strategy
February 10, 2016 Bain Brief By Mark Judah, Dunigan O’Keeffe, David Zehner and Lucy Cummings
The email arrives and your jaw clenches: It’s planning time again and there’s nothing you can do about it. No matter what else is on your plate, you know that the next month or so will be dominated by filling out templates and sitting through endless planning sessions. The irony is that you have some strategic ideas you’re really excited about but you figure you’ll have to work the back channels to get them in front of the right people. Previous experience has taught you that your company’s formal planning process is where the best ideas go to die.
If this sounds familiar it’s because the typical strategic planning process is not delivering what it should at most companies. When we asked nearly 300 global executives to rate their company’s planning process, only one in three said that the strategy it produced met three vital criteria: bold ambition, adaptability in the face of changing market conditions and concrete guidance for management and the front line (see Figure 1).
In our experience, few companies have a strong strategic planning process that is well-supported across the organization. Yet more than 60% of the executives we surveyed said they are satisfied with the very processes that lead to such mediocre strategy. Why? Some executives may have a different conception of what a good strategy looks like, but most have simply lowered their expectations. They either believe their strategic planning process is as good as it’s ever going to get, or they feel that fixing it would mean devoting even more time and effort to a difficult and tedious process—the last thing they want to do.
The companies that produce great strategy take a different approach. They treat strategic planning as a critical capability that can and should be world class. It is as much a reason for their success as continuous improvement is for a low-cost manufacturer or service excellence is for a high-end retailer. These companies have invested in the people, processes and tools that allow them to identify the most important strategic priorities and adjust as needed to remain sharp and relevant as conditions change. The process creates time for focused strategic debates, dials up the cadence of decision making, and engages the organization at all levels to both think strategically and translate strategy into action.
There is no one-size-fits-all approach. But we find that world-class strategic planning incorporates five key principles.
Principle 1: Strategic planning and budgeting are both essential, but they aren’t the same thing
A great strategy strikes a careful balance between bold ambition and practical implementation, but ambition leads the way. Too many companies conflate strategy and budgeting in a single process that muddies the discussion and turns priorities on their head. Instead of the smartest, most ambitious strategic ideas determining where the company should invest to support both today’s growth engine and tomorrow’s, the organization spends an inordinate amount of time debating math and updating budget targets, resulting in only incremental improvement each year. At the other end of the spectrum, the top leaders at some companies devise strategy in a bubble, coming up with big, lofty ideas that they never ground in operational reality.
|INTERACTIVE FEATURE |
Is your strategic planning world class?
Answer 12 questions to assess where your company’s strategic planning process stands.
Our research suggests that separating strategic planning and budgeting can improve the quality of strategy dramatically—as much as 40% (see Figure 2). That’s because it forces leadership teams to schedule ample time for healthy debate about customer needs, competitive dynamics and business conditions. The most effective teams are careful to develop processes that link strategy to budgetary and operational planning. But the budget is always an outcome of the strategic aspiration, not the other way around.
Top leadership at one global resource company, for instance, focuses the first part of each year on strategy development. This is the company’s chance to take stock—to train its sights outward and debate how markets are changing and what opportunities are emerging. Executives then spend the next few months on the practical implications of strategy, developing detailed budgets, operational plans and goals against key performance indicators.
Budgeting remains a top priority, but it doesn’t get in the way of more expansive thinking.
Principle 2: Strategy amplifies the voices of the front line and customers
Strategic planning is traditionally viewed as the realm of the C-suite executive. Planners and analysts set the agenda and top executives mull over alternatives, eventually meting out decisions that will guide action for the next 12 months or longer. The problem with this approach is that it isolates decision makers from the customers they are trying to serve. The company’s “doers”—those on the front line who execute strategy—are separated from the “thinkers”—those who make decisions. Not surprisingly, this very often leads to strategy that lacks real customer insight and is exceptionally difficult to execute.
The most effective strategic development processes amplify the voice of the customer. They tap the best thinking of those closest to the market by establishing deep ties to the people on the front line who deliver the customer promise every day. Instead of pushing a fully formed strategy down through the organization, these processes incorporate the voice of the customer and translate it into a set of behaviors that the front line can embrace wholeheartedly. This eliminates distance between the C-suite and customers and builds the kind of organizational will that leads to strong execution.
Principle 3: Resource allocation is purposely undemocratic
Many planning processes default to “last year plus” when allocating resources across the organization. Planners spread investment around democratically, divvying up precious resources among every unit that has received an allocation in the past with little regard to real future potential. As each unit lobbies on its own behalf, it only seems “fair” to reward satisfactory performance.
But a winning strategy demands ruthless prioritization; satisfactory is not good enough. The planning process should be biased toward defining the company’s most critical future growth opportunities and purposely allocating the largest share of dollars, time and even talent against them. It should encourage the company to staff “big jobs with big people”—recruiting the best performers from the lower-value areas where they may have become entrenched. Strategy isn’t figuring out how to make the most of every opportunity but a rigorous exercise to determine how the company can redeploy trapped resources and overwhelm the opportunities that really matter.
Principle 4: Don’t let the earth’s rotation around the sun determine when you make decisions
Most strategic planning processes leave little opportunity for free-flowing debate outside of the annual planning window, which is typically highly formal and jam-packed with other priorities. Many important issues receive minimal airtime or never see the light of day. This tends to encourage a parallel, informal process in which leaders make many critical decisions ad hoc, influenced by those with the loudest voices—not necessarily those with the best ideas or the most critical priorities.
Keeping pace with today’s dynamic markets requires breaking the stranglehold of the typical annual planning cycle. Our research shows that companies are 60% more likely to make timely, high-stakes decisions if business needs, not the calendar, determine the cadence of their strategic planning process. That often means creating a continuous, issues-based strategic agenda that runs throughout the year. Top decision makers need regularly scheduled opportunities for real, no-holds-barred debates on strategic alternatives ranked by dollar value and urgency. This avoids one-and-done thinking and promotes a more flexible cycle in which critical initiatives are deployed, monitored and adjusted in real time.
One large software company discovered the limitations of a static, calendar-based planning process several years ago when market changes during the year created a sudden disconnect between strategic needs and the resources required to pursue them. A year-end shortfall forced the company to make a number of decisions that were both painful and distracting. The solution was to create a process that set ambitious multiyear goals but then institute a continuous planning forum to debate and resolve the highest value issues on a real-time basis—tracking, tuning and reconciling resource allocation along the way. The new process created a rolling, decision-focused dialogue around the most critical strategic and operational issues facing the company. And it enabled the organization to respond to changes in the market or competitive landscape more quickly and effectively.
Principle 5: Leaders focus on the most important decisions and simplify the rest
How do companies create time for a regular cadence of strategic debate? They radically simplify the leadership agenda to exclude many of the “business as usual” issues that tend to drag strategic discussions into the weeds. That means empowering the finance function and business units to make decisions about budgeting and operational issues that are important but can be handled just as effectively by capable staff.
Companies also need to zero-base the planning process itself. One particularly noteworthy finding in our research was that C-level executives were 37% more likely to declare satisfaction with their company’s strategic planning process than others we surveyed. The reason: Top leaders are very often isolated from the worst of the annual planning ritual—the thousands of hours spent filling out templates or preparing the boss for meetings with thick binders of information. Zero-basing forces leaders to imagine the process with a clean sheet of paper and determine what information is truly critical to making robust strategic decisions. Leadership can’t afford a planning process layered with bureaucratic complexity that just diverts focus from what really matters: figuring out how to serve customers better than the competition, both now and in the future.
A world-class strategic planning capability based on these five principles eliminates the noise from the planning process, creating essential time for debate and distilling the agenda down to the critical issues that will truly propel the company to sustained profitability and leadership. However, hardwiring a strategic capability at any company is a multiyear, multiphase process. Through our client work and research, we have found that many companies are still struggling with the basics. And not every organization will want—or need—to develop a world-class capability across the board. Market dynamics, cultural issues and other organization-specific considerations will likely determine what the end state should look like for any particular company.
A critical first step is self-diagnosis: Is your strategic planning process an annual ritual that your organization reluctantly endures? Or is it a means to empower the entire company—from the front line to the C-suite—to dream big, define a mission and drive toward it relentlessly? At a time when unprecedented turbulence in global markets requires bold vision, world-class execution and quick adaptation, the answer can be a game changer. It may spell the difference between settling for satisfactory underperformance or stretching toward full potential.
Mark Judah is a Bain partner based in Sydney and a leader in the firm’s Strategy practice in the Asia-Pacific region. Dunigan O’Keeffe is a partner based in Mumbai and leads Bain’s Asia-Pacific Strategy practice. David Zehner is the managing partner of Bain’s Australia and New Zealand offices and a Strategy practice leader. Lucy Cummings is a director in Bain’s Global Strategy practice based in Washington, DC.
Strategic Planning Process: Importance and Implications
Updated Mar 25, 2017 Ricky Springfield
The strategic plan is important in the development of any business organization. The strategic plan provides basis for the activities in the business, thereby significantly impacting the performance of these activities and the performance of the entire organization. Some of the most important aspects of strategic planning include the vision, mission, values and the strategy used in the organization of interest. In addition, other factors in the strategic planning activity of the organization include the timeliness of the strategies, as well as variables like the business situation, the available courses of action, and the desired outcomes. The aim is to develop a strategic plan that suits the business condition based on an accurate evaluation of the internal factors and external factors influencing the operations of the organization.
The situation of the business organization is also a major factor in the development of business strategic plans. In this regard, strategic planning significantly relates to a variety of activities throughout the business organization. The significant connections between strategic planning and practically every component of the business organization emphasizes the significance of strategic planning in enforcing the overall growth and progress of the organization of interest. The following analysis of the significance of strategic planning in a business organization considers the overall context of strategic planning in order to establish the connection between strategic planning and the development of the organization, the impacts of strategic planning and management performance, the impacts of strategic planning on organizational performance, the efforts of strategic planning and organizational viability and attractiveness to employees and investors, and the overall ability of the organization to ensure sustainable and viable operations in the long-term. It is argued that strategic planning serves as a major foundation on which an organization builds its growth and expansion, such that strategic planning is a critical success factor in the development of organizations.
Strategic Planning Context
The context of strategic planning involves the needs of the business organization, including the need for the organization to ensure that its operations properly match the conditions of the market. For instance, the market situation changes over time, such that the dynamism of the market condition can significantly impact the demand for the products and services of the organization of interest. The context of strategic planning requires consideration for the changes that occur in the market situation in order to optimize the development of the organization.
The development of the organization depends on its ability to address the current preferences, and trends and expectations of the consumers in the market. Such a condition means that strategic planning is usually conducted for the purpose of developing new guidelines, policies, programs, tasks and procedures that the entire organization could follow in order to maximize the capability of the organization in addressing the demand and expectations of consumers in the target market. Such a context of strategic planning emphasizes the ability of managers to maximize the performance of the organization through the strategic planning process. In effect, strategic planning is generally viewed as a managerial process or, sometimes, a managerial tool, for developing policies, programs, rules and regulations that impose requirements and controls the activities within the organization, for the purpose of maximizing the performance of the entire organization given its current context.
Another factor in the context of strategic planning is that it is based on the abilities and limitations of the business organization of interest. For instance, as mentioned earlier, managers engage in the strategic planning process in order to maximize the performance of the organization. However, the reality is that managers need to consider the capabilities of the members of the organization, i.e. the workers of the business, because the characteristics of these organizational members directly influence or even define the capabilities of the organization in fulfilling any strategic plan.
The context of strategic planning involves the skills, knowledge, abilities, limitations, concerns and so on, of the members of the organization. Managers need to consider these characteristics of the workforce in order to ensure that the resulting strategic plan would be able to contribute to the maximization of the performance of the business organization of interest. The context of the strategic planning process requires consideration for the characteristics of the internal environment of the organization, as well as consideration for the characteristics of the external organizational environment in order to optimize the effectiveness and potential for success in the implementation of the resulting strategic plan.
The Strategic Planning Process and Managerial Performance
This significant relationship between the activities of managers and the strategic planning process emphasizes the reality that the strategic planning process impacts managerial performance or management performance in the organization. For instance, the activities of managers in an organization generally involve strategic planning requiring an analysis of the internal organizational environment and the external organizational environment, such that the ability of the managers to address issues identified in the internal organizational environment and issues identified in the external organizational environment depends on the ability of these managers to effectively utilize the strategic planning process and developing appropriate solutions and actions to address such issues.
The effectiveness of the strategic planning process to arrive at such solutions directly impacts the effectiveness of managers in addressing such solutions. As a result, it can be argued that the performance of managers in providing the appropriate solutions for the issues encountered in the organization depend on the specific activities involved in the strategic planning process. Therefore, the strategic planning process influences the capabilities of managers in providing support for the organizational ability to address his issues as the organization develops.
Strategic Planning and Human Resource Management
The strategic planning process involves the characteristics of the human resources of the organization, especially because of the fact that the resulting strategic plan will be implemented through the action of the employees in the organization. It is necessary for the managers to ensure that the resulting strategic plan would be able to support or commitment from the workers in the organization. The inability of the managers to get such commitment and support for the resulting strategic plan could spell disaster in the implementation of the strategic plan. The lack of such commitment and support could lead to the failure of implementation of the strategic plan and the failure of the managers to attain the desired results in the implementation of the plans.
Strategic planning is a significant factor that influences the ability of the managers to drive and affect the specific activities of the individual members of the organization. As mentioned earlier, the commitment and support of the individual workers in the organization depends on how the resulting strategic plan matches the characteristics of the workers. For example, the expectations and preferences of workers significantly influence the probability of success of implementation of the strategic. Strategic planning impacts the management’s performance because it directly influences the ability of the resulting strategic plan in getting the commitment and support of the human resources of the organization in order to maximize the output or consequences of implementation of the plan.
In relation, the performance of individual workers could greatly dependent on the strategic plans developed through the efforts of the managers of the organization. As mentioned earlier, alignment is necessary between the characteristics of the human resources and the characteristics of the strategic plan. The activities of the individual workers would demand on the natural characteristics of the strategic plan implemented in the organization. In effect, the strategic planning process influences the alignment between the characteristics of the strategic plan and the characteristics of the workers in the organization, such that the strategic planning process also influences the performance of individual workers. The natural ability of the workers to satisfy the requirements of their jobs would be significantly influenced through the characteristics of the strategic plan. Strategic planning influences the productivity levels of the workers in the organization.
Strategic Planning and Organizational Performance
Strategic planning directly impacts the organizational performance. The level of organizational performance directly depends on the level of performance of the managers. The effectiveness of the managers to address the specific needs, issues and concerns of the organization influences the ability of the organization to address its own means, especially because of the fact that the managers are the ones who provide direction for the entire organization. The ability of the managers to engage in the strategic planning process to arrive at the best possible strategic plans determines the ability of the organization to perform for the satisfaction of its goals and objectives, and to achieve further improvement or growth in its development.
The level of performance of the individual workers in the organization directly determines the ability of the organization to achieve its goals and objectives. The human resources of the organization define the capabilities and capacities of the organization to change an address his issues, needs, and challenges. As a result, it is necessary for the managers to ensure that the strategic planning process would be able to bring out the best possible productivity levels from the human resources of the organization. The alignment of the strategic planning process of specific characteristics of the human resources of the organization will directly determine the natural ability of the organization to perform according to the desired goals and objectives of the business.
Strategic Planning and Business Viability
Strategic planning directly influences the viability and attractiveness of the business organization for employees. Every business organization needs to maximize its human resources in order for it to maximize its organizational performance and the ability to achieve its goals and objectives. Human resources directly determine the capabilities of the organization to change according to the changes in the market. Human resources also determine the ability of the organization to develop particular products and services and to provide such products and services to the target consumers.
The human resources of the business organization significantly impact his natural ability of the business organization to achieve its goals and objectives. The support that the human resources offer for the achievement of goals and objectives of the organization serves as a critical part in the success of the business. It is necessary for the managers of the business organization to maximize the overall attractiveness of the organization in order to attract the best possible employees for the organization. Managers want to make sure that the human resources of the organization have the best possible skill sets and the best possible background and knowledge so that such human resources would be able to provide the necessary support for the continued growth and development of the business.
One of the most important factors that employees usually look at when it comes to applying for certain jobs in large organizations is the strategic planning process in the organization. For instance, employees want to make sure that the strategic planning process considers the needs and concerns of employees. This is so because of the fact that employees want to feel that they are valued in the organization. Workers want to make sure that they are part of the organization and that they contribute significantly to the positive development of the organization, rather than just simply working for the fulfillment of specific tasks or procedures. Workers want to be able to fulfill the requirements of their jobs. Workers tend to analyze the strategic planning process in the organization and consider it as an indicator of the connection between the managers and the subordinates or the workers throughout the organization.
It is necessary for the managers to align the strategic planning process with the concerns, interests and the abilities of the workers throughout the organization in order to maximize the attractiveness of the business organization to potential applicants. The maximization of the alignment of the characteristics of the strategic planning process to the characteristics of the employees in the organization could help in improving the overall attractiveness of the organization to potential applicants. This also means that the maximization of the alignment of the characteristics of the strategic planning process to the characteristics of the employees could directly influence the ability of the organization to attract the best possible employees that could contribute to the continued growth and development of the business.
Strategic planning is important because it influences the attractiveness of the business to investors. These organizations greatly depend on their ability to attract investors. This is especially true in business organizations that are already large or are already public. For instance, large business organizations like Walmart require support from investors in order for these companies to continue to grow and develop. Basically, the attractiveness of the business organization to investors influences the capability of the organization to access valuable sources of capitalization. For instance, investors provide the bulk of the financial resources that as organizations use, which means that it is necessary for the managers of business organizations to maximize the effectiveness of the business to potential investors.
The attractiveness of the business to potential investors means the ability of the organization to access financial resources that it could use for its continued growth and development. Such attractiveness of the business organization is dependent on the strategic planning process. This is so because of the fact that many investors examine this interdependent process of the organization, as well as the resulting strategic plans as basis for their decisions on whether or not to invest in the organization. When investing in a particular company, investor usually looks at the company portfolio along with the strategic planning process and the strategies of the organization in order to determine the profitability and attractiveness of the organization.
It is crucial to managers of the organization to make sure that the strategic planning process and the resulting strategic plans are as attractive as possible to the potential investors of the business in order to maximize the accessibility of available financial resources that could be used for the support of the growth and development of a business organization. Failure of the managers and leaders of the organization to maximize the effectiveness of the strategic plan and attractiveness of the strategic planning process could result in the inability of the business organization to access such necessary financial resources. The high-level effectiveness of the managers and leaders to optimize the attractiveness of the strategic planning process and the attractiveness of the resulting strategic plans investors means the ability of the organization to get the necessary financial resources for its continued growth and development, especially in the face of competition among organizations to attract investors and competition among companies to gain access to limited financial resources available in the capital market.
Strategic planning influences the ability of the organization to survive in the long term. The viability and survival of the business organization in the long term depends on the capacity of the organization to change according to the changes of its market. Basically, it is necessary for the business organization to change in order for you to effectively address the needs or demands in the target market. For example, it is important for a business organization to change its products and services over time in order to ensure that these products and services continue to match the expectations and needs of the customers. Such changes could occur in the form of variations in the features of products and services. These changes could also occur in the form of the development of entirely new products and services in order to maximize the capability of the organization to get the attention of the potential consumers.
The strategic planning process in the organization determines the ability of the organization to become flexible enough in order to change according to the changes in the market. The specific characteristics of the strategic planning process determines the ability of the organization to change and to effectively address the changes in the market demand, trends, expectations, and so on. As a result, it is of critical importance for the managers and leaders of the organization to ensure that the strategic planning process would be able to provide support for the flexibility of the organization.
Strategic planning is a critical factor that influences the success on the organization and the long-term. Strategic planning affects the performance of managers. Strategic planning also influences the performance of individual workers in the organization. Strategic planning also influences the attractiveness of the organization to employees and potential investors. Moreover, strategic planning also affects the flexibility of the organization to address Larry’s changes in the market, such as changes in the preferences of consumers. Therefore, strategic planning determines the long-term success of the business.