How to Fix Strategic Planning
Research suggests that strategic planning is perhaps the most widely used managerial tool, with close to 90 percent of all organizations developing plans. However, McKinsey recently noted that less than half of organizations are pleased with the strategic planning process, and under a quarter make major decisions within its borders. There is little doubt that for many firms, the strategic planning process is broken. But why is that?
I believe one of the causes of this strategic disconnect is the tendency for organizations to focus on, and sometimes become obsessed with, very tactical and specific questions about how their business operates, without first determining what their business is all about – the fundamental strategic priorities that underpin all decisions.
Each and every day there are decisions to be made, choices to reckon with, and all of them appear more urgent and important as competition and the velocity of change increase. But how do we ensure the decisions we make are the right ones, and truly reflective of both our identity and priorities as an organization?
In my book “Roadmaps and Revelations: Finding the Road to Business Success on Route 101” I define strategy as “The broad priorities adopted by an organization in recognition of its operating environment and in pursuit of its mission.” These broad priorities are determined by answering four fundamental strategic questions:
- What propels us forward?
- What do we sell?
- Who are our customers?
- How do we sell (our value proposition)?
Answering these questions creates a foundation of strategic choice, which then serves as a filter or ‘decision-engine’ to answer more tactical strategic questions.
Let’s put this into context. A financial services firm attempting to differentiate itself from its many competitors may be grappling with questions such as these
- Do we need a new customer relationship management software system?
- Should we have automated branches?
- Should we invest in social media?
The company may have considered dozens of other strategically important questions as they attempt to find a defensible strategy. But, have they been able to answer these and other questions with confidence and conviction?
My assertion is that you must follow a sequence when developing and executing strategy. Before you can answer specific questions like those presented above you must agree upon the fundamental or broad priorities of your business, as represented by my four questions. Take for example, “Should we have automated branches?” This requires context in order to be answered successfully, and that context is provided by your responses to the fundamental questions. Before deciding whether or not to have automated branches it’s crucial to determine what your product and service focus will be. Will that mix be amenable to an automated branch environment? Similarly, your customer focus must also be considered prior to answering this question.
Will automated branches meet the requirements of your targeted customer segment? And of course, how will automated branches impact your chosen value proposition? If you believe customers come to you because of your outstanding personal service, then automated branches may be a direct violation of that value proposition.
Organizations must focus first on the broad priorities of their business, so that going forward they will be able to make more informed decisions regarding the strategic choices they face. It’s possible that questions of a tactical nature may come up during their discussions of the fundamental priorities but it’s vital that they ‘table’ those or use them to help answer the larger questions. Remember, the initial purpose of strategic planning is to lay the foundation of your strategic process, not address specific operational issues or challenges. Coming to consensus on your broad strategic priorities will not only enhance alignment among your team but also provide the basis for making improved and more timely decisions on the many strategic choices you face each day.