Demystifying strategic planning (part 1)

So, you've heard the buzz about strategic planning. Maybe you're nodding along, acknowledging its importance, but secretly thinking, "Do I really need this in my business?" or "Gosh, that sounds great, but it’s really overwhelming!" I’m here to say, yes, it’s necessary, regardless of your business size (see my prior post); and the good news is, it’s totally doable!

You Need a Better Reference

Let's start by getting clear on terms, because there’s a lot of jargon out there. Strategy is not synonymous with vision, mission, values, or goals (although those are all good things, and you need them, too). It's not a mysterious result of innovation, inspirational leadership, or ambition. And you don’t have to be a genius or give a Ted Talk to come up with a strategy for your business. According to Richard P. Rumelt, a strategy is a "coherent set of analyses, concepts, policies, and actions that respond to a high-stakes challenge."[1] It involves three elements: a diagnosis of the situation, a guiding policy, and set of coherent actions.

If you’ve seen a strategy at all, it might have been a bad one—characterized by “fluff, failure to face challenges, mistaking goals for strategy, or setting bad strategic objectives.”[1] (Confession: I’m pretty sure I’ve made each of these four mistakes). If that’s the case, no wonder you’re skeptical!

A good strategy, in contrast, presents a clear path to overcoming a challenge. It makes use of our strengths, and incorporates expectations about how customers and competitors will respond. It is easy to explain, and provides a lens against which to evaluate decisions, including resource commitments.

Here are a few “good” strategies:

• Scale the company down to a niche producer, by paring down product lines, discontinuing peripherals, reducing inventory, cutting distribution and retail partners, and opening a web store (Apple, 1997)

• Transition from a DVD-by-mail service to a streaming platform, in recognition of the changing landscape of media consumption (Netflix, 2007)

• Continuously collect information from store staff about local tastes, and develop nimble merchandising teams and a network of manufacturers who can quickly bring new product offerings to market (7-Eleven, 2008)

Getting Started: No Magic Formula

Strategic planning doesn't come with a neat set of steps or a template; rather, it’s a continual evaluation of whether you're on the right path or need a course correction. This reassessment could be triggered by a deviation from a planned course, or changes in the external landscape.

Begin by assessing the external dynamics relative to your company’s purpose. What's happening with competitors, customers, the economy, and society that could impact those you serve, and how their needs are met? Is your company’s vision and mission still meaningful and clear, or does it need a rewrite?[2] Next, evaluate your current condition. How is your business performing? What are your capabilities and advantages, and where do you struggle? A Strengths, Weaknesses, Opportunities, Threats (SWOT) grid can help organize these thoughts, but remember, none of these elements are fixed or isolated.

Decipher the Challenge

As you work through this assessment, you'll likely notice new dynamics at play. Where do strengths align with opportunities? What untapped advantages do you have, or could you create? Where are competitors ahead of you? Note your key assumptions and doubts. Where is the marketplace going, and where do you see your company within it? You don’t need a crystal ball, just a few reasonable expectations.

By this point, you and your fellow leaders will be spewing out ideas left and right: Let’s launch a new product! Open a store! Restructure the organization! Shut down that underperforming plant! Resist the urge to evaluate each line item. Rather, make sure you’ve adequately diagnosed the key challenge at hand.

Strategy is Choice

Once you’ve agreed on the challenge, you then must decide what to do about it. That’s why this process is hard: strategy is about making choices. We have to say “no” to most things in order to say “yes” to the critical few. Human nature is to want to keep all the irons in the fire, since we’re not really sure what will work. However, as a leader (or leadership team), your responsibility to the business IS to make these hard choices. You must use your judgment to focus the efforts and attention of the team, and the investment of your resources, because trying a little bit of everything is a recipe for over-extension and scattered, inconsequential change.

Avoid these common traps:

• A laundry list of disconnected initiatives that overwhelm your organization

• A “word salad” that sounds lovely, but doesn’t really mean anything

• A more roundabout way of saying “let’s increase revenue and decrease costs”

Step back and ask, what's the single most important focus for the next year? This should include a high-level “how”, which represents the path you are choosing to follow. Not a tactical, step-by-step how, but a big picture approach – your best hypothesis about what you think will work.

Yes, this conversation might leave you a bit uneasy. The crucial point is that you're picking a path. It won't be perfect, but it's far better than attempting to do everything, or burying your head in the sand and changing nothing.

This conversation should, at the very least, provide clarity on the challenge to address and a high-level approach. But it’s not technically a *plan*, yet. Stay tuned for more insights on how to carry your newfound strategic clarity forward into a cohesive plan. Spoiler alert: it's not as complicated as it sounds!

Contact me today to learn how we can work together on your strategic planning process.

[1] Rumelt, Richard P. Good Strategy Bad Strategy: The Difference and Why it Matters. Crown Publishing Group, 2011.

[2] Revising your vision or mission should be rare (as these are meant to be durable), and is a precursor rather than a substitute for strategy.