A broad answer to the question, what is strategic planning is that corporate strategic planning is a systematic attempt to decide how best to anticipate and respond the challenge of change.
In a sense, corporate strategic planning is just like any other type of long-range planning. A production manager for example will have a long-range plan that shows how their factory will have enhanced capability to produce new products in say the next decade. The manager bases this planning on their knowledge of trends in manufacturing systems. Similarly, a marketing director plans the firm’s product range for some years ahead, knowing about product life cycles, trends in consumer tastes and the competitive forces of the market place.
Therefore, when asked what is strategic planning, we can say there is nothing mysterious about it, except that it is concerned with plans one step up the hierarchy, that is, not plans for parts or functions of the enterprise but plans for the organization as a corporate whole.
At the corporate level, only a few questions need concern the executives responsible for corporate strategy. The long-term destiny of any enterprise depends on only two, three, four, or at most a handful of huge decisions. Get these wrong, and no amount of brilliant marketing, research or other expert efforts will turn the organization into a champion performer. Get them right and watch your organization thrive!
Corporate strategic planning is mainly concerned with identifying these few elephant sized issues. Most of these big strategic issues and decisions do not require elaborate and detailed calculations.
They are usually more matters of qualitative judgment than of numerical accuracy.
With all due respect to the highly paid strategy consultants, with their sophisticated statistical analyses, elaborate computer models, many faceted scorecards and multivolume reports, I do not believe you need to be an Einstein to do strategic planning.
Corporate strategic plans should be simple, not complex. Nevertheless, they are also difficult, not easy to produce. Part of the difficulty is that the future is uncertain. Part is that many of these decisions are judgments, including moral ones. Not only is this the wrong field for geniuses, it is also a rather barren area for advanced management techniques. However, it is a field where experienced senior line managers are in their element. There is no doubt in my mind that the best strategic planners, whether in a company or non-profit organization, are its own top executives.
A corporate strategic plan is a plan consisting of a very few simple but far-reaching statements. These are about the long-term future of the enterprise as a whole.
Let me give an example. Imagine a company manufacturing agricultural chemicals. It is extremely successful in this business. It has growing cash reserves. Projected market share will exceed 25 per cent in the coming year.
However, let us imagine, the political climate is hostile to companies seen as having too much market power. This means market share is more than 25 per cent. Regulatory agency enquiries have recently shaken up several large companies, with attendant adverse publicity affecting share prices. This company therefore decides to use its strongly positive cash flow to acquire companies in the fields of fertilizers, pharmaceuticals, and foodstuffs. This is its corporate strategic plan.
Four brief sentences sum up the plan, as below. Once it is committed to action, and after acquiring these various companies, its destiny will be shaped for many years. It will be extremely difficult to turn back once it has set out on this radical new course. Consider these brief sentences:
Now you may object that this set of statements of corporate strategy is far too brief. Surely, you might argue, there should be further levels of decisions — statements 5 and 6, or more. Moreover, that these should contain much more detail concerning all manner of aspects of all these new business areas. Perhaps there should be, but I believe that, before this company gets down to these details, it should spend a great deal more time thinking about the statements it has already made, especially statements 3 and 4.
Indeed, in terms of the answer we are giving to the question ‘what is a strategic planning’ these statements do qualify as the corporate strategic plan for this organization. They are of the right order; addressing truly elephant sized issues that may affect the organization for many years to come. All further detail is at least an order of magnitude less important.
A corporate strategic plan can be that simple.
Remember however, that does not mean that the process to produce these seemingly simple statements is easy. In addition, it does not mean that these simple statements are valid. A corporate strategic plan they may be, but whether they are suitable is a different question.
Despite a superficial plausibility, I believe these statements are not valid. Statement 3 does not follow from 1 and 2, for example. The mere fact that the company may face hostility from government agencies and the media does not mean that it must diversify. It could consider other options, including not diversifying and meeting the problem head on. Why choose just these three areas, even if diversification makes sense? Why not two or four? Why those three? Why not farm drainage systems or veterinary products? Also, why adopt the structure of a diversified national company? Why not become a world farm chemical company by purchasing international competitors in the field that it understands? Why not go into farming?
point that I am making here is fundamental to understanding of our
approach to answering the question ‘what is strategic planning?’ I
believe that most organizations, whether businesses or non-profit
organizations, take these big decisions without adequate thought and
discussion. These decisions are so big that many executives simply do
not know how to tackle decisions of that magnitude, so they slide over
or round these big ones, and tackle the details.
Most executives are
at home with detail. They perceive operational activities, and the
associated troubleshooting or problem solving, as their ‘real job’.
Planning discussions take time, and distracts them from this ‘real job’.
They can measure, plan, and control details of their daily operational
reality. It is harder to come to grips with broad concepts like
diversification, internationalization, or industry restructuring.
This is why so many corporate planning systems start off with deciding the mission of the company’.
Conventional wisdom about strategic planning is that you start by writing a mission statement. These approaches do not say how to decide it; an enterprise just writes it and then does its strategic planning.
So, is mission’ an input to the corporate planning process?
I believe this is completely misguided. The big decision receives far less discussion than the details. No. Let us have a strategic planning process where the mission is an output.
Corporate strategic planning decisions, then, are decisions that affect the whole structure of the company many years or decades into the future. They are huge decisions taken in conditions of extreme uncertainty about the future. It is the size of these decisions; the fact that there are so few of them, and the enormous errors in the forecasts on which they are always based that characterizes strategic planning.
How should we take decisions of this sort?
Most of simply-strategic-planning.com will be devoted to answering this question. All that I need to say here is that these decisions follow a review of the total strategic situation of the organization.
Since this is a lengthy exercise, it is tackled systematically. The planners work systematically through a checklist of factors affecting the company strategically. At the end of this long difficult process, a set of answers to the strategic questions comes out. These are then tested and evaluated. If they pass, they are actioned and carefully monitored.
For a slightly different take on the meaning of strategic planning check out this.
Strategic planning is a systematic, formally documented process for deciding the handful of key decisions that an organisation, viewed as a corporate whole, must get right in order to thrive over the next few years. The process results in the production of a corporate strategic plan.
Strategic planning is a process that produces a strategic plan! Yes, and not only a plan, it should also produce other less obvious and more important things like confidence in, commitment to, and communication of the plan throughout the organization.
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