The key components of 'strategic planning' include understanding the firm's vision, mission, values, and strategies. (Often, a "Vision Statement" and a "Mission Statement" may encapsulate the vision and mission).
- Vision: outlines what the organization wants to be or how it wants the world in which it operates to be (an "idealized" view of the world). It is a long-term view and concentrates on the future. It can be emotive and is a source of inspiration. For example, a charity working with the poor might have a vision statement that reads "A World without Poverty."
- Mission: Defines the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its vision. For example, the charity above might have a mission statement of "providing jobs for the homeless and unemployed."
- Values: Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities and provide a framework for making decisions. For example, "Knowledge and skills are the keys to success" or "give a man bread and feed him for a day, but teach him to farm and feed him for life." These example maxims may set the priorities of self-sufficiency over shelter.
- Strategy: Strategy, narrowly defined, means "the art of the general."- a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there. A strategy is sometimes called a roadmap - the path to plow towards the end vision. The most crucial part of implementing the strategy is ensuring the company is going in the right direction, which is towards the end vision.
Organizations sometimes summarize goals and objectives into a mission and/or a vision statement. Others begin with a vision and mission and use them to formulate goals and objectives.
Many people mistake the vision statement for the mission statement, and sometimes one is used as a longer-term version of the other. However, they are distinct, with the vision being a descriptive picture of a desired future state; the mission is a statement of a rationale applicable now and in the future. The mission is, therefore, the means of successfully achieving the vision. This may be in the business world or the military.
For an organization's vision and mission to be effective, it must assimilate into its culture. Therefore, they should also be assessed internally and externally. The internal assessment should focus on how members inside the organization interpret its mission statement. The external review — which includes all of the business's stakeholders — is valuable since it offers a different perspective. These discrepancies between these two assessments can provide insight into their effectiveness.
Strategic Planning Process.
There are many approaches to strategic planning, but typically one of the following approaches is used:
Situation-Target-Proposal
- Situation - Evaluate the current situation and how it came about.
- Target - Define goals and/or objectives (sometimes called ideal state)
- Path / Proposal - Map a possible route to the goals/objectives
Draw-See-Think-Plan
- Draw - What is the ideal image or the desired end state?
- See - What is today's situation? What is the gap from perfect, and why?
- Think - What actions must be taken to close the gap between today's situation and the ideal state?
- Plan - What resources are required to execute the activities?
Tools and Approaches
SWOT analysis is among the most widely used tools for strategic planning (Strengths, Weaknesses, Opportunities, and Threats). The main objective of this tool is to analyze internal strategic factors, strengths and weaknesses attributed to the organization, and external factors beyond the organization's control, such as opportunities and threats.
Other tools include:
- Balanced Scorecards, which create a systematic framework for strategic planning;
- Scenario planning was used initially in the military and recently used by large corporations to analyze future scenarios.
- PEST analysis (Political, Economic, Social, and Technological)
- STEER analysis (Socio-cultural, Technological, Economic, Ecological, and Regulatory factors)
- EPISTLE (Environment, Political, Informatic, Social, Technological, Economic, and Legal).
- ATM Approach (Antecedent Conditions, Target Strategies, Measure Progress, and Impact). Once an understanding of the desired end state is defined, the ATM approach uses Root Cause Analysis (RCA) to understand the threats, barriers, and challenges to achieving the end state. Not all antecedent conditions identified through RCA are within the direct and immediate control of the organization to change.
Therefore, a review of organizational resources, both hn and financial, are used to prioritize which antecedent conditions will be targeted. Strategies are then developed to target the prioritized antecedent conditions. Linking strategies to antecedent conditions ensure the organization does not engage in activity traps: feel suitable activities that will not lead to desired end-state changes. Once a strategy is defined, performance measures and indicators are sought to track progress toward and impact the desired end state.
Situational Analysis
When developing strategies, it is essential to analyze the organization and its environment as it is at the moment and how it may develop in the future. The analysis has to be executed at an internal level as well as a superficial level to identify all opportunities and threats of the external environment as well as the strengths and weaknesses of the organizations.
There are several factors to assess in the external situation analysis:
- Markets (customers)
- Competition
- Technology
- Supplier markets
- Labor markets
- The economy
- The regulatory environment
It is rare to find all seven of these factors having critical importance. It is also uncommon to find that the first two - markets and competition - are not of paramount importance. (Bradford "External Situation - What to Consider")
Analysis of the external environment focuses typically on the customer. Therefore, management should be visionary in formulating customer strategy. It should do so by thinking about market environment shifts, how these could impact customer sets, and whether they are the ones the company wishes to serve.
Regarding market planning specifically, researchers have recommended a series of action steps or guidelines according to which market planners should plan.
Goals, Objectives, and Targets
Strategic planning is a significant business activity. It is also crucial in the public sector areas such as education. It is practiced widely informally and formally. Strategic planning and decision processes should end with objectives and a roadmap of ways to achieve them. Strategic planning mechanisms like formal planning aim to increase specificity in business operation, especially when long-term and high-stake activities are involved.
One of the core goals when drafting a strategic plan is to develop it in a way that is easily translatable into action plans. Unfortunately, most strategic plans address high-level initiatives and overarching goals but don't get articulated (translated) into day-to-day projects and tasks required to achieve the objective. Terminology or word choice and the level at which a plan is written are examples of easy ways to fail at translating your strategic plan in a way that makes sense and is executable to others. Often, plans are filled with conceptual terms which don't tie into day-to-day realities for the staff expected to carry out the project.
The following terms have been used in strategic planning: desired end states, plans, policies, goals, objectives, strategies, tactics, and actions. Definitions vary, overlap, and fail to achieve clarity. The most common of these concepts are specific, time-bound statements of intended future results and general and continuing statements of intended future results, which most models refer to as goals or objectives (sometimes interchangeably).
One model of organizing objectives uses hierarchies. For example, the items listed above may be collected in a hierarchy of means and ends numbered as follows: Top Rank Objective (TRO), Second Rank Objective, Third Rank Objective, etc. From any rank, the objective in a lower rank answers to the question "How?" and the objective in a higher rank answers to the question "Why?" The exception is the Top Rank Objective (TRO): there is no answer to the "Why?" question. That is how the TRO is defined.
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People typically have several goals at the same time. "Goal congruency" refers to how well the goals combine with each other. for example, does goal A appear compatible with goal B? Do they fit together to form a unified strategy? "Goal hierarchy" involves testing one or more goals within other goal(s).
One approach recommends having short-term goals, medium-term goals, and long-term goals. In this model, one can expect to attain short-term goals reasonably quickly: they stand just slightly above one's reach. At the other extreme, long-term goals appear very difficult, almost impossible to achieve. In this context, strategic management jargon sometimes refers to "Big Hairy Audacious Goals" (BHAGs). Using one goal as a stepping-stone to the next involves goal sequencing. A person or group starts by attaining the easy short-term goals, then s—p to the medium-term and long-term goals. Goal sequencing can create a "goal stairway". In an organizational setting, the organization may coordinate goals so that they do not conflict with each other. The goals of one part of the organization should mesh compatibly with those of other parts of the organization.
