Vistage Best Practices: Strategic Planning
No one can predict the future. But rather than sit back and wait for it to happen, effective CEOs anticipate what lies ahead. The orderly process needed to meet the challenges that inevitably follow is called strategic planning.
A good strategic business plan:
- Reflects the values of the organization
- Inspires change and modification in products or target markets
- Clearly defines threshold criteria for achieving success
No one business strategy model fits all organizations, but the planning process includes certain basic elements that all businesses can use. In this module, our Vistage best practices experts Ole Carlson, Stephen Haines and John Johnson, explore the vision, tactics and objectives of effective strategic plans and outline a set of underlying principles and management tools to help create a truly valuable strategic business plan.
Strategic planning, or business growth strategy, describes the status quo and the forces likely to change it in the immediate future. During the process, planners:
- Address questions of key importance
- Offer a framework for future decision-making
- Uncover and clarify future opportunities and threats
- Serve as a channel for internal communication
- Set specific objectives for achievement
- Create a basis for efficient performance measurement
- Communicate goals to employees, investors and others
- Focus attention on the company’s long-term growth
The Strategic Business Planning Team
The planning team’s ideal size is nine to 15 members, with an outside facilitator (or strategic planning consultant) and an internal coordinator.
“A facilitator brings a fresh perspective to the process, keeps the discussion on track and encourages all team members to act as equals,” notes Haines.”
“More important,” adds Carlson, “an outside facilitator levels the playing field between CEO and team members. In an atmosphere of informality, team members can address any issue, up or down in the organization, without fear of unjust reprisal.”
The CEO sets the context and endorses results, but he/she should remain in the background so that other members’ ideas can emerge. The CEO also serves as the strategic plan’s “spiritual leader,” providing energy and focus and holding peoples’ feet to the fire. “If the CEO doesn’t have passion for the plan, it will never happen,” says Johnson.
To incorporate a balance of viewpoints for the business growth strategy, team members should represent different segments of the company -- not just vice presidents, division and department heads but also operating, marketing and sales personnel who can bring balance when considering internal and external needs.
The Strategic Business Planning Process
The business growth strategy process consists of an orderly sequence of activities, including:
- Planning to plan. The facilitator designs the sequence of steps the process will take.
- Practicing creative thinking. Team members generate as many ideas as possible regarding the future direction of the business.
- Staying on track. Team members take a critical, unbiased look at what has worked before and what hasn’t. They also identify the best of your past business practices, drop other practices that have led to costly errors, challenge assumptions and anticipate a future working environment.
- Combining and distilling. When enough ideas have been generated, the team combines and focuses on those directly linked to the company’s overall goals. Then it:
- Creates four to six long-term goals linked to the organization’s vision.
- Comes up with business strategies to achieve these goals.
- Sets clear objectives for each growth strategy.
- Assigning responsibility. For each business plan objective, the team creates specific action steps, appoints an individual to be accountable for the process, and provides the resources needed to complete the action steps.
“Avoid becoming overly ambitious and overwhelming the company with the amount of work that needs to get done,” advises Johnson. “By limiting your strategic transition areas to no more than three, you can create small wins and move forward with regular progress.”
Asking the Right Questions
According to our experts, the strategic planning process, whether it's a small business strategy or large, involves asking a lot of questions in three basic categories:
1. Where Are We Now?
- Who are our customers and what do they want?
- What are our organization’s core competencies?
- Who are our competitors and where do they pose a threat to us?
2. Where Do We Want to Be Tomorrow?
- What changes will be necessary to better serve our customers in the next three to five years?
- What driving forces (e.g., new technology, aging customer base) will shape the entire industry?
3. How Do We Get There?
- How will we need to improve our products and services?
- How will we break into new markets?
- What new technology will be needed in order to survive?
- If a competitor moves into our market, how will we modify our product line and what marketing strategy will we use?
Other questions to consider during the strategic planning process include:
- Why do customers buy from us? Why do they buy from our competition?
- What is the customer’s buying process? Is it an impulse buy or carefully weighed?
- What differentiates products in our market? What guides consumer choice?
- Are there ways to reduce the bargaining power of customers and suppliers?
- Can we increase barriers to existing competitors and potential new ones?
Finally, suggests Haines, ask yourself this question: “If I left the company today, how would I compete against it?”
Creating a Vision
Our Vistage experts agree: an organization’s vision should be a BHAG -- big, hairy, audacious goal. “Visioning takes you out beyond the present,” says Johnson. “It represents the mountain top of the strategic planning process.”
An organization’s values serve as the underpinnings of its operations and connect with customers, employees and other stakeholders. Articulating these values provides a foundation and a means of choosing among the inevitably competing priorities springing up on a daily basis.
“Values represent an organization’s DNA,” Johnson says. “They are issues over which people can get hired, fired, promoted or demoted, depending on whether they support or violate the values.”
The Mission Statement
A mission statement describes what an organization does, what markets it serves and what it seeks to accomplish in the future. It should be focused enough to provide direction, but broad enough to encourage growth and evolution based on changes in customer demands.
As a first step in formulating the mission statement, the planning team should consider the question, “What is the company’s reason for existing?” As answers emerge from the brainstorming process, they can be refined to express something for which the organization can be held accountable.
Other guidelines for your business strategy's mission statement include:
- Maintain focus. Describe the essence of the business in words your employees and customers can remember you by. Avoid generalities. Vague or generic mission statements lack resonance and meaning.
- Hit the target. Focus on specific traits (e.g., quality, customer service) and on target or niche markets.
- Make it visible. Post the mission statement where all can see it -- on the conference wall, on promotional materials, even on the packaging of products.
Identifying Goals
Strategic planning identifies an organization’s goals and objectives. Goals represent those areas in which the business must achieve success in order to grow and prosper. Objectives are more specific and short-term. They should include target dates for completion, and name a person or persons responsible for taking action.
In general, objectives should be measurable, quantifiable and consistent. Conflicting objectives cause frustration and lack of focus. With solidly defined goals and objectives in place, an organization can identify specific issues and operational problems. Then new strategies can be designed to ensure success in the future.
SWOT Analysis
A SWOT (Strengths/Weaknesses/Opportunities/Threats) analysis is a tool for looking critically at the organization.
Strengths are those qualities -- tangible and intangible -- which enable an organization to achieve its mission. These include human competencies, products, services and process capabilities.
Weaknesses are those activities, services or other factors that block the organization from fulfilling its mission.
Opportunities present themselves through the environment in which a company operates. They may be generated by the appearance of new products, new trends in the marketplace or changes in the competition.
Threats are external to the organization. Unlike weaknesses, they cannot be controlled. In fact, they exploit a company’s weaknesses and increase its vulnerability.
A clear picture of an organization’s strengths and weaknesses leads to a realistic understanding of the marketplace at large. A SWOT analysis enables business planners to make better-informed choices.
Competitive Analysis
According to Vistage experts, conducting a competitive analysis involves taking the competitor’s point of view. It consists of:
- Developing a fact-based understanding of likely business strategy changes your competitors might make in coming months.
- Identifying probable competitor responses to changes you are considering.
- Forecasting each competitor’s probable reaction to changes in the industry affecting your own business.
Don’t restrict your thinking to companies similar to your own. Consider firms not presently in the industry that could overcome entry barriers without incurring great expense and those for whom competing in the industry makes sense from a corporate strategic viewpoint.
To design growth strategies for a competitive edge, look closely at your three top competitors. What are their business strategies regarding customer service? Pricing? Quality? Operations? Resources? Personnel? If you find them lacking in any of these areas, there might be an opportunity for your business to fill the void.
Implementing the Business Plan
Implementation is the most difficult part of the planning process. Haines offers these “change structures” to aid in implementing the plan:
- The CEO. Develop a “stump speech” around your plan to promote its values, mission statement and actions. Use it to spread the word wherever possible.
- Day-to-day coordination. Enlist a support person to coordinate the basic change programs.
- Executive team. Have your management team keep a close eye on the top three priorities under each strategy in the plan. Ask for direct reports from the team on a regular basis.
- Strategy sponsorship teams. Organize top and middle managers into business strategy teams (one team for each strategy). These people form cross-functional teams that become change agents for each strategy.
To measure and monitor the business plan:
- Conduct regular updates. Schedule progress reviews on a monthly or quarterly basis, depending on the level of activity and time frame of the plan. Challenge underlying assumptions. Continue to examine the plan’s underlying assumptions, the continued validity of its objectives, and the influence of unanticipated events.
- Create a “champion” for every strategy and action. The champion doesn’t necessarily have to complete the actions, but ensures that they get done.
- Stay committed. Every action must have a due date. Due dates can be pushed back, but don’t let them go away.
- Conduct short-term reviews. Schedule team “huddles” every 60 to 90 days to revisit the original plan, determine if objectives are being met and implement new action steps as necessary.
- Expand skills. Expand employee skills through training, recruitment or acquisition to include new competencies required by the strategic plan.
- Establish milestones. Build milestones into the plan that must be achieved within a specific time frame. Reward success. Find creative ways to motivate people and reward them for focusing on the business strategy and vision.
Above all, be flexible. Move ahead with the plan as designed, but be prepared to let go and switch strategies as necessary.
No one strategic planning model is right for all organizations or circumstances. But our Vistage experts agree: a business that starts with a working model and achieves a tangible plan will be more successful than a business with no plan at all.
Contributing Experts:
These experts were selected from Vistage's stellar corps of expert resource speakers. Vistage expert resource speakers regularly share their expertise with individual Vistage groups in highly-interactive half-day sessions.
Ole Carlson
Ole Carlson is a corporate trainer, strategic planning consultant, international speaker and professional facilitator. He has conducted public and corporate seminars for Omega Seminars, Sportsmind Inc., Vistage and the Carlson Partnership. He has addressed more than 250 CEO forums on personal growth and corporate planning in the United States, Canada, the United Kingdom and Australia. Carlson also serves as a CEO coach and trainer for Vistage Group Chairs.
Stephen G. Haines
Steve Haines is a U.S. Naval Academy graduate, CEO, strategist and prolific author, with more than 5,000 pages on strategic management in print. He is the founder of the Centre for Strategic Management (CSM) and an internationally recognized leader in the field of strategic management and change. CSM's purpose is to assist visionary CEOs in planning, developing and sustaining high-performance organizations in today's dynamic environment. Steve has been a Vistage Speaker for more than 12 years, with many Vistage talks and outstanding evaluations to his credit. He also has been a personal advisor to more than 200 CEOs in his 30-year career.
John Johnson
John Johnson has been associated with Vistage for over 12 years, serving as Chair for up to three groups at a time, and has consulted with CEOs and senior managers for the past 13 years. He has nearly 30 years' experience in senior marketing management with consumer products in national and international arenas, and has marketed such world-famous consumer brands as Lux Toilet Soap, Lifebuoy, Dove and Levis.