The Strategic Plan Hoax

Business executives are often first introduced to the concept of strategic planning in B-school. There, techniques such as SWOT or the 5 forces model are taught to equip future leaders with the tools they need to successfully plan their business. So why is it that most strategic plans don’t work? In fact, up to 70-90% of plans fail to achieve their intended outcomes depending on which study you read.

It isn’t that strategic plans aren’t important. They simply are widely misunderstood. They are not:

  • One day meetings
  • Budgets
  • Project lists
  • A Process
  • A mission/vision statement(s)

These important business activities do not replace the purpose or value of a true strategy and corresponding strategic plan. Strategy is the concept that dictates how the organization will achieve its goals. It is an overarching direction that aligns diverse functions and determines necessary activities. When done well, it is market-centric. Strategic Planning is the process of developing the strategy and its corresponding implementation plan.  A process or a set of activities such as strategic planning does not ensure that an effective strategy will be developed or that it will be successfully implemented.

As a result the common misunderstanding of strategic planning, most work produced by organizations under the headline “strategic plan” is not strategic and not really an implementation plan. They are often a collective group of goals or projects that are targeted at improving short term operational performance. Thus, it is a bit like The Emperor with no clothes. Many strategic plans have no strategy. 

Every effective strategy defines who the organization serves specifically enough that you can find the needle, or customer target, in a haystack. And since every prospect with a bank account is not a great customer, it requires the ability to differentiate between the needle and the hay. Further, a good strategy must clarify how the organization will win the business from that customer set, with enough specificity so everyone who is involved in contributing to goals understands what to do.

The strategic plan answers the question of how to get from where an organization is today to where it wants to be tomorrow. What needs to change to effectively serve that customer segment and win consistently? It is a compilation of the initiatives, the investments, the people, and the culture that are needed to be successful along with the sequence or critical path, milestones, resource requirements and expected outcomes. Strategy is integrating by definition so it is imperative that strategy be developed in a collaborative enterprise-wide manner. The plan for implementation needs to cascade through the organization being built out for each function and level.

A comprehensive strategic plan will include: financial targets, strategic positioning, goal setting, profit drivers, operational strategy, product strategy, performance measures, target customers, customer value proposition, competitive strategy, channel of delivery, pricing strategy, resource deployment, human resource planning, acquisition/divestiture strategy, crisis management and contingency planning. The frequency with which the topics are included in strategic plans varies considerably from 90% that include financial targets to 6% for crisis management and contingency planning. Only 25% address acquisition and divestiture. This type of comprehensive strategy development doesn’t happen in a day and it doesn’t happen every year.

Because strategy is long-term in nature, investing the appropriate effort to develop a strategy and complete a strategic plan is essential. A plan that goes together quickly, without much input or reflection, is usually quick to fail due to inaccurate assumptions or lack of enthusiasm. Strategic execution is hard work and takes courage and persistence that are only acquired with confidence in a well-thought out strategy.

Effective strategy development requires three major phases:

1) Discover the market through the eyes of the customers. Gather facts on customers, competitors, market trends, financial patterns, product costs and similar factors that influence opportunities that mesh with the organization’s capabilities.

2) Develop the strategy, setting the course that guides the organization’s actions and investments in the coming years and aligns all operating areas.

3) Deliver results by thorough implementation planning with special attention to re-allocation of resources to match priorities and consistent, clear communication, two of the factors that can cause the most value to be lost during plan implementation.

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