Strategic planning

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Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy.

In order to determine the future direction of the organization, it is necessary to understand its current position and the possible avenues through which it can pursue particular courses of action. Generally, strategic planning deals with at least one of three key questions:[1]

  1. "What do we do?"
  2. "For whom do we do it?"
  3. "How do we excel?"

Many organizations view strategic planning as a process for determining where an organization is going over the next year or—more typically—3 to 5 years (long term), although some extend their vision to 20 years.

George Friedman in The Next 100 Years summarises "the fundamental principle of strategic planning: hope for the best, plan for the worst".[2]

Key components[edit]

Video explaining the strategic plan of the Wikimedia Foundation

The key components of 'strategic planning' include an understanding of an entity's vision, mission, values and strategies. (In the commercial world a "Vision Statement" and/or a "Mission Statement" may encapsulate the vision and mission).

Organizations sometimes summarize goals and objectives into a mission statement and/or a vision statement. Others begin with a vision and mission and use them to formulate goals and objectives. A newly emerging approach is to use a visual strategic plan such as is used within planning approaches based on outcomes theory. When using this approach, the first step is to build a visual outcomes model of the high-level outcomes being sought and all of the steps which it is believed are needed to get to them. The vision and mission are then just the top layers of the visual model.

Many people mistake the vision statement for the mission statement, and sometimes one is simply used as a longer term version of the other. However they are distinct; with the vision being a descriptive picture of a desired future state; and the mission being a statement of a rationale, applicable now as well as in the future.[citation needed] The mission is therefore the means of successfully achieving the vision. This may be in the business world or the military.

For an organization's vision and mission to be effective, they must become assimilated into the organization's culture. They should also be assessed internally and externally. The internal assessment should focus on how members inside the organization interpret their mission statement. The external assessment — which includes all of the businesses stakeholders — is valuable since it offers a different perspective. These discrepancies between these two assessments can provide insight into their effectiveness.

Tools and approaches[edit]

Among the most widely used tools for strategic planning is SWOT analysis which means (Strengths, Weaknesses, Opportunities, and Threats). The main objective of this tool is to analyze internal strategic factors, strengths and weaknesses attributed to the organization, and external factors beyond control of the organization such as opportunities and threats.

Other tools include:

Situational analysis[edit]

It is important to analyze the organization and its environment as it is at the moment and how it may develop in the future when developing strategies. The analysis has to be executed at an internal level as well as an external level to identify all opportunities and threats of the external environment as well as the strengths and weaknesses of the organizations.

There are several factors to assess in the external situation analysis:

  1. Markets (customers)
  2. Competition
  3. Technology
  4. Supplier markets
  5. Labor markets
  6. The economy
  7. The regulatory environment

It is rare to find all seven of these factors having critical importance. It is also uncommon to find that the first two - markets and competition - are not of critical importance. (Bradford "External Situation - What to Consider")

Analysis of the external environment normally focuses on the customer. Management should be visionary in formulating customer strategy, and should do so by thinking about market environment shifts, how these could impact customer sets, and whether those customer sets are the ones the company wishes to serve.

Analysis of the competitive environment is also performed, many times based on the framework suggested by Michael Porter.

With regard to market planning specifically, researchers have recommended a series of action steps or guidelines in accordance to which market planners should plan.[4]

Goals, objectives and targets[edit]

Strategic planning is a very important business activity. It is also important in the public sector areas such as education. It is practiced widely informally and formally. Strategic planning and decision processes should end with objectives and a roadmap of ways to achieve them. The goal of strategic planning mechanisms like formal planning is to increase specificity in business operation, especially when long-term and high-stake activities are involved.

One of the core goals when drafting a strategic plan is to develop it in a way that is easily translatable into action plans. Most strategic plans address high level initiatives and overarching goals, but don't get articulated (translated) into day-to-day projects and tasks that will be required to achieve the plan. Terminology or word choice, as well as the level at which a plan is written, are both examples of easy ways to fail at translating your strategic plan in a way that makes sense and is executable to others. Often, plans are filled with conceptual terms which don't tie into day-to-day realities for the staff expected to carry out the plan.

The following terms have been used in strategic planning: desired end states, plans, policies, goals, objectives, strategies, tactics and actions. Definitions vary, overlap and fail to achieve clarity. The most common of these concepts are specific, time bound statements of intended future results and general and continuing statements of intended future results, which most models refer to as either goals or objectives (sometimes interchangeably).

One model of organizing objectives uses hierarchies. The items listed above may be organized in a hierarchy of means and ends and numbered as follows: Top Rank Objective (TRO), Second Rank Objective, Third Rank Objective, etc. From any rank, the objective in a lower rank answers to the question "How?" and the objective in a higher rank answers to the question "Why?" The exception is the Top Rank Objective (TRO): there is no answer to the "Why?" question. That is how the TRO is defined.

People typically have several goals at the same time. "Goal congruency" refers to how well the goals combine with each other. Does goal A appear compatible with goal B? Do they fit together to form a unified strategy? "Goal hierarchy" consists of the nesting of one or more goals within other goal(s).

One approach recommends having short-term goals, medium-term goals, and long-term goals. In this model, one can expect to attain short-term goals fairly easily: they stand just slightly above one's reach. At the other extreme, long-term goals appear very difficult, almost impossible to attain. Strategic management jargon sometimes refers to "Big Hairy Audacious Goals" (BHAGs) in this context. Using one goal as a stepping-stone to the next involves goal sequencing. A person or group starts by attaining the easy short-term goals, then steps up to the medium-term, then to the long-term goals. Goal sequencing can create a "goal stairway". In an organizational setting, the organization may co-ordinate goals so that they do not conflict with each other. The goals of one part of the organization should mesh compatibly with those of other parts of the organization.

See also[edit]

References[edit]

  1. ^ J. Scott Armstrong (1986). "The Value of Formal Planning for Strategic Decisions: A Reply". Strategic Management Journal 7: 183–185. 
  2. ^ Friedman, George (2010) [2009]. The Next 100 Years: A Forecast for the 21st Century. Black Inc. p. 69. ISBN 9781921825545. Retrieved 2013-08-03. "[...] the Chinese must use their growing economic strength to develop military options against the United States. They will simply be acting in accordance with the fundamental principle of strategic planning: hope for the best, plan for the worst." 
  3. ^ Renger, R., & Titcomb, A. (2002). A Three Step Approach to Teaching Logic Models. American Journal of Evaluation, 23(4), 493-503.
  4. ^ J. Scott Armstrong (1985). "Evidence on the Value of Strategic Planning in Marketing: How Much Planning Should a Marketing Planner Plan?". Strategic Marketing and Management: 73–87. 

Further reading[edit]