Why strategic planning is vital for all businesses

Why strategic planning is vital for all businesses

The end of one year and the start of another is an opportune time for business owners and managers to review their strategies. Every day, every business faces threats that could destroy it if no action is taken. Entrepreneurs and business managers are often so preoccupied with immediate issues that they lose sight of their ultimate objectives. That is why a business review or preparation of a strategic plan is a virtual necessity. This may not be a recipe for success, but without it a business is much more likely to fail.
Businesses face threats from different forces. New products and services are being produced that can replace your old ones. Competitors are finding ways of producing the same or better goods faster and at lower cost. Shifts in Government policies and regulations can easily put your company out of business. Cheap imports from Asian and other countries can render your products uncompetitive. In such an unstable environment continuing to operate the same way that you have been doing is a sure recipe for disaster. To survive, managers and business owner, of all businesses, whether large or small, new or established, need to think strategically.
In the case of newly started ventures, strategic planning is usually done as part of an overall business plan (along with the marketing plan, the financial plan, and the operational management plan).
Organisations in industries that are changing rapidly, such as the local financial, banking, insurance, mining and manufacturing industries, will need to carry out strategic planning frequently. One reason many new businesses fail during the first year or two is that business owners do not think through their longer term strategies, and when things in the environment change, they either lack the resources capital and talent resources, or the business strategies, to allow them to remain competitive.

What is strategic planning?
Put simply, strategic planning determines where an organisation is going over the next year or more, and how it is going to get there. A way of measuring performance and results is required in order for one to be able to know if the objectives have been achieved or not. Strategic planning seeks to position an organisation so as to be able to take advantage of its future by capitalizing on its opportunities, addressing its challenges, and providing the form of leadership that can master change.
The focus of a strategic plan is usually on the entire organisation, while that of a business plan is usually on a particular product, service or program. A strategic plan is primarily intended to be used internally by the organisation, to guide its operations, where as a business plan is usually meant for outsiders, such as banks and investors who may require it before providing finance to a venture, although both may contain similar information on certain aspects.
The development of a strategic plan greatly helps to clarify the organization’s plans and ensure that key leaders are in accord. The strategic planning process itself is far more important that the document the strategic planning document.

Approaches to strategic planning
There is a variety of approaches to strategic planning. There is no perfect model for every organisation. Most companies develop their own models by selecting an approach that fits in with their organizational culture, the complexity of their organisation’s environment and their leadership, modifying it as they go along. A common model is the one that involves a three step process, sometimes called STP, i.e.
• Situation- evaluate the current situation and how it came about
• Target- define goals and objectives, that is , the ideal state you desire
• Path- map a possible route to the goals or objectives

Expanding on the basic approach Michael Allison and Judy Kaye articulated the following practical model in their book “Strategic Planning for Nonprofit Organisations, A Practical Workbook.”:
1. Getting Ready: Identify specific issues and choices the process should address, clarify roles, create a planning committee, develop an organization profile and identify the information which must be collected to help make sound decisions.
2. Articulate mission and vision: Reach consensus on why the organization exists, determine its primary business, identify its values and create an image of what success would look like.
3. Assess the environment: Gather up to date information on internal strengths and weaknesses and external opportunities and threats to develop an understanding of critical issues. Use the SWOT Tool to organize your information.
4. Agree on priorities: Identify the broad approaches (strategies) for addressing critical issues and the results to be sought (long-term and short-term) goals and objectives.
5. Write the plan: Put the pieces together into one coherent document..
6. Implement the plan: Align the plan with day-to-day work including operational or program-specific plans, fiscal and budget cycles, etc.
7. Make strategy a habit: Regularly evaluate progress and assess decisions made during the process.
Benefits of strategic planning
Strategic planning helps entrepreneurs and managers in an organisation to:
a) Clearly define the purpose of the organisation and to establish realistic goals and objectives consistent with that mission in a defined time frame within the organisation’s capacity for implementation.
b) Communicate those goals and objectives to the organisations members.
c) Develop a sense of ownership of the plan.
d) Ensure efficient use of the organisation’s resources by focusing them on the key priorities.
e) Provide a basis for measuring progress and establish a mechanism for informed change when needed.
f) Provides clearer focus of organization, producing more efficiency and effectiveness
g) Builds strong teams in the board and the staff of the company
h) Solves major problems
i) Helps the organisation to build on its strengths, resolve its weaknesses, exploit opportunities and avoid threats.
What is the most common reason strategic plans fails?
The most common reason for failure of strategic plans is nothing more than lack of implementation. Any plan that is not going to be used is not going to be very valuable. Organisations often develop strategic plans, commit them to paper, maybe circulate them to those who participated in the process, and then shove them into the back drawer, never to be looked at again.
Organisational leaders need to understand that there is a link between leadership and implementing of the strategic plan. Without leadership commitment to action the plan, most of the value is lost. Although the process of strategic planning is valuable, not using the plan after investing time and energy into it is a waste of resources.

Why bother planning in a chaotic and unpredictable world?
Due to various factors, the world today is unstable. So, the world around us is so unpredictable, how can strategic planning help, given that it is based, in part, on an understanding of that world?
Strategic planning guru, Henry Mintzberg, gives an answer in his book, The Rise and Fall of Strategic Planning. He says strategic planning should take into account that the world is somewhat unpredictable. When you incorporate that fact as an element or factor that needs to be considered so the company can navigate changing waters, you end up with a strategic advantage. What emerges is a strategy that accounts for, and plans for unpredictability. You plan for the unknown and come up with worst case scenarios and action plans for catastrophes. You plan for the unpredictability.
It’s also worth remembering that while the world often seems unpredictable and chaotic, particularly the business world in a globalized economy, we can make probability statements about what might happen. Remember that there is unpredictability everywhere in life, and the role of planning is to minimize the risks of that unpredictability.


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