"All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved."
Effective strategic planning is essential for any entrepreneur who envisions profit and growth for their company. It’s the key to looking toward the future and forging a deliberate path for your organization. In today's competitive marketplaces, effective strategic plans helps executives build their companies based on the values that matter most of them while maintaining their focus and sanity. The alternative is to simply react to the market whenever the wind shifts. In other words, effective strategic planning distinguishes the leaders from the followers.
Traditionally, strategic planning meant going offsite for a few days once a year. Businesses would conduct team building exercises and map out their company's direction and goals for the next 12 to 18 months. Most businesses, particularly large enterprises, felt obliged to engage in this exercise to get their management teams on the same page.
While this traditional goal setting method still holds some value, most companies really aren’t satisfied with the outcome. This is particularly true for startups and other companies with agile business models. A recent survey by The Alternative Board, shows that many entrepreneurs are dissatisfied with the end results of their strategic planning efforts. Indeed, more than 27% of entrepreneurs said that they wished that they had invested more time and effort into strategic planning! Besides more time, 15% of the respondents indicated that they should have spent more money on the their strategic planning processes. "Operations, technology investments and product development were all ranked lower" on the wish list, and only 1% of the entrepreneurs surveyed indicated that would have spent more time seeking venture capital and pursuing investors.
The Consequences of Poor Strategic Planning
It's clear that most of the leaders who were surveyed think strategic planning is essential. The consensus from the respondents who expressed regret is that they did not realize a return on investment for the time and effort spent. Ineffective strategic planning sessions often produce lofty objectives. However, they rarely produce quantifiable long-term results. Unfortunately, we've found that ineffective strategic planning often produces negative outcomes and breeds cynicism throughout the organization.
Startups should pay serious attention to the pitfalls of poor strategic planning. It’s a given that investors are going to expect you to deliver on your mission and end goals. Consequently, you can expect a great deal of scrutiny from qualified investors on exactly how you intend to deliver. You’ll also likely be asked about your backup plan if market forces change or you face unforeseen adversity. Therefore, be certain to avoid these five mistakes when you pull together your team for strategic planning sessions:
1. Lack of Focus
During early-stage strategic planning sessions, companies often get lost in the semantics of defining their mission, vision, and values. They spend a lot of time and effort trying to understand what these terms mean and how they fit together. It becomes mentally exhausting and unproductive. As a result, there’s little creative energy left once they get on to strategic opportunities, implementation and execution.
Tip: Concentrate on activities that are likely to produce long-term results during your initial strategic planning efforts. Ideation sessions and and contingency planning discussions are more likely to produce meaningful results for your company vs consensus building on value and mission statements. These types of activities will also help to create organizational culture where outside-the-box thinking is encouraged and rewarded.
2. Little or No Accountability
In some cases, a company’s strategic planning process becomes a political battle. When innovative strategies threaten established managerial duties, turf wars can ensue. Also, people will point fingers and the blame game will start if things don’t go according to plan, When, divisiveness occurs, key processes are likely to break down and the strategy is likely doomed to failure.
Tips: Set realistic and quantifiable benchmarks for each and every strategic objective. Identify process owners within your executive ranks and tie their compensation to to the benchmark goals. Filter the goals down throughout the organization to key management stakeholders. Produce benchmark metric reports and communicate performance throughout organization on a regular basis.
3. Lack of Flexibility
Many strategic plans become obsolete if market conditions fluctuate or when the competitive landscape changes dramatically. If regular status updates and strategic review sessions aren’t incorporated into your process, the results could be catastrophic to your company.
Tip: In the information age, the ability to adapt quickly to changing conditions is necessary for survival. Goals need to be revisited regularly if you're to stay on point and meet your financial objectives. It's best to adopt strategic best practices that allow you to change direction quickly. Consider incorporating agile planning processes, scenario planning approaches and Baysesian methods into your strategic planning toolkit.
Tip: By definition, a strategy is an action plan designed to achieve a major or end objective. Like a winning sports coach, a good business leader must understand that tactical goals shift while the game is being played. As a result, strategic plans need to be evaluated routinely. Additionally, your tactical goals often need to be reformulated to achieve desired results.
5. Insufficient Resources
To achieve your desired end goals, you must balance delivery time with the implementation / execution costs. For example, our firm worked with one company that had previously formulated an aggressive strategic marketing plan for a new product. Half way through the launch cycle, they had to abandon their plan completely. When asked why they replied that they had blown through their advertising budget because of the short time frame they were given to generate pre-orders.
Tip: When it comes to time, cost and quality: you can only pick two, Consider incorporating quality management tools into your strategic planning processes. A basic understanding of Lean Planning and Six Sigma methods is extremely beneficial for entrepreneurs, startups and other businesses with tight budget constraints.
Author: Erik Gagnon - Managing Partner, Chi Rho Consulting