To start a business - and to stay in business and grow - every company has to have a strategy. Some are simple and easily stated, others are complex and take months of careful thought, planning, writing, and rewriting. Some strategies are instantly successful. Others are plagued by underperformance, whether due to a poor economy, ruthless competitors, failure to establish the necessary customer base, or simply poor execution.
Bottom line? Achieving successful outcomes can be a challenge to both new and established businesses.
In Part I of our Strategic Planning series, XPRT discusses three issues every company should address before beginning the Strategic Planning process:
- Why do strategies and Strategic Plans fail?
- What are the elements of a successful strategy?
- How do you test your strategy for soundness?
Once these initial questions are considered, our series continues withStrategic Planning - Part II: Drafting the Plan; and Strategic Planning - Part III: Keys to Successful Implementation.
Why do strategies and Strategic Plans fail?
Most companies have a general sense of their overall strategy, whether it is comprehensive or fairly simple - both can work. Why then, do so many strategies underperform or fail to achieve their desired outcomes?
Strategy development is an art more than a science: to develop a solid, understandable, and implementable strategy requires a process-oriented, fact-based, and data-driven approach. Strategic planning cannot be done by simply filling in a template. Many strategic planning theories and frameworks exist, but these should be used as general guidelines without being a slave to them. Soft issues like employee engagement, organizational culture, and company values count as much or more than hard issues such as financial plans. Keep in mind that your company's financial performance is an outcome, not a strategy. If the strategy is not affordable (capital, expense, product/project risks), then the strategy is not viable.
The leader (the CEO, the Board, or the person designated as responsible) must own the strategy and has to live it - this cannot be outsourced nor delegated. And yet, one person cannot drive the process, so involving critical employees in strategy development is essential to create outcome ownership. Simply stated, "People support that which they create." Starting at the top of your company, organizational clarity and stability and clear communication of operating principles are critical. The Plan must be directly linked to the people and the business units who will be responsible for implementing it. And they must be given the necessary authority to execute what the Plan stipulates.
Implementation is discussed in more detail in Strategic Planning - Part III, but the basic elements can be summarized as follows. Strategic success depends upon successful implementation, which includes:
- clear leadership;
- thoughtful planning;
- team members assigned, aligned, and accountable;
- progress monitoring and reporting; and
- celebration of small successes.
It's important to recognize the difference between what can and cannot be controlled in the market. Strategic challenges like industry consolidation, technology transformations, and new entrant competitors cannot be controlled and must be adapted to as they appear.
What are the elements of a successful strategy?
Strategic planning is an ongoing lifecycle process, not a document to be drafted and put on the shelf. Goal setting is required to define both the financial and non-financial outcomes of the strategy. Financial goals include revenue, earnings, cost structure, and capital structure. Non-financial goals include the employee experience, the client experience, brand and reputation, and market position.
A strategic planning framework is needed to create ownership across the organization, and it has four elements, as shown in the graphic below. The overall corporate strategy defines the nature of company activities and its business philosophy. Market strategies define the way resources are used and identify competencies/differentiators to gain competitive advantage. Functional strategies are designed to enable and support the corporate and market strategies. Operational strategies are designed to deliver the corporate, market and functional strategies. Taken together, this framework will create a well-designed and well-managed strategic planning process, supported by thorough strategic business, market, and competitor analysis.
Once the strategic planning framework is in place, it is important to align the organization with the strategy. This can include leadership development and succession planning; employee engagement, development, and recruitment; strategy communication planning; Business Plan alignment and implementation; marketing and branding; and sales processes, systems, and tools.
The importance of taking these steps cannot be overstated, particularly if the overall strategy represents a new direction for the company. Oftentimes, strategic alignment requires evolutionary and/or revolutionary change. Quality improvements can address operational efficiency and LEAN processes. Restructuring and business process re-engineering can address internal gaps. Mergers and acquisitions can address key gaps that exist within the organization. Leveraging technology and capturing innovation can address maintaining the leading edge in the market. All of these actions will impact the organization's culture and may require culture change management.
Once the overall framework has been put in place, formal drafting of the Plan can begin, followed by careful implementation. Throughout the process it is critical to monitor progress, make adjustments as needed, and communicate regularly across the organization. The executive team and the implementation team must be responsive and nimble to changing circumstances and unforeseen opportunities or setbacks.
How do you test your strategy for soundness?
As shown at the right, there are two questions that need to be asked about any strategy. These need to be asked at the outset of the process, and then revisited regularly during implementation.
The Strategic Plan itself should be reviewed using framing questions, such as the following:
- What makes this market segment attractive?
- Does the market segment's attractiveness exceed the degree of difficulty and risk?
- Is the market strategy achievable considering leadership and management requirements, the cost to implement, and/or supporting infrastructure requirements (e.g., delivery platforms)?
- Does the market strategy have the right focus in terms of diversification vs. synergy and achieving scale vs. differentiation and profitability?
- What are the primary strategic drivers (e.g., capturing market-share, holding market share)
- Are you operationally ready to implement the strategy?
- What are the total costs to implement the strategy?
Finally, in light of this assessment, is the risk-reward relationship viable?
As noted above, strategic planning is an art, not a science. It is a process, not the act of filling out a template. And it is an iterative document, not something that is drafted and then set aside. Your success in achieving your strategic goals is critically dependent on establishing the plan, holding your leaders accountable, and engaging with employees who will be effected by what you have planned.
XPRT and its experts can help you with this process. In the two other papers in our Strategic Planning series, we outline the drafting process and the keys to successful implementation.