Strategic Planning Ultimate Guide
This comprehensive guide will provide you with valuable insights and practical tips to develop an effective strategic plan for your organization. Strategic planning is a crucial process that allows organizations to reflect on their market, assess their performance, and chart a clear course for the future. By taking the time to strategically plan, organizations can improve their performance, align their resources, and adapt to the ever-changing landscape.
In the first section, "Understanding Strategic Planning" we will explore what strategic planning is all about and why it matters so much to forward looking leaders. We will also delve into different types of strategic plans and address common misconceptions. This section will lay the foundation for your strategic planning journey by providing a solid understanding of key concepts.
The second section, "Strategic Planning Process" will take you through the step-by-step process of developing a strategic plan. From defining your organization's vision and mission to setting goals, formulating strategies, and executing the plan, we aim to demystify some of the buzzwords and help you navigate the strategic planning process effectively.
In the third section, "Tools and Best Practices" we will introduce you to strategic models, frameworks, and measurement tools that will support your strategic planning process. We'll cover key performance indicators (KPIs) and how to align your strategic goals with actionable metrics. Additionally, we will explore the importance of strategic alignment in driving successful strategic planning. We'll also share common mistakes to steer clear of in your process.
Finally, in the "Getting Started" section, we will provide you with guidance on how to begin your strategic planning journey.
So whether you're a seasoned executive looking to refine your strategic planning approach or a new entrepreneur embarking on the planning journey for the first time, this guide will provide you with the essential knowledge and practical insights to create a successful strategic plan. Let's dive into the world of strategic planning and unlock the potential for growth and success in your organization.
Understanding Strategic Planning
What is Strategic Planning?
There is no official definition of strategic planning, but conceptually it’s the time of year when an organization reflects on the market and looks for ways to improve performance. There are usually slides and Post-It Notes involved, and an executive retreat where the CEO removes his tie. This thinking leads into action, as resource allocation builds around how best to deliver the strategy.
Importance of Strategic Planning
Everyone knows the world is changing at an ever-faster rate. In 1958 the average lifespan of a company in the S&P Index was 61 years. Now it’s 18 . Put simply strategic planning means building the next growth engine before your current one expires, because waiting too long will mean extinction.
- Improved Performance. Companies do not do strategic planning because they love PowerPoint and sticky notes. They do it because it works. McKinsey have quantified this benefit as +40% over a fifteen-year period. This longer time horizon is key. Strategic Planning isn’t there to close out earnings this quarter, it’s there to make sure that in 12 quarters’ time you still have business to close out.
- Clear Direction. Creating a shared understanding of where an organization needs to go is critical for co-ordination, focus and motivation. Strategic Planning is the mechanism by which this direction is forged from the data, experience, and innovation inherent in any organization.
- Alignment of Resources. Every portfolio has constraints, so there will be a requirement to prioritize. Strategic planning provides the criteria for that selection process. Be warned, this can be uncomfortable; it risks making a mistake or putting someone’s nose out of joint. But the alternative is a proven route to failure, as ignoring constraints doesn't make them go away.
- Listening to Customers. Most organizations exist to service customers, on one level or another. Having a process which makes you stop and think about what those customers want from you is key to course correcting what you are doing and unearthing new opportunities. That's why Voice of the Customer should be a critical function in any organization, armed with the authority to speak truth to power.
- Risk Intervention. Strategic planning means lifting your eyes and scanning the horizon. Can you see nasty thunderclouds gathering? Even if you can’t change the weather, you can make sure you have a coat. By analyzing market trends and internal capability you are building readiness to respond, rather than lurching into blind panic when ‘business as usual’ ceases to be constant.
- Decision Making Framework. Most organizations work on a metronomic routine – sync calls, reporting deadlines, monthly targets, and in the most part this bias for action is positive, creating the muscle memory of getting stuff done. But without the ability to think about other factors, an organization will become outdated and stale, especially in an environment where technology is constantly changing the rules.
- Stakeholder Engagement. Getting people to participate in strategic planning builds both the quality and the buy-in with respect to an organization’s strategic plan. This alignment can be as simple as getting the board on the same page, or a more extensive engagement process that loops in staff, investors, suppliers, or broader community stakeholders.
It's clear that strategic planning is a critical activity, but of course what this means will vary wildly between organizations. It could be a heavy process resourced with a squad of consultants, or a family business taking a day to reflect. The key is getting the right size of process. An S&P enterprise shouldn’t run out of spreadsheet, while mom-and-pop don’t need a 100-page deck.
How often should strategic planning happen?
Strategic planning means taking a step back from day-to-day operations to reflect. As such, it’s not part of the weekly board meeting, but neither can it be ignored for 11 months of the year:
- Vision & mission should be steady. Perhaps revisit yearly, but change should be limited to avoid disruptive realignment, given how much process is built around them. It's also important to remember that high level strategy needs to be drip-fed into the fabric of an organization, which puts a huge value on consistency.
- Prioritization should be at least quarterly. The strategic goals may be steady, but opportunities to meet them will change. Some sectors require multi-year plans, but where possible avoid getting into the detail too early to keep your planning process agile. Work our what 'good enough' looks like and then deliver it.
- Review of metrics should be at least monthly. The key is to develop the muscle memory to use reported data to make sensible interventions to course correct delivery. Here it's important to be clear about what project success metrics (OKRs) versus overall business outcomes (KPIs), and to understand where accountability sits for hitting targets.
Types of strategic plans
A strategic plan can happen at different levels of the organization. It can be a top-down exercise led by the CEO, flowing into sub-plans thereafter, or a more localized initiative where individual teams take the initiative to make the most of their resources. For simplicity we’ll think about 3 types of plan:
- Corporate – High level strategy, that needs to balance business value, risk mitigation and stakeholder considerations. Likely to contain both big-ticket transformation initiatives and more functional business as usual work.
- Business – Growth focus, geared around value creation, typically balancing short and long term growth and the potential to make cost savings. Popular with commercial functions and the supporting teams (especially IT) that enable delivery.
- Functional – Within a department, working out how to best invest their resources. This often has a functional focus – for example building an IT backlog or an R&D pipeline. A planning process can happen at this level for a de-centralized organization, or could involve multiple functions planning in parallel using a common framework.
For larger organizations the real win is building a process that delivers all these plans, with common strategic goals connecting them, and dynamic resource allocation enabling them.
Business cases vs. strategic plan
Justification for spending money usually means offering Finance a projected return on their capital, but smart organizations know that they have to look beyond the numbers to align investments to strategy:
Financial return is different from strategic progress. An investment opportunity might make sense based on projected ROI, but this does not mean it is taking the business in the right direction when it comes to delivering the longer-term vision for the company. Watch our experiment here for more on this.
ROI is projected payback not real money. It assumes competing investments are equally predictable when they are not. For example, savings made from efficiencies are typically far more likely to materialize than those made from entering a new market. Adjusting for delivery risk is important. Read our ROI guide for more detail.
Money isn’t everything. Don’t tell your CFO, but not all metrics are best measured with her ROI model. What is the dollar value of achieving the net zero target you published? Any attempt to quantify it needs so many assumptions that 'data' is basically fiction. Putting into Excel doesn't change that. For this AHP (“Analytic hierarchy Process”) is an elegant solution to quantify the value of non-financial criteria.
On a personal level I once had to write a business case for sponsoring a yacht – if you can beat that for works of creative planning let me know.
‘Business as usual’ is critical for Strategic Planning
It’s always tempting to gravitate towards positive active nouns – building, creating, exploring, starting - and ignore the opportunity to improve what is already there. This is a mistake, for four reasons:
- Understand the ‘As Is’. Any journey starts from where you are today. Building a hypothetical plan that ignores existing realities is easier, but wholly unproductive as it simply pushes that complexity into the delivery phase, where it gets harder to course correct or deprioritize.
- Recognize resource is precious. Ignoring ‘BAU’ means accepting large blocks of capacity are unavailable, thus reducing organizational agility. Relying on new headcount for everything risks organizational bloating and sows the seeds for value-destroying cutbacks later, as the Tech sector demonstrated during their post-pandemic lay-off frenzy.
- Core operations can be strategic. Taking today’s customers for granted while chasing new business is a well-trodden route to failure. ROI may appear higher for the new initiative with Herculean assumptions, but in reality a more achievable opportunity may be available closer to home. Adding feasibility into a model helps factor in reality to your planning.
- Efficiency pays back. Building something new seems easy on paper, but customers rarely do what spreadsheets say. Conversely plans to unlock savings are far more in the gift of the organization, so having an initiative to deliver efficiency gains might well have greater probability of success, even if the number in the model is lower.
The Strategic Planning Process
Strategic Planning in 7 Steps
While there is no standard model for how to do strategic planning, there are key steps which feature in effective processes:
Step 1. Vision & Mission
A company's vision is it's high level purpose - it's reason to exist. The mission is what it will do in order to deliver against that purpose.
Here in the UK this typically happens via a combination of eating biscuits (that’s Cookies, not things covered in gravy) and writing ideas on Post-It-Notes, ideally with several different colors. The output should be simple and pithy.
For example, here at TransparentChoice our vision is to help the world make better decisions… our mission is to provide brilliant decision-making software for organizations.
Step 2. Strategic Analysis
This is where you reflect on your market and your organizational capabilities as you shape the evidence base for what comes next. This could take the form of data deep dives, voice of the customer, internal focus groups… or indeed all the above. There are many popular frameworks available to help shape the output of this – think SWOT, 5 Forces etc. This step is invaluable but be careful not to let a data nerd like me get too carried away with a 100 page+ deck. See Tools below for more on this.
The end-product from this step is often a simple infographic designed to provide the broader organization with an easy-to-read view of the strategy. My personal favorite is the strategy house, as it combines capabilities, key initiatives, and desired outcomes on one page.
Step 3. Goal Setting
Define the criteria that connect your mission to the potential investments. These high-level metrics should be SMART (specific, measurable, achievable, relevant, timebound) and act as the first level of prioritization by calling out what really matters.
They will form the basis for your KPIs and should cascade into the organization as people’s objectives. If you take your planning process through all the way to prioritization they will also provide the basis for project selection criteria.
For more on this check out our Guide to Strategic Goals.
Step 4. Strategy Formulation
Build a list of activities that will deliver your goals. Grouping these initiatives into portfolios will make it easier to prioritize and evaluate, with similar criteria in place to measure strategic alignment:
- Maintain. Functional projects that improve core operations. Driving efficiency, reducing operational risk and delivering core service commitments are common criteria.
- Grow. Deliver short term commercial objectives and respond to customer needs.
- Transform. Find new ways to do business to deliver longer term strategic opportunities or address systemic risks. Read more: Successful Business Transformation
At this stage it is critical for leadership to recognize the importance of diversity, building solutions that avoid group think or loudest voice bias from 'Hippo' in boardroom. Are there enough 'left brain thinkers' to solve problems creatively? Is there input from your 'resources' (aka people who are capable of having inspiring ideas). If you think engaging the broader org is just a tick box to please HR then consider HBR research that indicated that mid-level managers' projects are 4x more likely to succeed that their bosses'.
Step 5. Action Planning
This is where project outlines are fleshed out. Break down programs into projects with resource estimates, review budget allocation, cascade goals into departmental objectives. Check priorities still make sense, especially if a potential project's estimated costs have ballooned on closer inspection. The key here is to ensure that your strategic planning process creates momentum rather than drag.
Don't forget that half finished tasks and slow multi-year programs simply don't generate the organizational dopamine hit that a complete project can deliver, and if you're running a strategic planning process it's that feel good factor which will serve to build your credibility.
The best way to achieve this is a high-level roadmap, which should be delivering four key benefits:
- Visibility of deliverables. Manage expectations by giving a steer for when work will happen. It's critical to enable others' plans as well as helping to manage stakeholder expectations.
- Fix bottlenecks. Setting out a macro-view of key phases within the portfolio will help flag delivery risks. Use your strategic planning process to resolve them proactively.
- Find quick wins. Achievements are great for building momentum, and finding projects that can validate the value of the strategic planning process can be very powerful.
- Give leadership options. A good process should provide choices to an organization's leaders. Reality means they can't have everything, but they can have the final call on what matters most.
Step 6. Strategic Execution
Lock the plan of record, kick-off the highest priority projects and get working. Communication is key at this stage, as ‘resources’ need to feel buy-in if you want to maximize productivity. Make sure KPIs are defined, and a governance process in place to review them regularly throughout the year.
There also needs to be a watertight link into budgeting, with an agile budget being the holy grail of responsive organizations and a 30% performance premium being the prize.
Step 7. Evaluation & Review
Track the success of projects via OKRs (Objectives & Key Results) that will tell you how well your strategy is landing. In the British Army it’s often said that “no plan never survives first contact with the enemy,” and this is equally true of any strategic plan. Therefore, it’s critical to monitor progress, be ready to evolve and accept that strategy is inherently iterative rather than absolute. Likewise monitor KPIs to understand overall progress.
What are Strategic Goals?
Strategic goals are the high-level ambitions you aspire to deliver through your strategic plan. They are not projects, or even programs, they are the reasons you will commit resources to these initiatives later in the process (we call them criteria). They should be clearly defined, measurable and weighted for relative importance. It’s tempting to skip this step and go straight to the action, but it’s a very bad idea.
Learn more: Strategic Goals – the Key to Strategic Execution
Measuring the Success of a Strategic Plan
No plan is complete without measurement, but to do this properly it is key to bake this into your plan from the outset. There are three levels of measurement we recommend:
- Key Performance Indicators (KPIs). Measure overall business success against strategic goals. Can be linked to a Balanced Scorecard as a framework for combining ‘hard’ and ‘soft’ measures.
- Objectives and Key Results (OKRs). Measure project level success against the business case used to justify funding. Again, can be quantifiable goals, or may require survey-based assessment. The key is to agree these at the point of sign-off, rather than scramble to append something retrospectively.
- SMART Objectives. Measure personal or departmental progress against areas of accountability derived from the plan. At their best objectives are, Specific, Measurable, Achievable, Relevant, Timebound.
If you currently do none of these don’t despair. Adding in any kind of after-the-fact analysis is a huge value add, even if it’s not the perfect solution.
Strategic Planning Tools and Best Practices
Strategic Models and Frameworks
Strategic models are analytical tools and frameworks that help organizations understand their internal and external environments, make informed decisions, and create long-term strategies for growth and sustainability.
Below, we delve into a selection of strategic models and explore how each can be instrumental in the strategic planning process. The key is to remember these tools are simply enablers to support and structure thoughtful leadership. The value is in the discussion not the slide deck that's used to document it.
Porters Five Forces
- What it is: Developed by Michael Porter in 1979, this model helps organizations analyze the competitive forces in their industry.
- How it helps with strategic planning: By assessing the five key forces (Threat of New Entrants, Threat of Substitutes, Bargaining Power of Customers, Bargaining Power of Suppliers, and Industry Rivalry), organizations can understand the attractiveness and profitability of an industry. This aids in making decisions such as entering new markets, developing new products, or realigning business objectives.
Value Chain Analysis
- What it is: Also developed by Michael Porter, this model focuses on analyzing an organization's internal activities, such as operations, marketing, and service.
- How it helps with strategic planning: By evaluating each activity’s contribution to the organization’s value, companies can identify areas where they add most value, vs. areas where performance needs to be improved.
- What it is: This model analyses the macro-environmental factors affecting an organization, including Political, Economic, Social, Technological, Legal, and Environmental aspects.
- How it helps with strategic planning: Understanding these external factors helps organizations identify opportunities and threats in the market, and adapt their strategies to evolving environments. For example, recognizing a technological trend early on could lead to the development of new products.
- What it is: This simple but powerful framework helps organizations analyze their Strengths, Weaknesses, Opportunities, and Threats.
- How it helps with strategic planning: By examining internal strengths and weaknesses alongside external opportunities and threats, organizations can develop strategies that capitalize on their strengths, address their weaknesses, exploit opportunities, and mitigate threats.
- What it is: Developed by Robert Kaplan and David Norton, this model focuses on measuring organizational performance from four perspectives: Financial, Customer, Internal Process, and Learning & Growth.
- How it helps with strategic planning: The Balanced Scorecard ensures that organizations balance short-term and long-term objectives, financial and non-financial measures, and internal and external perspectives. This holistic approach helps in setting well-rounded objectives and tracking performance against strategic goals.
The Ansoff Matrix
- What it is: This matrix helps organizations decide on growth strategies by evaluating existing and new markets and products.
- How it helps with strategic planning: By examining the risks associated with different growth strategies (Market Penetration, Market Development, Product Development, and Diversification), organizations can make informed decisions on where to allocate resources and where to expand.
Sightline Strategic Planning Process
- What is it: Sightline, from Rebecca Sutherns is a guide to Collaborative Strategic planning. Specifically she calls out the 6 A's framework as an approach to modern strategic planning
- How it helps strategic planning: Rather than seeing strategy as an entity that is formed via a model, then shifted to execution, she advocates a process of continuous learning, where tasks take shape iteratively based on feedback, and insight from each deployment feeds back to make the next iteration stronger. It's an ideal base for Collaborative Strategy Building.
Strategic Planning Tools
Much of the value is the process itself with the quality of discussion, but having tooling to help consolidate outcomes is valuable too. Here are the leading options:
Show your objectives and key dependencies in a summary format. Could be a simple ‘strategy house’ or a more complete view which cascades into actions and objectives.
Kaplan and Norton’s Balance Scorecard approach is the best-known type of strategy map, designed to facilitate, communicate, and track strategic plans.
This map should be the first step of prioritization, so be ruthless about eliminating non-critical elements. A good strategy is about choices and should create some uncomfortable decisions. Avoid the trap of seeing it as a challenge to retrofit a pretty diagram onto what already happens today.
The Analytic Hierarchy Process introduces Decision Science rigour into strategic planning. Through structuring goals an AHP model combines quantitative and qualitative criteria into a combined score, thus enabling choices to be shaped by analysis. Moreover, by collating the views of different stakeholders there is also a reduction in cogitative biases.
Talking of bias, this is what we, at TransparentChoice do… and we believe it’s the best tool for the job when it comes to strategic planning.
Learn more: Why AHP works for Prioritization.
Visualize key risks identified by mapping severity versus probability. This is important as determining the balance of risk mitigation versus investment in growth is a key strategic decision for leadership, and enabler for effective prioritization.
Every good strategic plan should flow into an action plan. Making that plan a roadmap means overlaying resource constraints, prioritizing competing projects, and delivering a set of time-bound goals against which the plan will be measurable.
However, beware the risk of excessive detail. Resource scheduling means very detailed task-level allocation and can only happen after projects are scoped out in-full. Far better to start with a simple approach, such as T-Shirt sizing, lock in the broad plan, then build up execution detail on the first wave of projects.
The growth of hybrid working since 2020 has made demand for Collaborative Strategy Building tools boom. There are a variety of solutions out there which can enable remote brainstorming, structure decision making, and make it easy for folks to share creatively. There are also solutions designed to enable broader stakeholder participation with easy to use voting apps, and AI capable of synthesizing townhall feedback objectively. The key is to invest in the change process that wraps around it, as Chris Carter, a leading strategy expert says, "you can't just virtualize what we used to do".
The humble spreadsheet is great for simple scoring, scheduling, and planning, but beware the danger of the monster spreadsheet, that gets too complex to understand, and too brittle to change. If you’re in a large organization with multiple stakeholders and a lot of potential projects, then we think our software could become your strategic advantage.
Strategic Alignment (and why it matters)
A strategic plan has no innate value unless it drives execution, which is why strategic alignment matters. Every organisation is different structurally and culturally so there’s no silver bullet solution but follow these six tips and you’ll set yourself up to succeed:
- Align the C-Suite. If executives don’t agree on the strategy and how to deliver it, then your organization is wasting money. This could be via time-sapping internal politics, low value pet projects or poor collaboration on cross-team initiatives. Eliminate this to turbo-charge performance.
- Allocate resource strategically. This can mean budgeting, access to shared services, or shaping peoples’ objectives. However, you intend to drive action, it’s important to remember that if a strategy does not connect to resource allocation it is pointless.
- Measure progress vs. strategic goals. Break big ambitions into specific ones, enabling progress to be measured via KPIs. These metrics are typically the outturn of collective effort, so make a great focal point for communications, whether that’s to celebrate success or to demand more.
Drive accountability: Understand who owns what within the strategy and ensure they have the resources needed to deliver. Use OKRs to track progress and maintain focus. At project level sponsorship is critical. Read more: 'Organizational Accountability and Its Role in Strategy Execution'
- Think people (not ‘resource’). If you have buy-in to your strategy people will work harder to deliver it and approach problem solving with a more creative mindset. Every CEO knows this – the best ones build participation into their strategic planning; the rest rely on cascading their ideas and hoping managers put them into action. Read more: 'Prioritization: Why people are so much more than resource'
- Avoid Ivory Tower leadership. Coming up with (another) new management initiative which seemingly ignores the reality on the ground undermines the credibility of the plan itself with front-line staff, as well as missing vital contextual detail.
Learn more: Strategic Alignment
Agile Planning & Budgeting
This is an emerging concept right now which draws on the principles of Agile software development to build a more fluid responsive strategic planning process. Read Henny Portman for his perspective on Agile Portfolio Management, an approach which champions value responsiveness ahead of task based organization. The key is to challenge rigid ways of organizing activity in favor of one capable of responding at pace to signals in a fast-moving market.
Agile budgeting is a similar concept. It emphasizes flexibility and responsiveness, enabling organizations to adapt to market changes by aligning resource allocation with clearly defined value-orientated priorities. This approach can increase the value derived from resources by 30% according to Bob Kitchen of Catalyze.
Shifting to agile planning is not a simple transition. It requires a mind-set shift for individuals trained to build career ambition around the size of their budgets, and competitve leaders who see value definition as an exercise is gaming the system. But anything good requires effort, and adding agility into your planning process has the potential to become a genuine strategic advantage, so the upside is definitely there for leaders with the right growth mindset.
Avoiding common mistakes in strategic planning
If you’re about to start your strategic planning process, then best to be aware of the pitfalls:
- Lack of left-brain thinking. We live in a period of rapid disruption. Focusing strategic planning on improving today’s business model is simply not enough, when the potential for existential change is so high. In part this re-enforces the importance of rigorous modelling but also underlines the importance of adding creative problem solving to the boardroom when figuring out “What Next”?
- Treating projected customer behaviour as a data point. A number does not become a fact because it is in a spreadsheet. Recognise that it is a judgement and treat with appropriate caution. Better still, survey a panel of experts to reduce the noise. Better again track those assumptions and prepare to pivot if things change.
- Over-planning. Projecting the future is essentially impossible. It’s important to have a go, but don’t waste time modelling bottom-up detail if you can achieve equal accuracy with a simple top-down estimate. Analysis paralysis is a common trap, and wastes time and resources.
- Failure to align leadership. If your executives are not all bought into the plan they will become disrupters, with their (divisive) perspectives rippling out via their teams. Address these issues up front as a matter of priority, as ignoring them does not resolve them.
- Organizational engagement as an afterthought. A good strategy should not be a big reveal at the company all hands (been there, seen it, worked out the numbers were nonsense in about 10 seconds…). It should be the result of a collaborative process that draws together subject matter expertise with leadership vision in an iterative staged development that fosters buy-in.
- Don’t connect strategy and action. A strategic plan needs to feed into a prioritized backlog, then into a roadmap. If this process isn’t joined up, you are almost certainly wasting resources. It's also very likley you'll lose momentum if you have too many projects kicking off and not enough delivering value.
- Failure to be responsive. Even the best strategy will be a bit wrong. Be ready to flex, adapt and evolve, with re-prioritization and acceptance that stopping projects is OK. Knitting value-led measurement into a robust governance process gives you the capability to course correct proactively, rather than blindly ploughing on regardless. For more on this HBR are excellent.
If you’re ready to get started with Strategic Planning we believe AHP is a solution which will add value to your organization. It’s not as colorful as Post-It notes, but it’s a powerful solution for building an effective Strategic Plan, which builds on the principle that collaborative prioritization should be core to strategic planning. Take a look at this short demo if you’d like to see it in action.
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