Many entrepreneurs feel that strategic planning is a large company activity, however, all multi-year decisions are inherently strategic and the actions taken usually imply a strategic objective. Executive hiring, contracts and leases, price lists, and capital equipment purchases all strategically drive the company in directions that may or may not be anticipated, compatible, or desired.
Healthy companies make multi-year decisions that follow a robust formal strategy. Their decisions reinforce each other, are timely, reality based, and goal oriented. If a company needs to create market differentiation, deal with a highly variable business environment, respond to long-term trends, achieve corporate growth, or find outside investment, having a thoughtful and defined strategy makes the task easier.
Given that management routinely makes strategic decisions, what’s the advantage of a formal written plan? Without a written plan there usually is no incentive to change, there are no commitments or deadlines, coordination is difficult, and day-to-day issues rule. The written plan literally keeps everyone on the same page.
Even though the factors necessary for successfully reaching strategic objectives may be well-known, many strategic plans fail because of poor implementation. First, the company needs to understand and agree on its vision and mission. For example, if it decides to focus on a niche market, salesmen should be discouraged from soliciting orders outside that market.
Without factual knowledge of the company’s history and its current environment, measurable and realistic objectives cannot be set. Becoming “world class” may sound good, but may not fit the company and its resources.
A strategic plan is not a document to be written and filed away for twelve months. Because the business environment is constantly changing at what often seems like an increasing tempo, a plan written eight months ago and then not re-visited is probably not addressing new business realities. As a result, the plan may be ignored and an informal “fix” applied to solve a problem. Regular review of assumptions, progress, and the business environment make the strategic plan a living company document. With ongoing updates, strategic plans frequently become more stable due to an increased understanding of assumptions and realities.
Finally, the active involvement and support of formal strategic planning by top management makes the plan viable. Deadlines and objectives will not be met if they are not managed.