Strategic planning in business

Wikipedia, the free to: navigation, to be confused with strategic gy • strategic ry strategy • strategic gic planning • game l porter  • rita gunther henderson  • gary e a. Paine  • adrian oster  • chris mintzberg  • clay itive advantage  • experience chain • portfolio competency • generic analysis  • growth–share gic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. Strategic planning became prominent in corporations during the 1960s and remains an important aspect of strategic management. It is executed by strategic planners or strategists, who involve many parties and research sources in their analysis of the organization and its relationship to the environment in which it competes. Strategy can be planned (intended) or can be observed as a pattern of activity (emergent) as the organization adapts to its environment or gy includes processes of formulation and implementation; strategic planning helps coordinate both. Strategic plan gic management processes and gic planning is a process and thus has inputs, activities, outputs and outcomes. 3] these elements are considered throughout the strategic planning is gathered from a variety of sources, such as interviews with key executives, review of publicly available documents on the competition or market, primary research (e. These values may be captured in an organization's vision and mission essence of formulating competitive strategy is relating a company to its gic planning activities include meetings and other communication among the organization's leaders and personnel to develop a common understanding regarding the competitive environment and what the organization's response to that environment (its strategy) should be. A variety of strategic planning tools (described in the section below) may be completed as part of strategic planning organization's leaders may have a series of questions they want answered in formulating the strategy and gathering inputs, such as:What is the organization's business or interest? Output of strategic planning includes documentation and communication describing the organization's strategy and how it should be implemented, sometimes referred to as the strategic plan. 2] a strategic plan may cover multiple years and be updated organization may use a variety of methods of measuring and monitoring progress towards the objectives and measures established, such as a balanced scorecard or strategy map. Balance sheets, income statements, and cash flows) for several years when developing their strategic plan, as part of the goal setting activity. Capital budgets very often form the backbone of a strategic plan, especially as it increasingly relates to information and communications technology (ict). The planning process produces outputs, as described above, strategy implementation or execution of the strategic plan produces outcomes. How close they are to the strategic goals and vision will determine the success or failure of the strategic plan. A business organization that operates within the legal requirements operates with minimum problems; this directly increases the company’s share-market. The other short-term objective to be met by the strategic action plan entails increased customer loyalty. Customers are usually attracted to business organizations that offered good services and respected the client needs. 1] these were developed by companies and management consulting firms to help provide a framework for strategic planning. Planning, which was originally used in the military and recently used by large corporations to analyze future scenarios;. Share matrix, which involves portfolio decisions about which businesses to retain or divest; ed scorecards and strategy maps, which creates a systematic framework for measuring and controlling sive evaluation, which uses a constructivist evaluation approach to identify the outcomes of objectives, which then supports future strategic planning gic planning vs. Extending financial statement projections into the future without consideration of the competitive environment is a form of financial planning or budgeting, not strategic planning. In business, the term "financial plan" is often used to describe the expected financial performance of an organization for future periods. The financial plans accompanying a strategic plan may include 3–5 years of projected ey & company developed a capability maturity model in the 1970s to describe the sophistication of planning processes, with strategic management ranked the highest.

What is strategic planning in business

The four stages include:Financial planning, which is primarily about annual budgets and a functional focus, with limited regard for the environment;. Based planning, which includes multi-year financial plans and more robust capital allocation across business units;. Management, where widespread strategic thinking occurs and a well-defined strategic framework is ries 3 and 4 are strategic planning, while the first two categories are non-strategic or essentially financial planning. Planning has been criticized for attempting to systematize strategic thinking and strategy formation, which henry mintzberg argues are inherently creative activities involving synthesis or "connecting the dots" which cannot be systematized. Mintzberg argues that strategic planning can help coordinate planning efforts and measure progress on strategic goals, but that it occurs "around" the strategy formation process rather than within it. Further, strategic planning functions remote from the "front lines" or contact with the competitive environment (i. In business, facing the customer where the effect of competition is most clearly evident) may not be effective at supporting strategy efforts. Strategy strategy on making rise planning ated business ry strategy and the art of war for the gic planning gy markup language (stratml). Abcs of strategic management : an executive briefing and plan-to-plan day on strategic management in the 21st century. Gic planning 's five forces ries: strategic managementbusiness planningbusiness termsstrategyhidden categories: articles containing video logged intalkcontributionscreate accountlog pagecontentsfeatured contentcurrent eventsrandom articledonate to wikipediawikipedia out wikipediacommunity portalrecent changescontact links hererelated changesupload filespecial pagespermanent linkpage informationwikidata itemcite this a bookdownload as pdfprintable version. 3 free articles big lie of strategic the january–february 2014 y–february 2014 gy making forces executives to confront a future they can only guess at. If you are entirely comfortable, you’re probably stuck in one or more of the following ng arguably makes for more thorough budgets, but it must not be confused with lend themselves wonderfully to planning, because the company controls them. Planning can’t make revenue magically -referential strategy managers who avoid the first two traps may end up using a framework that leads them to design a strategy entirely around what the company controls. Company can avoid those traps by focusing on customers, recognizing that strategy is about making bets, and articulating the logic behind strategic executives know that strategy is important. If executives adopt this definition, then maybe, just maybe, they can keep strategy where it should be: outside the comfort t trap 1: strategic lly every time the word “strategy” is used, it is paired with some form of the word “plan,” as in the process of “strategic planning” or the resulting “strategic plan. The subtle slide from strategy to planning occurs because planning is a thoroughly doable and comfortable your energy on the key choices that influence revenue decision makers—that is, gic plans all tend to look pretty much the same. This part of the strategic plan tends to be very organized but also very long. Strategic plans become the budget’s descriptive front end, often projecting five years of financials in order to appear “strategic. But management typically commits only to year one; in the context of years two through five, “strategic” actually means “impressionistic. Planning typically isn’t explicit about what the organization chooses not to do and why. And its dominant logic is affordability; the plan consists of whichever initiatives fit the company’s ing planning for strategy is a common trap. They are, after all, primarily current or former managers, who find it safer to supervise planning than to encourage strategic choice. Analysts pore over plans in order to assess whether companies can meet their quarterly t trap 2: cost-based focus on planning leads seamlessly to cost-based thinking. Costs lend themselves wonderfully to planning, because by and large they are under the control of the company.

The trouble is that planning-oriented managers tend to apply familiar, comfortable cost-side approaches to the revenue side as well, treating revenue planning as virtually identical to cost planning and as an equal component of the overall plan and budget. S a simple reason why revenue planning doesn’t have the same desired result as cost planning. Companies may fool themselves into thinking that revenue is under their control, but because it is neither knowable nor controllable, planning, budgeting, and forecasting it is an impressionistic course, shorter-term revenue planning is much easier for companies that have long-term contracts with customers. For example, for business information provider thomson reuters, the bulk of its revenue each year comes from multiyear subscriptions. Planning can’t and won’t make revenue magically appear, and the effort you spend creating revenue plans is a distraction from the strategist’s much harder job: finding ways to acquire and keep t trap 3: self-referential strategy trap is perhaps the most insidious, because it can snare even managers who, having successfully avoided the planning and cost traps, are trying to build a real strategy. Unfortunately, two of the most popular ones can lead the unwary user to design a strategy entirely around what the company can 1978 henry mintzberg published an influential article in management science that introduced emergent strategy, a concept he later popularized for the wider nonacademic business audience in his successful 1994 book, the rise and fall of strategic planning. If the future is too unpredictable and volatile to make strategic choices, what would lead a manager to believe that it will become significantly less so? Your company can , the concept of emergent strategy has simply become a handy excuse for avoiding difficult strategic choices, for replicating as a “fast follower” the choices that appear to be succeeding for others, and for deflecting any criticism for not setting out in a bold direction. This concept became extraordinarily appealing to executives, because it seemed to suggest that strategy was the identification and building of “core competencies,” or “strategic capabilities. You have a large corporate strategic planning ly not: if you have a corporate strategy group, it is ly: in addition to profit, your most important performance metrics are cost- and ly not: in addition to profit, your most important performance metrics are customer satisfaction and market ly: strategy is presented to the board by your strategic planning ly not: strategy is presented to the board primarily by line ly: board members insist on proof that the strategy will succeed before approving ly not: board members ask for a thorough description of the risks involved in a strategy before approving can a company escape those traps? If the company does connect with that customer, the how-to-win choice will determine whether she will find the offering’s targeted value equation article also appears in:Hbr’s 10 must reads ship and managing a strategy is about just those two decisions, it won’t need to involve the production of long and tedious planning documents. Characterizing the key choices as where to play and how to win keeps the discussion grounded and makes it more likely that managers will engage with the strategic challenges the firm faces rather than retreat to their planning comfort 2: recognize that strategy is not about noted, managers unconsciously feel that strategy should achieve the accuracy and predictive power of cost planning—in other words, it should be nearly perfect. Until they accept this, they will get planning instead of strategy—and lots of excuses down the line about why the revenue didn’t show 3: make the logic only sure way to improve the hit rate of your strategic choices is to test the logic of your thinking: for your choices to make sense, what do you need to believe about customers, about the evolution of your industry, about competition, about your capabilities? It is critical to write down the answers to those questions, because the human mind naturally rewrites history and will declare the world to have unfolded largely as was planned rather than recall how strategic bets were actually made and why. In addition, by observing with some level of rigor what works and what doesn’t, managers will be able to improve their strategy decision managers apply these rules, their fear of making strategic choices will diminish. Have argued that planning, cost management, and focusing on capabilities are dangerous traps for the strategy maker. For if it’s strategy that compels customers to give the company its revenue, planning, cost control, and capabilities determine whether the revenue can be obtained at a price that is profitable for the company. Human nature being what it is, though, planning and the other activities will always dominate strategy rather than serve it—unless a conscious effort is made to prevent that. He is a coauthor of creating great choices: a leader’s guide to integrative article is about strategic planning. He is a coauthor of creating great choices: a leader’s guide to integrative article is about strategic ey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. By using this site or clicking on "ok", you consent to the use of to improve strategic this article on this article on this article on ad this can be a frustrating exercise, but there are ways to increase its conference rooms everywhere, corporate planners are in the midst of the annual strategic-planning process. For the better part of a year, they collect financial and operational data, make forecasts, and prepare lengthy presentations with the ceo and other senior managers about the future direction of the business. But at the end of this expensive and time-consuming process, many participants say they are frustrated by its lack of impact on either their own actions or the strategic direction of the sense of disappointment was captured in a recent mckinsey quarterly survey of nearly 800 executives: just 45 percent of the respondents said they were satisfied with the strategic-planning process. All panelists have mostly financial or strategic responsibilities and work in a wide range of industries for organizations with revenues of at least $500 million.

Given these results, managers might well be tempted to jettison the planning process for those working in the overwhelming majority of corporations, the annual planning process plays an essential role. In addition to formulating at least some elements of a company’s strategy, the process results in a budget, which establishes the resource allocation map for the coming 12 to 18 months; sets financial and operating targets, often used to determine compensation metrics and to provide guidance for financial markets; and aligns the management team on its strategic priorities. The operative question for chief executives is how to make the planning process more effective—not whether it is the sole mechanism used to design strategy. Ceos know that strategy is often formulated through ad hoc meetings or brand reviews, or as a result of decisions about mergers and research shows that formal strategic-planning processes play an important role in improving overall satisfaction with strategy development. That role can be seen in the responses of the 79 percent of managers who claimed that the formal planning process played a significant role in developing strategies and were satisfied with the approach of their companies, compared with only 21 percent of the respondents who felt that the process did not play a significant role. There are many ways to conduct strategic planning, but determining the ideal method goes beyond the scope of this article. The changes we discuss here (such as a focus on important strategic issues or a connection to core-management processes) are the elements most linked with the satisfaction of employees and their perceptions of the significance of the process. These steps cannot guarantee that the right strategic decisions will be made or that strategy will be better executed, but by enhancing the planning process—and thus increasing satisfaction with the development of strategy—they will improve the odds for with the ceos what they think strategic planning should involve and they will talk about anticipating big challenges and spotting important trends. If the calendar-based process is to play a more valuable role in a company’s overall strategy efforts, it must complement budgeting with a focus on strategic issues. In our experience, the first liberating change managers can make to improve the quality of the planning process is to begin it by deliberately and thoughtfully identifying and discussing the strategic issues that will have the greatest impact on future business d, an approach based on issues will not necessarily yield better strategic results. The music business, for instance, has discussed the threat posed by digital-file sharing for years without finding an effective way of dealing with the problem. But as a first step, identifying the key issues will ensure that management does not waste time and energy on less important found a variety of practical ways in which companies can impose a fresh strategic perspective. For instance, the ceo of one large health care company asks the leaders of each business unit to imagine how a set of specific economic, social, and business trends will affect their businesses, as well as ways to capture the opportunities—or counter the threats—that these trends pose. Only after such an analysis and discussion do the leaders settle into the more typical planning exercises of financial forecasting and identifying strategic consumer goods organization takes a more directed approach. The corporate-strategy function summarizes the results, adds appropriate corporate targets, and shares them with the organization in the form of a strategy memo, which serves as the basis for more detailed strategic planning at the division and business-unit levels. Every december the corporate senior-management team produces a list of ten strategic questions tailored to each of the three business units. The leaders of these businesses have six months to explore and debate the questions internally and to come up with answers. We recently worked with a sales company to design a strategic-planning process that begins with in-depth interviews (involving all of the senior managers and selected corporate and business executives) to generate a list of the most important strategic issues facing the company. We found that survey respondents who were satisfied with the strategic-planning process rated it highly on dimensions such as including the most knowledgeable and influential participants, stimulating and challenging the participants’ thinking, and having honest, open discussions about difficult issues. In contrast, 27 percent of the dissatisfied respondents reported that their company’s strategic planning had not a single one of these virtues. Such results suggest that too many companies focus on the data-gathering and packaging elements of strategic planning and neglect the crucial interactive gic conversations will have little impact if they involve only strategic planners from both the business unit and the corporate levels. The key strategy conversation should take place among corporate decision makers, business unit leaders, and people with expertise essential to the discussion. In addition to leading the corporate review, the ceo, aided by members of the executive team, should as a rule lead the strategy review for business units as well. The head of a business unit, supported by four to six people, should direct the discussion from its side of the table (see sidebar, "things to ask in any business unit review").

To ask in any business unit major trends and changes in your business unit’s environment affecting your strategic plan? If your business unit plans to take market share from competitors, how will it do so, and how will they respond? What are your business unit’s distinctive competitive strengths, and how does the plan build on them? Beyond the immediate planning cycle, what are the key issues, risks, and opportunities that we should discuss today? Pharmaceutical company invites business unit leaders to take part in the strategy reviews of their peers in other units. This approach can help build a better understanding of the entire company and, especially, of the issues that span business units. The risk is that such interactions might constrain the honesty and vigor of the dialogue and put executives at the focus of the discussion on the ate senior-management teams can dedicate only a few hours or at most a few days to a business unit under review. So team members should spend this time in challenging yet collaborative discussions with business unit leaders rather than trying to absorb many facts during the review itself. This reading material should also tee up the most important issues facing the business and outline the proposed strategy, ensuring that the review team is prepared with well-thought-out questions. In our experience, the right 10 pages provide ample fuel to fire a vigorous discussion, but more than 25 pages will likely douse the level of energy or engagement in the planning cycles to the needs of each rs are justifiably concerned about the resources and time required to implement an issues-based strategic-planning approach. One easy—yet rarely adopted—solution is to free business units from the need to conduct this rigorous process every single year. In all but the most volatile, high-velocity industries, it is hard to imagine that a major strategic redirection will be necessary every planning cycle. In fact, forcing businesses to undertake this exercise annually is distracting and may even be detrimental. Managers need to focus on executing the last plan’s major initiatives, many of which can take 18 to 36 months to implement companies alternate the business units that undergo the complete strategic-planning process (as opposed to abbreviated annual updates of the existing plan). One media company, for example, requires individual business units to undertake strategic planning only every two or three years. This cadence enables the corporate senior-management team and its strategy group to devote more energy to the business units that are “at bat. More important, it frees the corporate-strategy group to work directly with the senior team on critical issues that affect the entire company—issues such as developing an integrated digitization strategy and addressing unforeseen changes in the fast-moving digital-media companies use trigger mechanisms to decide which business units will undergo a full strategic-planning exercise in a given year. One industrial company assigns each business unit a color-coded grade—green, yellow, or red—based on the unit’s success in executing the existing strategic plan. Although many of the metrics that determine the grade are financial, some may be operational to provide a more complete assessment of the unit’s g business units from participating in the strategic-planning process every year raises a caveat, however. When important changes in the external environment occur, senior managers must be able to engage with business units that are not under review and make major strategic decisions on an ad hoc basis. Indeed, one advantage of a tailored planning cycle is that it builds slack into the strategic-review system, enabling management to address unforeseen but pressing strategic issues as they ent a strategic-performance-management the end, many companies fail to execute the chosen strategy. All this suggests that putting in place a system to measure and monitor their progress can greatly enhance the impact of the planning companies believe that their existing control systems and performance-management processes (including budgets and operating reviews) are the sole way to monitor progress on strategy. As a result, managers attempt to translate the decisions made during the planning process into budget targets or other financial goals. We estimate that a significant portion of the strategic decisions we recommend to companies can’t be tracked solely through financial targets.

A company undertaking a major strategic initiative to enhance its innovation and product-development capabilities, for example, should measure a variety of input metrics, such as the quality of available talent and the number of ideas and projects at each stage in development, in addition to pure output metrics such as revenues from new-product sales. One information technology company, for instance, carefully tracks the number and skill levels of people posted to important strategic gic-performance-management systems, which should assign accountability for initiatives and make their progress more transparent, can take many forms. One industrial corporation tracks major strategic initiatives that will have the greatest impact, across a portfolio of a dozen businesses, on its financial and strategic goals. The corporate-strategy team assumes responsibility for reviews (chaired by the ceo and involving the relevant business-unit leaders) that use an array of milestones and metrics to assess the top ten initiatives. Each business unit, in turn, is accountable for adopting the same performance-management approach for its own, lower-tier top-ten list of designed well, strategic-performance-management systems can give an early warning of problems with strategic initiatives, whereas financial targets alone at best provide lagging indicators. It therefore put in place a regular review of the key strategic metrics against its actual performance to alert managers to any emerging ate human-resources systems into the strategic monitoring the execution of strategic initiatives is not sufficient: their successful implementation also depends on how managers are evaluated and compensated. Yet only 36 percent of the executives we surveyed said that their companies’ strategic-planning processes were integrated with hr processes. One way to create a more valuable strategic-planning process would be to tie the evaluation and compensation of managers to the progress of new gh the development of strategy is ostensibly a long-term endeavor, companies traditionally emphasize short-term, purely financial targets—such as annual revenue growth or improved margins—as the sole metrics to gauge the performance of managers and employees. A major pharmaceutical company, for example, recently revamped its managerial-compensation structure to include a basket of short-term financial and operating targets as well as longer-term, innovation-based growth gh these changes help persuade managers to adopt both short- and long-term approaches to the development of strategy, they don’t address the need to link evaluation and compensation to specific strategic initiatives. For example, one north american services business that launched strategic initiatives to improve its customer retention and increase sales also adjusted the evaluation and compensation targets for its managers. By introducing metrics for these specific initiatives and linking their success closely to bonus packages, the company motivated managers to make the strategy advantage of this approach is that it motivates managers to flag any problems early in the implementation of a strategic initiative (which determines the size of bonuses) so that the company can solve them. Otherwise, managers all too often sweep the debris of a failing strategy under the operating rug until the spring-cleaning ritual of next year’s annual planning business leaders have found ways to give strategic planning a more valuable role in the formulation as well as the execution of strategy. To create an agile in the workplace fifty: evaluate an oil and gas giant outmaneuvered low oil from the mckinsey tions and deceptions in strategic ry 2006 – companies are vulnerable to misconceptions, biases, and plain old lies. This is bringing us into a new economic era—a distributive one—where different rules to create an agile in the workplace fifty: evaluate an oil and gas giant outmaneuvered low oil ng the bank for an ecosystem nsultingtraining & certificationoverviewbalanced scorecard certificationkpi professional certificationpump® certificationother coursescourse schedule & registrationpolicies & termssoftwarebalanced scorecard softwarequickscore bsc softwarebsc basicsabout the balanced scorecardarticles & videosexamples & success storiesaward for excellencekpi basicsstrategic planning basicsblogaboutabout bsibsi associatespress releasesgsa schedulecontact usstrategic partnersglobal partnersbsi locationsbsi africabsi middle eastbsi europebsi australia/se day , november 01 , basics  >  strategic planning the balanced scorecardarticles & videosexamples & success storiesaward for excellencekpi basicsstrategic planning is strategic planning? Planning is an organizational management activity that is used to set priorities, focus energy and resources, strengthen operations, ensure that employees and other stakeholders are working toward common goals, establish agreement around intended outcomes/results, and assess and adjust the organization's direction in response to a changing environment. Effective strategic planning articulates not only where an organization is going and the actions needed to make progress, but also how it will know if it is is a strategic plan? Strategic plan is a document used to communicate with the organization the organizations goals, the actions needed to achieve those goals and all of the other critical elements developed during the planning is strategic management? Strategic management activities transform the static plan into a system that provides strategic performance feedback to decision making and enables the plan to evolve and grow as requirements and other circumstances change. Strategy execution is basically synonymous with strategy management and amounts to the systematic implementation of a are the steps in strategic planning & management? Many frameworks cycle through some variation on some very basic phases: 1) analysis or assessment, where an understanding of the current internal and external environments is developed, 2) strategy formulation, where high level strategy is developed and a basic organization level strategic plan is documented 3) strategy execution, where the high level plan is translated into more operational planning and action items, and 4) evaluation or sustainment / management phase, where ongoing refinement and evaluation of performance, culture, communications, data reporting, and other strategic management issues are the attributes of a good planning framework? Based, non-profit professional association dedicated to advancing thought and practice in strategy development and deployment, has developed a lead-think-plan-act rubric and accompanying body of knowledge to capture and disseminate best practice in the field of strategic planning and management. Asp has also developed criteria for assessing strategic planning and management frameworks against the body of are numerous strategic planning and management frameworks that meet these criteria, such as the balanced scorecard institute's nine steps to success. For more information about the criteria, please visit the asp  more information about strategic planning and management in general or for about how balanced scorecard institute can help you, please consider our certification or consulting services, or contact us  about balanced scorecard based strategic planning and do you stand against other high performing organizations in terms of strategy management? The strategic management maturity model™ to assess your certified by the association for strategic gic thinking versus strategic 5 most important factors to successfully implement strategy in your strategic plan?