20 Bay Street, 11th Floor
Toronto ON
M5J 2N8 Canada Phone +1.416.846.6185 Contact Us
Everyone has an opinion about strategic planning. Companies who are the envy of the stock market are applauded for their business strategies. Losers are lambasted for choosing the wrong one. Strategic planning is widely viewed as the most important business process for any organization.
But most members of the public and even analysts are unaware of a disturbing reality: for many companies today, strategic planning is little more than a brainstorming, budgeting and creative writing exercise during which their leaders and managers actually spend little time thinking strategically. And their formal “strategic plans” are often poorly articulated, overly complex, under-communicated, and generally not understood or even read by the majority of their employees.
Whether the decline of strategic business planning is being driven by a focus on short-term results, public reporting or other combinations of factors is debatable. What is clear is that the recession has accelerated an already worrisome trend, as companies defer their long-term planning to focus on resolving short-term issues. As a result, “true” strategic planning efforts are in a steep decline.
As an example, let’s look at a recent “strategic planning process” for the consumer health unit of a global consumer packaged goods company.
Their process is spread out over 5 months and results in a 100 page PowerPoint presentation plus multiple spreadsheets. The bulk of the plan was developed by an unfortunate individual in marketing who created a draft using a generic corporate template, high-level guidance and market research as filler. It was then sent to departments to complete sections. Each wrote vision statements which largely justified projects already being worked on and compiled a “wish list” of investments they wanted in the next budget. Leaders got together only once, near the end of the process, to refine the document in essentially a fiscal budgeting session. The marketing individual then “wordsmithed” the final output.
When department heads were asked for their views on the process and results, their comments were consistent: the output was not strategic, the process only used because it was required by the corporate parent, sections were completed in isolation, and not one had read the entire document because “it was long, confusing, and didn’t help”. Departments criticized the lack of specifics from executives, who in turn wondered why there were so many projects listed which didn’t fit their vision. Significant last-minute removal and de-prioritization of projects had also become the norm...
Strategic planning cannot be accomplished using an over-the-wall, transactional process. It must be done collaboratively by leaders who physically work together to make decisions using insights from every department. It is also not the responsibility of one person; someone needs to define the process and facilitate it, but all functions need to participate. And the final output is not a binder – it should be a series of basic content elements (“the meat of the strategy”) which can be placed in presentation slides, on walls, or wherever it is needed to communicate to and align your troops.
But most members of the public and even analysts are unaware of a disturbing reality: for many companies today, strategic planning is little more than a brainstorming, budgeting and creative writing exercise during which their leaders and managers actually spend little time thinking strategically. And their formal “strategic plans” are often poorly articulated, overly complex, under-communicated, and generally not understood or even read by the majority of their employees.
Whether the decline of strategic business planning is being driven by a focus on short-term results, public reporting or other combinations of factors is debatable. What is clear is that the recession has accelerated an already worrisome trend, as companies defer their long-term planning to focus on resolving short-term issues. As a result, “true” strategic planning efforts are in a steep decline.
As an example, let’s look at a recent “strategic planning process” for the consumer health unit of a global consumer packaged goods company.
Their process is spread out over 5 months and results in a 100 page PowerPoint presentation plus multiple spreadsheets. The bulk of the plan was developed by an unfortunate individual in marketing who created a draft using a generic corporate template, high-level guidance and market research as filler. It was then sent to departments to complete sections. Each wrote vision statements which largely justified projects already being worked on and compiled a “wish list” of investments they wanted in the next budget. Leaders got together only once, near the end of the process, to refine the document in essentially a fiscal budgeting session. The marketing individual then “wordsmithed” the final output.
When department heads were asked for their views on the process and results, their comments were consistent: the output was not strategic, the process only used because it was required by the corporate parent, sections were completed in isolation, and not one had read the entire document because “it was long, confusing, and didn’t help”. Departments criticized the lack of specifics from executives, who in turn wondered why there were so many projects listed which didn’t fit their vision. Significant last-minute removal and de-prioritization of projects had also become the norm...
Strategic planning cannot be accomplished using an over-the-wall, transactional process. It must be done collaboratively by leaders who physically work together to make decisions using insights from every department. It is also not the responsibility of one person; someone needs to define the process and facilitate it, but all functions need to participate. And the final output is not a binder – it should be a series of basic content elements (“the meat of the strategy”) which can be placed in presentation slides, on walls, or wherever it is needed to communicate to and align your troops.
Great business strategies help people to “connect-the-dots”. They take high-level goals which executives know are important and cascade them down to prioritized areas of focus for each business unit or department. And, just as importantly, they document the rationale behind each decision to explain why some projects are priorities and others need to be put on the back burner.
A strategic business plan summarizes the investment priorities of a business by answering simple but tough questions in a logical sequence:
A strategic business plan summarizes the investment priorities of a business by answering simple but tough questions in a logical sequence:
The result is a charted course of action. The first time around, it is not perfect and does not need to be. What is important is that certain priorities have been agreed upon, investments will be made and people are moving forward. It is also not static – it needs to be a living and breathing framework that can be adjusted in both quarterly and annual cycles. As new insights are received, the strategic course is corrected and refined. The strategic planning process begins to takes less time and gain momentum.
The company described above decided to try this revised approach earlier this year, resulting in several revelations. First was that the act of true, cross-functional strategic planning was more difficult than they realized. Second was the tremendous value gained by answering the key questions together, and what kinds of additional research and insight would become critical to enabling their strategy to succeed. Last, but not least, was the satisfaction of reaching a level of understanding and alignment with the conclusions that would never have been accomplished through the old process.
So why do so many companies not do this, certainly not consistently?
One big reason is a lack of understanding about what specifically needs to be in a strategic plan to align and drive stakeholders forward. People need to be reminded of the basics and shown examples of what a good strategic plan looks like in order to agree upon the need to do (or redo) one.
A second is a perception of the effort required. A first, true strategic plan can be completed by a cross-functional management team holding about three meetings for 1 to 2 days each, supported by guidance from executives and research staff. It should never become a multi-month or many person-year effort.
A third, but less talked-about reason is the concern about avoiding embarrassment. Executives don’t like making wrong decisions publicly, and they are also not good at starting with blank sheets of paper. Solve this problem by using a mid-level manager group to draft an initial strategy and then present it to the leaders for confirmation and redirection. Executives are much better at telling you what they like and don’t like, so give them something to edit and you’ll end up with much more clarity as a result.
As your company emerges from the recession and wants to determine its next areas of growth and success, be sure to understand and use a truly effective strategic business planning process. It could be the highest-return investment your company makes in the years to come.
The company described above decided to try this revised approach earlier this year, resulting in several revelations. First was that the act of true, cross-functional strategic planning was more difficult than they realized. Second was the tremendous value gained by answering the key questions together, and what kinds of additional research and insight would become critical to enabling their strategy to succeed. Last, but not least, was the satisfaction of reaching a level of understanding and alignment with the conclusions that would never have been accomplished through the old process.
So why do so many companies not do this, certainly not consistently?
One big reason is a lack of understanding about what specifically needs to be in a strategic plan to align and drive stakeholders forward. People need to be reminded of the basics and shown examples of what a good strategic plan looks like in order to agree upon the need to do (or redo) one.
A second is a perception of the effort required. A first, true strategic plan can be completed by a cross-functional management team holding about three meetings for 1 to 2 days each, supported by guidance from executives and research staff. It should never become a multi-month or many person-year effort.
A third, but less talked-about reason is the concern about avoiding embarrassment. Executives don’t like making wrong decisions publicly, and they are also not good at starting with blank sheets of paper. Solve this problem by using a mid-level manager group to draft an initial strategy and then present it to the leaders for confirmation and redirection. Executives are much better at telling you what they like and don’t like, so give them something to edit and you’ll end up with much more clarity as a result.
As your company emerges from the recession and wants to determine its next areas of growth and success, be sure to understand and use a truly effective strategic business planning process. It could be the highest-return investment your company makes in the years to come.
The Demise of Strategic Planning
The final business strategy needs to be summarized in as few pages as possible so that anyone, internal or external, can pick it up and “get it” within a few minutes. It should use simple frameworks and diagrams to communicate a lot of information as crisply as possible. A great strategic plan is deceptively simple and clear when you see it. Getting it done efficiently and effectively is the key.
The best strategic planning processes hold a series of cross-functional meetings where participants assess the latest information available and then answer those tough questions above to the best of their ability. It starts at the top, and cascades down, with each piece of the plan developed in sequence and fed back to more senior levels if clarifications are needed. An objective facilitator guides the process and compiles decisions in a structured format so that it can be used and communicated effectively.
The best strategic planning processes hold a series of cross-functional meetings where participants assess the latest information available and then answer those tough questions above to the best of their ability. It starts at the top, and cascades down, with each piece of the plan developed in sequence and fed back to more senior levels if clarifications are needed. An objective facilitator guides the process and compiles decisions in a structured format so that it can be used and communicated effectively.
What are your specific business goals, stated with both amounts and timeframes?
This is what the leaders need to provide, in simple but very carefully crafted statements.
What is the role of each unit or area of investment (for example, marketing, sales, product development, geographic expansion...) in achieving those goals?
In other words, what should each growth or profitability driver to contribute towards the overal goals.
What areas/markets/domains could the company invest in, which ones are a strategic priority at this time (and which are not), and why?
This is the core of the strategy, where cross-functional leadership and management teams use shared insights collaboratively to decide where and where not to invest their resources.
How much will you limit the total investment in each area?
There are always less resources available than desired, so it is better to invest well in a few areas than dilute invesment across too many. This step describes where you will place your best, and how much on each priority area.
Finally, what is a plan of attack for each invesment area including a roadmap of time-phased major projects that will realize the overall strategy?
In other words, what the organization will need to accomplish and when in order to achieve succcess.
Fax +1.416.214.2043
Knowledge Center
© 2010 StratForm