By: Jill Huettich
Pondering strategic planning? Good for you! Ironically, as important as strategic planning can be to a business’ overall success, an astonishing number of companies don’t actually bother to do it. And, worse, many business owners don’t necessarily grasp the concept. Which begs the question: what is strategic planning?
In fact, when small business owners were asked how far they plan in advance, a whopping majority (63%) indicated that at best, they only planned a year out. Unfortunately, that’s a problem, because as the saying goes, “When you fail to plan, you plan to fail.”
Perhaps if businesses knew about the benefits of strategic planning, they’d be more gung-ho about it. That’s the intent of this article—to help companies of all sizes approach strategic planning from a “must do” perspective, rather than viewing it as a “nice to have.”
Strategic planning is the process of documenting a company’s long-term goals, and specifying how that organization intends to achieve them.
So, in this brief introductory guide, we’ll explain strategic planning in greater detail, mention some common objectives of strategic planning, and discuss the various reasons strategic planning is so important.
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What is strategic planning?
Before we can cover strategic planning in depth, it’s important to first understand exactly what it is.
Strategic planning refers to the process of documenting a company’s long-term goals and how that organization intends to achieve them. A strategic planning document may also include the company’s mission, as well as its vision for the future.
With such a document, companies have a strategy in place they can use to guide future decisions and actions. They also have something they can refer to later to determine whether they’re making progress—or if they’re idling in neutral.
The 5 objectives of strategic planning
Companies engage execute on the strategic planning for a number of different reasons. When they do, they usually have an objective of controlling costs, improving quality, or some other similar concern.
For instance, organizations that engage in strategic planning often have one of the following objectives:
The better the product or service you provide, the happier your customers will be. Even better, these satisfied customers are likely to be repeat customers—which is a critically important, since it’s vastly easier to sell to an existing customer than it is to make a new one. For these reasons, many businesses choose to focus on improving the quality of their goods and services when they create a strategic plan.
Speed is important for any business. After all, nobody wants to submit an online order, then wait 3-4 weeks for it to be shipped from overseas. However, delivery time—while important—is not the only reason speed appears on this list. For instance, many companies try to reduce the length of time it takes to manufacture an item or to perform some other type of critical business process. The leaders at these organizations know that by moving things along at a faster pace, they’ll be able to increase their companies’ overall efficiency.
People expect businesses to keep their promises. Period. And of course if they don’t, customers are happy to take their business elsewhere, patronizing their competitors. Think, for instance, of UPS or FedEx—if they continually promised overnight shipping while delivering those same packages a week later, they’d lose their standing in the industry very quickly. For this reason, many businesses make dependability a primary objective when they engage in strategic planning.
Typically the larger a business grows, the more layers of bureaucracy people must penetrate when they want to make a change. Although small businesses have things a little easier, it’s safe to say that companies in general often struggle to truly be flexible. As a result of this fairly common problem, some organizations choose to focus on flexibility, making it a key area they want to improve. With flexibility as a goal, should these companies experience rapidly shifting market conditions, they’ll be well-poised to react quickly.
Increasing profits is always a worthy objective. So, an organization’s strategic plan might detail action steps to grow its customer base, increase profit margins, or sell more products to loyal, existing customers.
Now that we’ve reviewed some typical objectives of the strategic planning process, let’s take a look at why strategic planning is so critical to organizations of all sizes.
Why is strategic planning important?
Strategic planning is important for businesses for a variety of reasons. These include:
- Strategic planning determines priorities. With limited funds and resources, every company needs to decide where they’ll get the proverbial “most bang for their buck,” then focus their efforts accordingly. Strategic planning allows them to do that.
- Strategic planning gets everyone on the same page. Strategic planning ensures that operations, sales, marketing, and administration are united in achieving common goals, rather than creating a scenario where each department is pursuing separate, and possibly competing, objectives.
- Strategic planning makes decision-making easier. Strategic planning establishes priorities. This helps the company’s leadership stay focused and committed to the plan, rather than getting distracted by new ideas. With this kind of commitment, decision-making is naturally easier.
- Strategic planning establishes a shared direction. In smaller organizations, the company’s founder might have a vision of where the business should go, but that vision hasn’t been articulated to others. By taking the time to commit the founder’s vision and goals onto paper, other team members have the opportunity to learn what the plan is and get on board with it.
- Strategic planning helps companies be proactive, rather than reactive. Instead of reacting reflexively to fluctuating markets, a strategic plan determines a company’s primary objectives from the get-go, giving the organization the opportunity to be proactive. Plus, because companies that engage in strategic planning are better at anticipating unfavorable scenarios, they’re more apt to take the necessary precautions to avoid them.
These are just some of the reasons an organization might go through the strategic planning process to improve performance. Still, as you can imagine, a developing a strategic plan can seem intimidating at first. That’s when it’s enormously helpful to have the right software and process in place to get you started on the right foot.
- 6 steps to a successful strategic planning process
- Developing a strategic plan? Get started with this template
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