To build a thriving, sustainable business, strategic business planning is crucial at every level. Preparing your organization for the future entails plotting explicit and actionable goals, properly allocating resources, and establishing clear, robust processes.
However, putting this into practice is easier said than done, so I’ll walk you through the necessary steps to ease your journey. In this piece, we’ll explore:
- What strategic planning is
- Its pros and cons
- How it’s carried out
- Tips and key consideration for effective strategic planning
- A basic overview of the whole process
What is strategic business planning?
Strategic planning acts as the compass that guides your organization towards its goals. This systematic approach involves activities such as:
- Determining your business’s direction
- Making informed decisions about resource distribution
- Crafting a short- or long-term roadmap
It’s a comprehensive process that considers internal and external variables — such as industry trends, company strengths and weaknesses, etc. — to drive continual success.
Why is strategic planning beneficial?
Strategic planning offers multiple advantages.
It aligns goals
This approach lays the foundation for success by aligning your and your employees’ efforts with the business’s goals, ensuring all involved individuals contribute to achieving these objectives.
This promotes a sense of ownership for the organization’s direction, and with all parties united on the same goal, it can enjoy the best results.
It improves decision-making
Strategic planning also provides a clear understanding of what needs to be done so personnel make informed decisions that are in line with the company’s set objectives.
It optimizes resources
Having clearly defined goals enables the efficient allocation of resources. Thanks to strategic planning, your organization’s time, money, and effort will be funneled towards activities that help accomplish its objectives. This also prevents assets from being wasted on anything unessential.
It enhances communication
An established plan of action fosters a shared understanding of organizational goals among team members. By establishing a unified approach to success, internal communication will also improve.
It helps you adapt
The strategic planning process takes into account internal and external elements that impact your business’s direction and performance, such as:
- Industry and market trends
- Technological advancements
- Regulatory environments
- Operational inefficiencies
- The organization’s competencies
Knowing how these factors affect your organization makes you better prepared to pivot in the face of any significant changes.
Drawbacks of strategic planning
Despite strategic planning’s benefits, it has some downsides that you need to be aware of.
It can be rigid
Long-term timelines (e.g., three-year, five-year, and 10-year plans) are based on far-ahead considerations, which are vulnerable to disruption. In rapidly changing business environments, they may easily become obsolete, and unexpected circumstances may pose a challenge.
Besides accounting for the distant future, you should also prepare for possible fluctuations due to short-term disruptions.
It may lead to misjudgment
Since a strategic plan relies on long-term predictions, complex market and industry dynamics that suddenly pop up can be overlooked. That heavy dependence on long-term forecasts may lead to misguided decisions, especially when dealing with uncertainties.
It doesn’t align with younger workforces
Employee behaviors are shifting, particularly among Millenials and Gen Zers. Both generations prefer to explore various positions, careers, and industries, so your long-term strategic planning will constantly have to contend with an ever-changing workforce.
As a result, your preparations and management have to take a more people-focused approach and consider how these young employees operate.
It’s resource intensive
Having a strategic plan in place helps with future resource allocation. However, the process of developing and implementing one also requires a significant investment of time, effort, and finances, which smaller businesses may not be able to afford.
Keys to successful strategic business planning
Knowing the pros and cons of strategic planning is important, but carrying it out effectively requires a firm grasp of its core components.
Thorough research and analysis
A multitude of internal and external forces influence your overall business operations and success, and accurately identifying them is a vital element of the strategic planning process. There are two widely embraced approaches that help in this regard.
A PESTEL Analysis dives into the following aspects:
Political variables include government policies, industry regulations, taxes and tariffs, government stability, and more. For example, a change in minimum wage or tax policies can instantly alter a small business’s profitability and ability to build a competent workforce.
A country’s economy directly affects a company’s well-being. Some elements you should consider include inflation, employment, and interest rates.
Inflation, for instance, can result in more expensive raw materials and lower margins. To address this, a price hike for your products or services might be necessary. However, workers will also have to deal with higher costs of living, resulting in an inevitable clamor for better compensation.
Social considerations include consumer behaviors, population growth rates, workforce attitudes, and demographic traits like age, gender, and ethnicity. Think of how diversity, equity, inclusion, and belonging (DEIB) now play a huge role in creating successful workplace environments:
- For example, diverse teams composed of various age ranges and geographic locations make better business decisions up to 87% of the time.
- According to McKinsey, when compared to their peers, employees that feel included at work are “three times more likely to feel excited by and committed to their organizations.”
Technology encompasses automations, robotics, and other advancements that play a role in an industry’s ability to develop new products and services.
Access to these can dramatically improve your business, such as how tools that integrate artificial intelligence (AI) and machine learning now play a huge part in streamlining repetitive business processes and boost overall employee efficiency.
Environmental factors include the availability of raw materials, regulations that tackle air quality or your carbon footprint, etc. Depending on your region or industry, you should also take into account the potential impact of weather and climate on your business operations.
Fashion and apparel businesses, for instance, release products by season. Weather conditions, meanwhile, can affect irrigation schedules in agriculture.
Lastly, legal considerations can involve policies that cover employee health, workplace safety, consumer rights, data privacy, and more — all of which determine how your company operates.
On the other hand, a SWOT analysis focuses on four key business elements:
This involves identifying your business’s advantages. Do you have access to an abundant pool of resources, for instance? Does your brand have a strong competitive advantage in some respect?
Here, your primary focus is to identify areas in need of improvement. Are there products that underperform? Do you have any operational bottlenecks or employees who lack training?
This part of the analysis identifies advantages you can capitalize on. Do consumer trends point to a demand for your offering? Are there new market segments you can target?
This entails looking at what stymies your business. Will upcoming regulatory changes hinder your operations? Are competitors gaining the upper hand?
A clear mission and vision
Your business’s mission and vision embody its purpose, aspirations, and values. They guide how the organization and its stakeholders work towards the goals you set and act as the foundation for strategic decision-making.
Take Target’s mission as an example: “To help all families discover the joy of everyday life.” That statement enforces the retail giant’s commitment to provide a fun and easy shopping experience for customers walking through their stores and ensures everyone’s efforts help accomplish it.
To produce a clear roadmap for your strategic plan, your goals must be specific, measurable, achievable, relevant, and time-bound (SMART), as well as aligned with your mission and vision. For example, do you want to improve your business’s revenue by 10% each quarter? Or, are you looking to improve your employee retention rate by at least 30% this year?
Then, consider how you’ll meet these ambitions. Your tactics and initiatives must be built on concrete and attainable objectives. This approach enables the next key element of effective strategic planning as well.
Continuous monitoring and evaluation
No matter how meticulous your strategy’s design, things won’t always go according to plan. To stay on course and achieve your goals, repeatedly measure performance and constantly make improvements.
That requires you to establish key performance indicators (KPIs), then identify actions that impact them. Here are some examples:
- Return on investment (ROI): This is the most common metric, and many factors incluence it, including the resources your initiatives require, the cost-efficiency of your strategies, employee performance, and sales or revenue growth.
- Market share: This quantifies the portion of industry revenue you generate. To calculate, select a specific period, add up your business’s revenue during that time frame, and divide it by your industry’s total. Multiply the result by 100, and you’ll have your market share percentage.
- Customer satisfaction metrics: Net promoter score (NPS) gauges loyalty by asking how likely consumers are to recommend your brand to people they know. Meanwhile, churn rate gauges the rate at which customers stop doing business with you over a given time frame.
- Employee engagement metrics: These measure how committed workers are to your organization and their jobs. They can range from employee net promoter score (eNPS) to retention rate, turnover rate, and more.
As mentioned, unforeseen issues and opportunities will inevitably arise and hinder your careful preparations. You can limit these situations though by incorporating flexibility into your strategies.
Create a reserve pool of finances and talent, for instance, so you have ample breathing room for times when unforeseen problems arise.
Leaders are essential for the strategic planning process because they bear the heavy responsibilities of:
- Determining your organization’s direction
- Ensuring all stakeholders are on the same page
- The plan’s implementation
Their active participation is crucial for your business’s success, as they secure everyone’s commitment, alignment, and accountability.
Stakeholders — managers, employees, customers, etc. — offer diverse insights and expertise, which can greatly supplement your decision-making.
Throughout the planning process, gather their input to gain multiple perspectives and improve your strategy’s relevance and effectiveness. Involvement in these meaningful company endeavors is also excellent for nurturing employee engagement.
Everyone in the business needs to buy into your goals and initiatives. To align your personnel and foster understanding, clearly communicate the plan to all organizational levels. Once its implementation goes live, share regular updates as well.
Tips for effective strategic planning
Now that we’ve explained the vital considerations needed for a robust strategic plan, here are some best practices that’ll make the most of your efforts.
Understand your goals in depth
A thorough understanding of what you want to achieve is key. Are you looking to grow your business, then eventually sell it for a profit? Or, are you genuinely motivated to solve your customer’s problems?
Whatever the case, this will serve as your driving purpose and steer the organization’s ensuing actions.
Know when to hire and introduce new roles
You need a clear picture of your workforce before implementing your plan so your efforts are both effective and efficient.
Account for your team’s current capacity throughout your planning process. Is your manpower enough to carry out the initiatives you set, or will you need to embrace recruitment strategies? Are they equipped to handle upcoming tasks, or should upskilling come first?
It’s also important to avoid employee burnout, so pinpoint the right time to hire additional talent. Regularly check in with your team as well; evaluate their workload and results, then make adjustments.
For instance, as you grow, an employee who wears multiple hats may need to let go of certain responsibilities and delegate them to someone else. In that case, your organization will need a new, separate role.
Adopt the right tools and software
Whether it be assessments that ensure prospects fit specific roles in your organization, or strategic talent management solutions that nurture your employees’ growth, using the right tools throughout your planning process helps you avoid slipups.
Software that unifies your tech stack and streamlines processes is also a must, but make sure its features will scale with your growth. That prevents the need to transition to new software after the company reaches a certain size — a process that’s time-consuming, expensive, and confusing for personnel.
Establish correct processes early
As the results of your strategic efforts unfold and your business grows, unsynchronized processes will give rise to new problems and throw off your team. Retraining them can cause confusion, not to mention the expenses in time, money, and effort.
Meanwhile, throwing together corrective, patchwork processes to address these obstacles can get the job done but inefficiently. To avoid this massive hassle, make sure to follow best practices from the start.
Train your team for different scenarios
This ties into the previous tips. A team equipped for various situations and well versed in your processes, tools, and software can help the organization traverse rocky terrain, which is another compelling reason to assess your workforce capacity throughout your planning.
Strategic planning steps
You now know what elements are necessary to create a strategic plan. But, to give you a concrete understanding and kick-start your efforts, here’s a basic overview of the process.
Step 1: Analyze your business environment
Your first step will be to assess the internal and external forces that impact your organization’s overall operations and success. This is where your PESTEL and SWOT analyses come into play, so be sure to identify their key considerations.
Step 2: Establish your mission and vision
After determining what affects the inner and outer workings of your business, you can develop its mission and vision. To reiterate, these outline your organization’s purpose and aspirations and guide how it’ll reach them.
With that in mind, you should have a clear understanding of the values your business embodies, the problems it’ll address, and what you want to accomplish. Since they’ll serve as the pillars for your strategies and decisions, make sure your mission and vision motivate stakeholders to contribute to your goals.
Step 3: Set goals
Next, clearly define objectives that align with your mission and vision. Remember, your goals should be SMART. Establish KPIs for your efforts in this step and determine the actions that influence them.
Step 4: Formulate strategies
With your analysis complete and objectives set, it’s time to develop actionable strategies to achieve them.
Let’s say your overall goal is to boost company revenue. From your analysis, you identified a new market segment and found you possess the technology to develop products that meet its needs. Your approach should then take advantage of that opportunity. Further, throughout the process, you would create timelines, identify individuals equipped to carry out your initiatives, delegate responsibilities, and allocate resources accordingly.
Step 5: Execute
This step is self-explanatory and involves the implementation of your strategic plan. All your preparation comes to fruition at this point, and the only task left is your final step.
Step 6: Monitor and evaluate
To reiterate, despite building a well-crafted, comprehensive strategy, the results won’t always be favorable; unexpected problems will inevitably pop up, and you’ll constantly find areas in need of improvement. As previously mentioned, a reserve pool of resources and talent significantly helps mitigate these issues.
To give your efforts the greatest chances of success though, you must continuously assess your plan’s performance and make necessary adjustments to get back on track and steer the company towards its goals.
Wrapping up — Strategic planning drives business success
Strategic planning is the cornerstone of your organization’s success, providing a roadmap that enables it to traverse market and industry complexities more smoothly.
While there will be challenges, a diligent and flexible approach lets you enjoy the outweighing benefits that’ll yield fruitful results. Throughout the process, keep these key takeaways in mind:
- Comprehensively examine your business environment
- Involve leadership and stakeholders at all levels
- Clearly define your mission, vision, and SMART goals
- Always monitor your progress, then make tactical adjustments
- Communicate with everyone involved
By integrating these elements into your planning, your business can position itself for sustainable growth and weather dynamic industry landscapes.